The past few weeks have supplied a consistent string of negative news on the climate change front.
- NOAA released its annual Arctic Report Card, warning that the globe has likely reached an important “tipping point” – namely, that melting permafrost now makes the arctic a net carbon emitter rather than a net carbon sink.
- Polar experts representing 50 countries published a report in the gold-standard scientific journal, Nature, showing that Greenland is losing ice seven times faster than in the 1990s. The researchers found that ice losses from the Greenland ice sheets have been consistent with the IPCC’s worst-case warming scenario.
- COP25, a meeting to negotiate details of the Paris Agreement’s carbon emission reductions, failed to agree on coordinated action steps. The fact that Australia, a country facing climate change-related catastrophic fires and record-setting high temperatures, was on the side of the countries impeding agreement is my newest candidate for best working definition of the word “irony.”
No one in the investing world can survive without being an optimist, but neither can one survive in this world by failing to deal with reality.
The reality is that if humanity waits for world governments to reach a simultaneous epiphany on a successful framework to spur carbon emission reductions, there is little hope for us. We just don’t have the luxury of time to allow politicians around the world to come to the realization they must act against powerful vested interests for people who are not their immediate political constituents.
While I’m bearish on government action, with my background in investing, I believe that the force that brought humanity to this precipice – capitalism – could be used to pull us back from the ecological brink. Capitalism, love it or hate it, is the economic manifestation of our species’ greatest strength – adaptability.
Humans are the only species to live on all seven continents, from the deserts of Saudi Arabia to the peaks of Tibet to the Amazon jungle to the frozen wasteland of Antarctica. The only way we have been able to inhabit such a wide range of ecological niches is because of our creativity and adaptability.
Similarly, you are able to read this article on your hand-held computing device while riding in the back of a Toyota Prius taxi is because of the amazing creativity and adaptability of capitalism. Life throws up barriers; capitalism finds ways to profit while moving around those barriers.
I have spent a year speaking with entrepreneurs, venture capitalists, scientists, central bankers, and heads of non-governmental organizations. These conversations – many of which I have written about in this column – have been bittersweet.
On one hand, my interactions have convinced me that we have the resources as a species to successfully address the issue of climate change. On the other hand, I am realizing that the pace at which venture capitalists and the broader investing world is working is too slow to be able to solve all the problems we face as quickly as we need.
The reason that the investment world is behind the eight ball is structural. An institutional investor can only analyze so many potential deals in a year, those analyses will be colored by his or her own human biases and considerations of whether the deals are likely to help their careers in the short-term or not.
Entrepreneurs, on the other hand, often don’t understand how investors see the world and don’t speak investors’ language. Their ideas may not fit into the conceptual buckets or be synched up with the investment time horizons of the investors. Unable to frame their business opportunities in a way that investors see the world, a lot of great ideas die on the vine.
The problem is one of centralization. The solution lies in the power and wisdom of crowds.
We can no longer wait for governments or VCs to figure out what to do and who will do it. We must take responsibility and invest our money and our time directly in projects and ventures that will allow our civilization to adapt to the increasingly obvious challenges posed by climate change.
The structure for this type of direct action exists. A few weeks ago, I spoke with Louise Wilson, the co-founder and managing director of an London-based firm called Abundance Investment. Abundance provides a platform for individual investors to participate in alternative energy and other sustainability projects with an investment as low as £5 ($6.50).
My conversation with Ms. Wilson was eye-opening to me; so much so that I have found myself reassessing my entire approach to climate change investing. I’ll be posting an article detailing my interview with her next week.
In the meantime, I also wanted to provide an example of direct, individual action that is literally close to home. A couple on our block, Amy Myers and Michael Baker, just committed to rebuilding their 1960s vintage split-level suburban home into a state-of-the-art, Platinum LEED Certified dwelling.
I was bowled away by the couple’s commitment to both their local community and the global one, and would hope that others with the means to do so would put their money where their mouth is too. Rather than digging that in-ground pool that you’ll only use a few times a year, why not spend your money on new insulation and some modern, high R-value windows that will pay you back every day while helping to reduce the amount of fossil carbon emitted into the atmosphere?
Investing is not only how you allocate your 401(k), it’s how you live your life! Intelligent Investors take note.