From Climate Change to Climate Alpha: The next opportunity in sustainable investing

[Music] good morning well it's taken 27 cop Summits prior to this one to remind us that we've not done enough to adapt to climate change mitigation decarbonization Greening our Industries and Supply chains has been the primary focus and it's not wrong it's not misplaced it's necessary but it's not sufficient we realize today that Global carbon emissions have exceeded 58 uh gigatons per year and they continue to rise meanwhile the annual number of natural disasters and catastrophes the insurance premiums and payouts from those disasters continue to rise to hundreds of billions of dollars a year and that's just the financial numbers think about the human numbers the costs the number of displaced people internally International climate migrants now equal the number of political refugees and economic migrants in the world so we do have to balance out the mitigation focus with adaptation and that's what I want to talk to you about today and this affects everyone because indeed our built environment our infrastructure our real estate housing all of those things that amounts to the largest sector of the entire world economy you can take all the current currencies all the stock exchanges all the treasuries all the crypto add it all up it's not even it's a rounding error compared to the value of our land property assets our built environment and that is what's being most affected by climate change of course because it is almost by definition immobile so as Flo said I'm a geographer I like to bring things back to Earth and so we're going to talk about the impact of climate change on our geography and what it means for our adaptation because because indeed we have to live every day forward thinking about where we're going to invest where we're going to live and that investment risk that we all bear is something that is not going to be solved through today's Collective action which is insufficient both in mitigation and adaptation if you look around the world you can see that it is really the M the locations the geographies of the world that are home to the majority of the human population developing world global South whatever you want to call it that are in fact the most affected to summarize this very briefly it is Asia this region West Asia Middle East Africa that have the largest populations and would suffer the most damage to their economic growth and these are indeed the growth engines of the world economy from accelerating climate change then these are also the regions that lack that are the most efficient in adaptation capacity which is to say how are they how much money and capital is being committed to retrofitting their infrastructure to uh providing new kinds of food water energy Transportation housing Logistics systems to help those societies to cope with the real world day-to-day inevitable impact that climate change is ha is having no matter how quickly we decarbonize and just one important point on this I think we've all come to realize that the the biosphere our Global ecosystem is a complex system it's not one that's simply going to bounce back to those comfortable realities of the 1800s pre-industrial era and so forth simply because we are trying to reduce emissions so as I always remind people the climate will not adapt to us we have to adapt to it and the adaptation capacity is severely lacking and again it's a reminder that we're not spending nearly enough on it so that's where we come in as a software company climate Alpha there is a lot of data a lot of information a lot of modeling that comes straight from the best-in-class industry standard ipcc climate models a Consortium an ensemble of scientific institutions that tell us what the future likely impact or what the future outlook is for climate events or climate phenomena floods droughts fires heat waves sea level rise storms hurricanes wind patterns those things are known to the extent that they can be known and predicted and forecasted and for many parts of the world it's not good what we have not done a good job of doing is actually quantifying the resilience of a location to those risks right what are the things that can be what are the risks that need to be offset what are the Investments that would need to be made to offset them is it going to be enough to make those Investments is it actually going to have a material impact on the ground and what impact would it have financially uh for that or fiscally for those locations and for investors to help them to achieve those objectives and those are the kinds of things that we try to do and it's very complex to undertake this exercise because you're dealing with multiple unknown phenomena at the same time we don't know exactly what the growing uh frequency or impact or scale of climate Devastation is going to be and we don't know if the seaw walls that we build or the irrigation system and so forth are going to be enough and so it's a constant Dynamic process that requires a lot of econometrics machine learning and so forth to try and figure out what is going to happen to each geographical coordinate in the world and that's what we try to do but in doing so it can help to promote the right Investments and resilience in the right places now I've used this word resilience and we use it all the time it's a very important word it's come up coming up more and more in these cop discussions but very little has ever been done to try to quantify what it means for a geography to be resilient can you how can you statistically back test for what resilience is and strangely when we started doing this work we realized that well there isn't really a rigorous approach to quantifying resilience and yet it's so important because it is going to be ultimately numbers that talk that drive that guide us that guide