Investing for a step-change in decarbonisation

It’s never been more urgent to wean ourselves off fossil fuels and expand investment in zero carbon technologies and communities. Entire societies and economies are at risk and they need to invest in treating and removing that risk over the next 24 months, or it’s too late. Simply put, huge money needs to flow now.

There have been some encouraging signs from the COP26 Summit in Glasgow, with summit president Alok Sharma noting OECD analysis that shows developed countries will begin meeting their $100 billion-per-year promise from 2022^[1]. That promise was made 12 years ago at COP15 in Copenhagen. Better late than never, we hope.

Significant in-flows of private investment are required to match this public finance. Some positive moves are afoot, with the Glasgow Financial Alliance for Net-Zero (GFANZ), which represents over 450 financial firms across 45 nations, saying they will align their lending and investing with net-zero goals^[2]. We have local examples here out of Westpac and Pamu^[3], the Warehouse^[4] and Contact Energy^[5].

Elsewhere, the London Stock Exchange has announced plans to develop a market-based solution to accelerate the availability of financing for low carbon projects, and major financial institutions have recently called for 1,600 of the world's most polluting companies to urgently set science-based emissions reduction targets.

While these announcements are positive, they’re still just words, some of which we’ve heard before and have let us down. We’re out of time for that sort of behaviour now. Investment needs to deliver the things we’ve long talked about and idealised. Things like:

• Living, working, and playing within a 15 to 20-minute walking / biking radius:
  Thanks to the COVID-19 pandemic, we’re starting to remember and enjoy our local connections and the sense of place and belonging they bring. Enabling investment in 20-minute cities doesn't just pay off in tackling climate change, it also boosts local economies and improves people’s health and social wellbeing.
• Unlocking the full potential of electric vehicles and decentralised renewable energy:
  In decentralised renewable energy systems, electricity is generated close to the load it serves, especially our cars. Harnessing this alongside our national grid and directing it into our homes and mobility is one of the fastest, cheapest paths to decarbonisation. Investment in such renewable electricity systems is on the up around the globe, but the pace needs to quicken to meet the goals of the Paris Agreement.
• Consumption options and habits:
  Aligning our consumption behaviour with our personal values can play an important role in decarbonisation. A study in the Journal of Industrial Ecology found that household consumption contributes to more than 60 percent of global greenhouse gas emissions and between 50 and 80 percent of land, material and water use^[6]. It can be frustrating and feel like alternative low-carbon options are not available to us. With the holiday season looming, it’s a great chance to ask what a low carbon Christmas looks like - why not experiment and ask retailers for more options.

Show me the money

So, with decarbonisation proven to make good business sense and options readily available to roll out, where’s the money? You’d think funding would be streaming in at a torrential pace rather than a trickle. Global capital appears to be stuck in a very deep rut, extremely resistant to reconsidering the value of its fossil fuel systems and investments.

It’s also looking like our laissez-faire approach to change and innovation is coming up short. Our current approach of relying on grassroots home-garage start-ups to attract and upscale investment and build enterprise heroes straight out of high school won’t be enough, fast enough.

It’s heartening that the largest philanthropic organisations like the Bill and Melinda Gates Foundation prioritise climate change. But that scale is miles off what’s needed. The clean energy transition alone needs about $4 trillion by 2030, and $100 trillion by 2050^[7], let alone the rest of the economic system. But it’s coming, if you believe Wall Street, and ten years from now the level of invention and capital flows into new clean tech will explode^[8].

We’re watching to see if anything substantial changes in the finance arena and if the well-meaning words of financiers translate into meaningful action. It’s hoped that with the bolder targets set at COP26, we will see more action and money. Even so, we understand that COP is just one part of the extensive, more complicated network of efforts grinding away at the edifice of capital locked up in our high-carbon economy.

What if we did invest – what might it look like?

Future gazing for a moment, what might a decarbonised day-to-day future look like?

Perhaps it will mirror the idealised local communities and thermally efficient homes of Tolkien’s Shire, but with healthcare, home offices, denser living, welfare, and Wi-Fi. And if you’ve got a long journey to take, it’s unlikely you’ll own the vehicle you ride in. You probably won’t be controlling it, there may not even be a human driver, and you may be sharing it with any number of people. Unless it’s an adventure weekend, and you’re going camping, then you might have hired an electric SUV for the family and are picking it up on the edge of town right next to the station.

I imagine such transport-as-a-service that follows you around, on-demand, predicting links and gaps, filing them with all manner of mobility gizmos before you get there, to remove waiting and disruption. And as you leave the city, you drive through solar fields that your council’s holding company invested in to improve your community’s resilience and energy access - the landscape around you mottled with premium horticulture and native forest.

Our small effort in Aotearoa is vital. We don’t ‘have the money’ for the drastic change that is needed - no one does, that’s the point - we’re as entrenched as everyone else. But we can be sure that any money spent will have a great return on investment. So, in that sense, we can afford it. Our job now is to expose this logic to capital and enable its transition.

If the COVID-19 pandemic has shown us anything, it’s the potential of the nation-state and that a team of five million can make a difference. We can de-risk and direct capital flows into new economies and markets to break barriers, create barriers, and mobilise a whole new set of social norms. It’s a scary thought, but what’s more frightening is the catastrophic climate change that will come if we don’t direct every dollar spent to our decarbonised options; now.