The Race of our Lives
How the private sector can help us win
The following is a speech I delivered this week to all employees at an innovative company called GridPoint. The company provides businesses the knowledge and tools to optimize their energy usage through a subscription service, with the goal of lowering both their emissions and costs.
(Disclosure: I’m an investor in GridPoint).
Good afternoon. I’m Mark Tercek, and I’m here today to talk about the fact that we are all in the race of our lives.
We face a true climate emergency. Human behavior has already locked in devastating impacts from climate change. This human-made problem could have been avoided, but it’s too late now to prevent much of the damage. Much more importantly, looking ahead, unless we start making much better progress right away, we’re heading to truly catastrophic outcomes. That's the race we’re in. It’s up to all of us whether we remain on this collision course or whether we swiftly change direction and start accelerating progress.
As a career businessperson-turned environmentalist, I appreciate and admire the work all of you at GridPoint do every single day. I know your work is not easy, but I hope you all realize you’re doing two big and important things at once.
First, you’re improving business outcomes for clients by lowering their energy bills.
And second, you’re devising environmental solutions that reduce your clients' greenhouse gas emissions too.
That's what you do every day. And you know what? You’re demonstrating what is likely the best way available to accelerate climate progress.
And accelerate we must.
You know it’s bad when George Soros tells us how worried he is about this challenge. Soros is one of the greatest investors of all time. He’s not exactly known for being alarmist. He is a tough and accomplished person. He survived the Nazi occupation of his native Hungary and went on to achieve one of the most spectacular investment records ever in the hedge fund business. His life’s work is to dispassionately face facts and analyze them; consider key factors in science, politics and other domains; and make forecasts on which he stakes huge investment bets.
“Our civilization is in danger of collapsing because of the inexorable advance of climate change. The climate system is broken, and it needs to be repaired."
Again, I'll repeat this for emphasis. His forecast is bleak. “Our civilization is in danger of collapsing,” he says.
Nobody wants to hear that. So what do we do? Clearly we need to do everything we can to address this challenge.
But what exactly does that mean?
The Need for Government Action
The best way to address a collective action problem of this type is through government action, i.e., policy and regulations. Policy wonks have agreed on what we need for a long time. For instance, they recommend a high and rising carbon tax, or a stringent cap and trade program, or straightforward regulations that require fossil fuel use to be ramped down quickly. These would all be very effective ways to quickly reduce our use of carbon-intensive practices in order to lower our greenhouse gas emissions.
But in most political regimes today, these policy tools are simply out of reach. I’m not saying we shouldn’t keep fighting for them. We should and we will. And I’ll also note – as you know – we’ve seen good progress lately in the policy area. In the US we passed the IRA bill, which incentivizes investments in various decarbonization opportunities. The EU and UK also have achieved recent policy gains. But as long as the comprehensive climate regulation we really need remains elusive – and remember that time is not on our side in this race we are in – we must turn elsewhere.
The Private Sector Promise
In the absence of maximum government action, our next best bet is the private sector. Now, nobody is saying that the business sector is perfect or that it always gets it right. It's not and it doesn't. Indeed, that's an important reason why we need better regulations. But when the business sector is at its best, it does just what the climate crisis demands: it innovates, solves problems, moves fast, and gets things done at scale.
The private sector works best at climate when two specific outcomes are aligned: improving business results and contributing to economic growth on the one hand; and reducing emissions on the other. To the extent we can make these two things happen, we can be confident we’re contributing to progress.
Virtually every sector is rife with such opportunities.
In the electric power sector, the 2022 Inflation Reduction Act should significantly boost investments in clean power, transmission, and storage. Great. The bill should also accelerate the transition to EVs that is underway. Excellent.
Other important decarbonization opportunities remain largely underexploited. In land usage – the second biggest source of greenhouse gas emissions – progress has been slow. I’ve written in my newsletter about how breakthroughs in plant-based meats and new sustainable agricultural practices provide reasons for cautious optimism. But we really need to accelerate action here.
When it comes to buildings – your area of focus – progress is not where it should be. Commercial buildings contribute something like 10% of emissions today. We can and should be doing more to address this right away. Which takes me right to the work that all of you do.
GridPoint
I first learned about GridPoint when I met your Chairman Peter Corsell socially, back when I was CEO at The Nature Conservancy. Peter described your company with a lot of pride. My immediate reaction was: wow, this is a great climate solutions enterprise. And I was exactly right. You help clients find new ways to use less energy. You help them to reduce both their greenhouse gas emissions and their expenses. The proverbial “win-win.”
Now I know your work isn’t easy. But at the end of the day, for most of your clients, energy management is not their core expertise, nor their top priority. And as we move forward and use more renewable energy, new tools, technologies, software and technical know-how, energy management becomes more complicated. That's where you all come in – you bring the necessary specialization, focus, skill sets, and cutting edge know-how to get stuff done.
Business is never easy. I presume it can be hard to find new clients and to convince them to make the necessary upfront investments, even though they will earn high returns on such investments.
Further, today you also face economic headwinds and even political pushback in some circles. It’s not easy to stand on the street day after day, waving the red flag and trying to catch drivers’ attention, noble though your purpose may be.
And let me add an important – and probably obvious – caveat. But it's a point that seems often to be missed by naive champions of corporate decarbonization. Most efforts by companies to lower emissions as they proceed toward net zero will raise costs, not lower them. Decarbonization is expensive. Think of a steel or cement company. They don't have easy win-win opportunities that lower costs as they reduce emissions. And over time that will be increasingly the case for GridPoint clients too. Still, the same principals will apply. Your role will be to guide your clients toward the lowest cost, most efficient, and smartest way to do so.
The good news is that your market is more receptive than ever before. CEOs know that stakeholders want more from their companies, so they are stepping up their environmental commitments, even making net-zero pledges. Employees, customers, shareholders and environmental activists are all also working hard to push business to do more. As noted earlier, we’re all in this together. Lots of folks deserve credit for pushing business to do more. We need to keep it up and at the same time also keep pushing for the public policy that will support these efforts.
Technology will also increasingly be on your side too. The costs of renewable energy and storage will keep falling, new tools that allow intermittent renewable energy to be used optimally will keep improving, and so on.
That’s why it’s not surprising to me you had a great growth year in 2022. And looking ahead, there will only be even greater opportunity as new technologies arrive. The opportunity for clients will be that much greater. We’ll need companies like yours to support the buildout of the “electrify everything” strategy.
It's easy for people to get discouraged about the climate crisis. But if you can show individuals that they actually can make a positive difference – without too much hardship – it develops enthusiasm and confidence about supporting the movement to address the climate challenge. And this is where companies like GridPoint make the biggest difference. Thank you for leading the charge.
Onward,