behavior that help to shape investment Frameworks uh and Deals so that people will actually put money into resilience in the right places at the right times at the right time scales so we look at every place in the world we don't just look at what the climate risk is we try to quantify the resilience so that there is a dashboard a sign set of signposts so people know what they need to invest in where and when so what are the some of the things that actually correlate to resilience historically now if climate change were not happening at all you would still be able to look at the GDP the economic value of different locations around the world and say hm hm what are the things that have driven this Market this location this town community Village City to perform well over time to attract people to attract investment to grow to flourish to thrive the way this city has the way this country has well you would say it's things like the economic momentum the wellness uh of the population the social robustness the quality of the infrastructure the reliability of the energy grid all of these things rule of law Innovation we can come up with a long list and you can go back in time 50 60 years and gather that data and know what makes a place resilient but a lot of those things have not had to confront the realities of climate change once you add in those risks you have to think about yet more resilience factors such as again the physical infrastructure to offset uh climate disasters and so we keep on making an Ever longer list of resilience features and Geor referencing them which means putting it on a map and showing what is being done where it's being done or what is unfortunately not being done but where it should be done and that's how you directly confront climate change in ways that are proactive for every single climate physical risk that there is whether it is the flood storms heat waves droughts sea level rise there is a physical adaptation that can be made there is an intervention that is recommended and so I've given a few examples here whether it is the kinds of materials we use in our buildings whether it is Drainage Systems um and and so on and so forth flood flood controls um many many kinds of things that we can do but as I said before if you look at the total volume of spending that's dedicated to grappling with climate change 90 plus percent of it has gone into the decarbonization initiatives which again are absolutely crucial and they are Global public goods in many ways but it's not enough to actually help people in day-to-day reality adaptation interestingly is thought of as a private good a local good if I build a seaw wall here it doesn't help you in another part of the world whereas if we reduce emissions it helps everyone that is true however one of the things we're recommending is that we think really globally about this idea of resilience because the truth is that if we make investments in the kinds of places that are going to be Global providers of food of water of energy and even places that are going to become destinations for climate migrants and refugees again as I said before an Ever growing number it means that you wouldn't just invest the way the cop agenda is suggesting actually you know particularly in the locations that are the most physically vulnerable you would also be investing in the places that are going to be destinations inevitably for more climate migrants because they don't necessarily have the capacity to cope and when you have situations like the wars and conflicts that have broken out around the world and those res constrain or restrict or or uh interrupt um the movement of uh Commodities food for example and fuel if you invest in the global distribution of resource production then that creates a more resilient system so it's not just about investing in one place it's investing in the places that actually make the world as a whole more resilient as climate change accelerates so I'm I'm out of time but I'll close with a geographical Point as you can tell I love to make maps this is one of my uh one of my most complex it's a layering of many of the man-made infrastructures of the last 75 years what you see here are roads and Railways electricity grids um uh uh highspeed rails Fiber Optic internet cables all on one map and and political borders as well the lines in white that are terrestrial and the reason I created this is to remind people that geography is not Destiny it's one of the most famous adages and phrases that children learn in school geography is Destiny I have a different view which is that geography is what we make of it and this is actually what we're making of it and in this process of making these investments in global resilience in connecting Supply to demand in connecting people to each other and data and Technology Capital all of the things that flow around the world we're actually on the way towards building a resilient system I want to end on an optimistic note because I believe that this Global retrofitting that is underway is part of a bigger story of using connect activity to build Global resilience but time is running short we are investing only2 to3 trillion dollar a year when we need to be spending 10 to 15 trillion dollars a year on all of these kinds of Investments at the end of the day though it all boils down to this message that I put at the bottom of the slide if you want to really reduce it and and and bring it home what can you do every day I think really there's two things that we can do you can either move people to the geographies of resources or or you can move Technologies to the places where they're needed and to the people who need them those two things ask yourself every day are you moving people to resources or Technologies to people and that's ultimately how we're going to build a more resilient world thank you very much