Good morning,
Today will be the last issue of Green, Inc. before the new year, while all newsletters from Fortune take a two-week holiday until Jan. 4. As this is the final letter of 2022, it’s a good time to look back at the year gone by and the one waiting ahead.
Predictably, 2022 has been another year of climate disasters. Record heat waves killed thousands of people across multiple continents, glacial melt floods devastated Pakistan, and strained energy supplies (throttled by Russia’s attack on Ukraine) fueled a cost-of-living crisis across Europe that revived coal burning in many countries.
Russia’s invasion has also, however, convinced EU leaders to wean their economies off of Russian oil, subsequently accelerating the rollout of renewable energy systems. The buildout of solar and wind projects across Europe will gather pace in the coming year, although it will take longer for those farms to come online.
In finance, regulators, bankers, investors and politicians have all turned a scrutinous eye on ESG funds, piling pressure on the world of sustainable finance from all sides—including from within (see former HSBC responsible investing chief Stuart Kirk’s divisive speech against climate regulation).
While the U.S. Securities and Exchange Commission and the EU markets regulator, ESMA, have tightened regulation on ESG funds to prevent greenwashing, disgruntled old-school investors have taken up the counter argument and rallied against “woke” capitalism, withdrawing funds from managers they accuse of putting the planet before profits.
Personally, I favor more regulation of the market and believe surviving ESG funds will emerge stronger from the shakedown—although they might not call their funds “ESG” anymore, opting for a new moniker that doesn't combine three facets into one.
Then of course, just last month, world leaders gathered at COP 27 to continue negotiating how to keep the world on track to meet the Paris Agreement goals of preventing global warming from exceeding 1.5°C.
COP 27 failed to achieve a transnational agreement on phasing down fossil fuels—a vital step in reducing carbon emissions—but was successful in building international consensus on “loss and damage,” establishing that developed economies have a responsibility to compensate developing nations for the fallout from climate change and must set up a fund to do so. Details on that will come next year.
Although many were disappointed by the lack of action on fossil fuels at COP 27, BCG global head for sustainable investing, Vinay Shandal, told me last month that he felt invigorated by the conversations he saw on the ground there.
Shandal says COP 27 broke the taboo of discussing investment in climate adaptation, rather than mitigation, and that businesses, financiers and governments were huddling together to figure out how to actually implement solutions to our climate problems.
No doubt that taboo was broken partly because, this year, numerous reports showed the world is already hurtling past our Paris Agreement targets, having spewed enough greenhouse gas emissions into the atmosphere to lock in a certain amount of warming regardless of what changes we make now. Adaptation is a necessity.
So, as with every year since this newsletter began, the key takeaway of 2022 seems to be that change is coming, but not fast enough.
The upside of embracing adaptation means the year(s) ahead will hopefully see more startups announcing breakthroughs in building climate-resilient infrastructure, such as flood warning systems or drought resistant crops. Financing in green tech will be invigorated by U.S. President Joe Biden’s multi-hundred-billion-dollar Inflation Reduction Act, passed this year, too.
I’m on the watch for advances in industrial battery tech, progress on decarbonizing blast furnaces, and success in designing climate-resilient electricity grids.
Enjoy the holidays, and let me know what trends you expect to see in 2023.
Eamon Barrett
greeninc.news@gmail.com
@eamonbarrett88
P.S. MSCI also recently released a comprehensive outlook of ESG and climate tech trends in 2023, here, if you want some inspiration.
