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Private Sector to the Rescue?
How Business Can Accelerate Climate Resilience Efforts
The following is my keynote address to Indiaspora’s Third Annual Climate Summit held last week, which brought together environmental experts and community leaders who are engaged in seeking out solutions to the current climate crisis. My remarks sparked a lively Q&A and I thought readers of The Instigator would like to join in the conversation.
Back when I was the CEO of The Nature Conservancy, I had the great pleasure of visiting the city of Chennai, India. Just prior to my visit, Chennai had suffered from terrible flooding. Officials called a public meeting to discuss what to do. A local environmental leader and I were invited to moderate a discussion that would be open to all. The two of us were asked to start the meeting by offering some ideas on how green infrastructure might address the city’s water challenges. And then we were supposed to moderate a group discussion. When they told me the format, I was a bit puzzled. Would this really work? Could we have a polite and practical exchange of views on such a complicated topic? Would people speak up? Would there be debate? Would there even be questions, I wondered.
It turns out, there was no reason for me to worry. Right after I was introduced — and before the other moderator even got to say a word — hands shot up and people began expressing their own points of view on how nature might best be deployed to protect people and property from future flooding events. When someone disagreed with another speaker, he or she would speak up and push back. Folks asked questions when an idea wasn’t stated clearly. Wow, I thought. This is really great. The audience is well informed, they know that the stakes are high and that action needs to be taken, and they understand that everyone in the community will need to work together and address the challenge in a cooperative way.
When I reflect on that experience, I wonder whether we can globally replicate that practical, cooperative, and determined spirit to get on with taking the necessary action steps to address the impacts of climate change.
We face bigger challenges today than the city of Chennai was facing at the time of my visit. We are dealing with floods, drought, fires, hurricanes and heat waves all at once. We need to develop the passion, interest, and engagement that the residents of Chennai demonstrated during my visit.
My topic today is to speak about just that: How to build environmental resilience. And, more specifically, how the private sector can lead the way.
By “resilience,” I mean efforts to protect people and property from harm. The UN’s Intergovernmental Panel on Climate Change (better known as the IPCC) defines climate resilience as “the ability to cope with a climate disturbance and recover in a way that preserves one’s essential character, while at the same time exercising the capacity for adaptation, learning and growth.”
Resilience is of course a global challenge. In my remarks today, I’m going to focus on the US since that is where I'm now doing most of my work. But I believe my observations apply to all parts of the world.
So, let's address our main question: What can the private sector do to help build resilience?
I believe there are three big opportunities. The private sector can:
Innovate and scale those resilience strategies that also make business sense.
Lobby for the public policy and programs we need, and
Communicate the importance of resilience efforts and our shared interests. Show that resilience doesn't need to be one more topic that divides and polarizes our communities. Help people see that we really are all in this together.
Let’s dive in.
Corporate-Led Resilience Strategies that Make Business Sense
Let's start with corporate-led climate business strategies. In my view, we should do everything we can to encourage businesses to seize all opportunities related to climate change that will also provide appropriate returns.
But we shouldn’t kid ourselves and expect companies to do things that don't make business sense.
The good news is that there are many opportunities to both address resilience and also achieve positive business outcomes. How does this work? Resilience initiatives can present new market opportunities that drive top line growth, investments that reduce risk, and engagements that rally stakeholders and community members.
Let be more specific and note some clear examples:
Reinsurance companies have great risk management and scenario planning expertise connected to climate change. They can make public their analyses of where risks will be greatest. By sharing this information fully with the public, they can discourage risky behavior (such as immediately rebuilding in coastal areas after hurricanes).
Companies in the agricultural sector can prioritize tools and strategies to produce food in the face of heat waves, water crises (including both droughts, and intense downfalls), and infestations by pests.
Natural resource companies can deploy emerging technologies to improve forest management in order to reduce fire risks.
Engineering companies can prioritize heat-resistant metals (remember how the London Bridge needed to be wrapped in tin foil in order to avoid melting!)
Construction companies can develop infrastructure – including nature-based tools - to manage dangerous excess water and excess heat in urban settings.
And so on. . .
I also want to emphasize that we should be clear-sighted about the limits on what the private sector can do. To state what I hope is obvious, we should not be counting on the private sector to take on initiatives that don't make business sense. That’s not a realistic goal. But sometimes it sounds like that’s what some environmentalists are asking businesses to do.
We can draw some lessons here from private sector engagement on climate mitigation.
For example, we’ve seen great gains in the areas of renewable energy, batteries and electric vehicles. This is due not only to private sector ingenuity, but also to supportive public policy, including R&D programs, tax incentives, and renewable energy mandates. It's been a great and very encouraging example of climate progress.
Lots of actors deserve credit. In addition to business leaders and investors, credit is also due to policymakers, environmental activists, and everyday citizens. The program is working as intended. But even in this area, business leaders can't really go beyond what delivers appropriate returns to their shareholders.
