We have just received the UN risk report, telling us that we have less than 12 years to cut global CO2 emissions in two. Further, there are a lot of discussions of climate risk in the financial sector now. This is important, and it is needed. We face unprecedented challenges, and we are in a hurry to solve them. But, we also have to talk about the opportunities. The endless opportunities that arise from delivering solutions to some of our largest sustainability challenges. The things is also, we cannot exclude our way to a more sustainable future. We have to invest today for the future we want to see tomorrow.
After numerous annual risk reports from the World Economic Forum, where global sustainability risks topped the list of the largest economic risks the next decade, DNV GL, UN Global Compact and the Danish consultancy Monday Morning said: “Enough talk about risks, let`s turn these global sustainability risks into business opportunities!”. And so they did. Every year since 2015, they have published an Opportunity Report, highlighting business opportunities from solving global sustainability challenges. You see, adressing global sustainability risks through innovative products and services, is maybe the biggest business opportunity of our time.
The problem, however, is that most of us tend to understand the risks associated with the old world (which we are transitioning away from), better than all the opportunities that the new world represents. As the well-known Johan Rockström (who recently headed the Stockholm Resilience Center), said: “Where do we lack the most knowledge; about all the risks that we expose ourselves to, or all the endless opportunities that a fossil-free world entail”? Rockström made a clear reference to understanding and exploiting opportunities better.
We tend to understand the risks associated with the old world (which we are transitioning away from), better than all the opportunities that the new world represents.
So what are all these opportunities? Business and Sustainable Development Commisssion (BSDC) highlights 60 solutions in their report “Better business, better world”. These business opportunities cut across four main systems: food, cities, energy & materials and health & wellbeing. Together, these solutions represent more than 12 USD trillion of value annually by 2030. That is the same amount of worth as 12 Norwegian Pension Funds annually! In other words, huge opportunities. These are business opportunities that both contribute to and profit from the transition to a more sustainable, low-carbon economy and society.
Business opportunities from solving environmental challenges through innovative products and services represent more than 12 USD trillion of value annually by 2030 (Business and Sustainable Development Commission)
Some of the solutions with the most value creation potential are: circular business models within transportation, improved energy efficiency in buildings, the expansion of renewable energy, reduction of food waste, ecosystem solutions and energy storage systems. Also check out DNV GLs report.
Hence, these solutions are not only renewable energy, as some people might think. These opportunities span across most sectors and most systems. Together, they are exposed to the majority of the global economy. Further, we do not need incremental change, we need radical change. We are leaving the old world and transcending into a new world, hence also the size of the opportunities.
These are also big investment opportunities. According to the asset manager Pictet, the Environmental Markets (as defined by FTSE Russel), which consists of companies that deliver innovative products and services to environmental challenges, has grown faster than the conventional markets the last years. According to Pictet, the market is also expected to grow from 2 USD trillion in 2018 to 3 USD trillion in 2020. In order words, these are markets with a lot of growth!
The Environmental Market is expected to grow from 2 USD trillion in 2018 to 3 USD trillion in 2020 (Asset Manager Pictet)
A lot of the opportunities will also increasingly be found outside of the stock listed markets. The new business models, the innovations, the technologies and hence the growth that comes with them, will increasingly be be found in private equity, including venture and start-ups.
This is not to say that challenges do not exist. We are still not pricing our utilization of the ecosystems assets and services. We also have to reconsider the sustainabilityness of our own economic system, which people such as John Fullerton brilliantly highlights. But currently, the opportunity focus is largely lacking in the media coverage and in my opinion, in the sustainable investment debate.
At the same time, we know that the transition is moving to slowly. Capital is one of the keys to unlock the acceleration to a more sustainable low-carbon future. Significantly more capital needs to flow towards the green economy in a much faster pace, as former head of the climate negotiations in the UN, Christiana Figueres, has said.
Therefore, let`s move from a risk mindset, to a mindset of opportunities. Let`s dive into and increase our understanding of all the opportunities that arise from the transition to a more sustainable future, and how we can profitably invest to contribute to this transition. In that way, we contribute to setting the speed we need in the transition to the future we want.
Written by Susanne Gløersen, initiator of the platform for sharing insights in sustainable opportunities ” The Sustainable Opportunity Initiative “