A Year of Hope

The world is currently is struggling with the consequences of over-valuing its financial assets in wake of the credit crunch. There however looms a more pressing crisis ahead, as the under-valuing of environmental assets, which serve as the basis of all life and prosperity shall result in an ecological credit crunch as human demands on natural capital reach unsustainable levels. In the past three decades, one third of the planets resources, its “natural wealth” has been consumed. Fortunately, I believe that the winds of change are upon us, and one of the positive effects of the global credit crisis has been to cause investors to take a long hard look at the credit crunch, and the short-termism practices that caused it, and decide they can benefit from a more comprehensive analysis of investment risk, one which incorporate environmental, social and governance issues (ESG). In November alone, owners representing more than $1,500bn (£914bn, €1,160bn) of assets signed up to the United Nations six principles of better long-term equity ownership, which brought the total above $18,000bn. This practice continues to gain traction in light of the broader acceptance of climate change as an environmental threat, which brings with it previously unidentified risk and opportunities.

I believe 2009 is the beginning of a new hope for the world as we must tackle the challenges facing us or reap the consequences of our actions, as Al Gore reminds us, “Nature does not do bailouts.” Although I remain optimistic about the future, I should remind you of a quote by Edmund Burke, "All that is necessary for the triumph of evil, is for good men to do nothing.” The onus is on all to ensure we start acting and investing sustainably. Speaking of hope, President-elect Barack Obama comes to mind, who wants to spend $150 billion over the next decade to promote alternative energy sources, a proposal, he says, that would create millions of "green collar" jobs. He has also called for an 80 per cent reduction in greenhouse gas emissions by 2050 through a cap-and-trade program. Although policies and measures are increasing worldwide to combat climate change, I only hope that the scale of investment and action will be sufficient at this critical juncture. The unraveling of debt-heavy investment banking firms and the demise of Wall Street icons Lehman Brothers and Merrill Lynch, means that financing for large-scale renewable energy projects has gotten harder and more expensive. Sector-wise, wind farms will most likely be hit the hardest by the squeeze in credit as they are more mature along with solar and geothermal projects. Although companies that require public markets for financing have less attractive options, the private equity side of the business has showed much less sign of distress. Companies that require late-stage financing could have trouble going from product development to commercialization, and rather than trying to tap public markets or investment banks for capital, clean-tech companies may look to other sources like hedge funds, private equity firms or large corporations. Additionally, money allocated to bailout plans has possibly reduced the amount that would have been invested by governments into adopting cleaner energy sources. This has also not been helped by the deep slump in oil prices, which makes fossil-fuel energy look more attractive. In general though, long-term trends point to demand for clean technologies and supportive government policies.

Voluntary action remains a major driver in tackling the climate crisis, and fortunately in a recent UNEP survery, nearly 90 per cent of young people across the globe said they urge world leaders to do, "whatever it takes" to tackle climate change. If you are looking to take action I ask that you consider that the loss of natural forests around the world contributes more to global emissions each year than the transport sector, and curbing deforestation is a highly cost-effective way to reduce emissions. Seven billion trees - to be planted by the end of 2009 -are the target of UNEP’s Billion Tree Campaign. More than 4,319,593,340 trees have already been pledged and 2,599,045,202 planted. The worldwide campaign encourages people, communities, business and industry, civil society organisations and governments to enter tree planting pledges online in a call to further individual and collective action.