Take the recent case of BP. More than most oil companies, they’ve had a number of ambitious clean energy goals that pleased environmentalists like me. But these same programs disappointed their shareholders. BP's share price lagged rivals like Exxon and Chevron to such a degree that rumors circulated that the latter, more highly valued oil companies might attempt a takeover of BP. Before that could happen, BP recalibrated. The company scaled back some of its green initiatives (although they still plan to do more than most of their peers), and their share price rose sharply.
Unlike some critics of BP, I don’t see this as a failure by the company. I admire how BP is trying to find its sweet spot — trying to do everything they can to address the climate challenge, while at the same time balancing the need to deliver returns to shareholders. That's the job of a public company, and it’s a more — pardon my use of this term — “sustainable” strategy in the long run.
A second example I will note has to do with land use change – the second biggest source of greenhouse gas emissions after fossil fuels. The term “land use change” is really a euphemism for agriculture. Expanding agriculture — most of which is growing crops to feed livestock — is an enormous threat to the world’s great forests. But there is good news from the world of plant-based meat substitutes. New companies like Impossible Foods and Beyond Burger have innovated in an exemplary way. Their products taste very good, are healthier, and are very superior to meat in terms of greenhouse gas emissions. But these meat substitutes do not benefit from supportive government policy (as traditional agriculture and ranching do). So the meat substitutes cost more and therefore have trouble scaling as quickly as climate advocates should want. If we want this climate tool to grow, we need better public policy to make that happen.
The point I want to make here is that when we turn to climate resilience, yes – we should ask the private sector to do everything it can to address the challenge. Yes, we should encourage companies to take longer term views and to accept more risk in exchange for possibly high returns. But we shouldn’t expect them to do things that don’t make business sense. That's where public policy has to step in.
Lobby for Public Policy
That takes me to my second ask of the private sector.
Climate resilience requires thoughtful and ambitious public programs to stave off the harshest outcomes. I have in mind initiatives like building sea walls, relocating people from coastal areas, addressing catastrophic heat waves, and attending to likely surges in climate refugees. And please keep in mind that the adverse outcomes in these scenarios are not distributed fairly. It will be vulnerable people who bear the most risk. In the event of an extreme heat emergency, or a hurricane, for example, it's elderly and disabled people who can't exit quickly and are therefore most at risk.
In these matters, the challenge is not so much identifying what needs to be done; rather, it’s getting government leaders to take action. Now is the time to make the substantial investments in infrastructure and policy we need.
The business community has a strong voice, proven government lobbying capabilities, and recognized expertise in making long-term investments to manage risks. Business leaders are therefore well positioned to step up and be champions for the governmental programs we need. We don't see nearly enough discussion about these urgent public policy matters. Business leaders can change that.
Contribute to Constructive Discourse
And let me turn to my third and final ask of business: Please help people understand that on the one hand, none of this is going to be easy; but on the other hand, all of it is in everyone’s interest. Investments in resilience are investments in the public good, period. But we know today’s divisive political environment has not been conducive to large-scale government-led problem solving. Just look at the debate over efforts to reduce greenhouse gas pollution, for example.
To mitigate the harshest effects of the climate crisis, people have to come together, overcome differences, think long term and decide on big investments in the face of a lot of scientific uncertainty.
To do this, people will need to demonstrate the attitudes and civic-mindedness that I witnessed when I visited Chennai. I think there is reason to be cautiously optimistic about this. Adverse climate outcomes usually express themselves locally and in ways that arouse pragmatic problem solving instincts. Confronted by floods, droughts, hurricanes, or heatwaves – and especially if well-guided by leaders – citizens should be supportive of practical ways to intervene.
Business can play a role in clearing the water, so to speak. Demonstrate that we can talk about resilience in a calm, inclusive and respectful way. This is not about debating science. This is not an argument about bigger or smaller government. Rather, it's about working together on common-sense no-regret efforts to protect people and property.
Let me wrap up my remarks.
I got into the environmental arena as a businessperson. I worked on Wall Street from 1984 to 2008 as an investment banker at Goldman Sachs. My big takeaways from that experience: most of the time, businesses are led by good and honorable people. And most of the time, business succeeds by making the world better. It seemed to me, therefore, that business could be a powerful force for good by tackling environmental challenges.
So I left Goldman Sachs to become the CEO of The Nature Conservancy — the world’s largest environmental non-profit organization. For 11 years I worked with amazing colleagues and supporters. We did our best to harness the private sector to accelerate progress in protecting nature. And by and large, it worked.
Business brings great skills and resources to environmental opportunities. Business knows how to innovate, how to scale, and how to move quickly. Business also knows how to communicate and how to get public policy aligned with top priorities. These are just the skills sets we need to address the climate resilience challenge.
Let's get to work.
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