Closing the clean energy funding gap is a matter of economics — and national security
The Fourth National Climate Assessment forecasts a deeply troubling future for U.S. national security. As combat veterans, we acutely appreciate the threats identified by this report and the risks of inaction. As business leaders, we also recognize the financial opportunity that thwarting these risks offers for the American economy.
Whether it’s rising sea levels, more extreme temperatures, increases in severe weather events or disruptions related to aging energy infrastructure, the grim outlook should not be viewed as a forgone conclusion. The worst impacts of climate change can be avoided if we accelerate and scale our response.
Across the 1,600-page report, explicit references to national security and the military are numerous, as are discussions of how climate change will touch all aspects of everyday life. While efforts to adapt and mitigate these impacts have increased in recent years, by the end of the century, warming on our current trajectory would cost the U.S. economy upward of $500 billion a year in crop damage, lost labor and extreme weather damages.
Disruptive technologies that are more efficient and resilient not just in energy sector but across the entire economy are reaching economies of scale and readily deployed.
Look no further than the military’s increasing adoption of distributed energy technologies to enhance energy security at domestic bases (PDF). For instance, the U.S. Army operates three 30-megawatt solar projects at Fort Benning, Fort Gordon and Fort Stewart with Georgia Power. Further, Naval Submarine Base New London is developing a fuel cell powered microgrid in Connecticut. Those are just two examples of energy resilience in action.
Innovation of this nature presents enormous economic opportunity that remains untapped. The IPCC report estimates that it will take an investments of around $3 trillion a year globally over the next three decades to transform global energy supply systems for the clean economy.
As it stands, only 0.4 percent of institutional capital is invested in clean energy and low-carbon market opportunities (PDF), according to data surfaced by the World Economic Forum. Market inefficiencies coupled with a lack of understanding of the clean energy asset class are two primary factors inhibiting wide scale institutional investment in the markets. There continues to be significant interest as shown by the fossil fuel divestment movement by pension funds and university endowments, but we must provide those investors with the opportunity to take the next step and invest in clean energy.
The good news: Impact and sustainable investing activity is growing. According to the latest US SIF Report on US Sustainable, Responsible and Impact Investing (SRI) Trends, the net total of SRI assets at the beginning of 2018 was $12 trillion. Climate change was the most important specific ESG issue considered by money managers in asset-weighted terms.
We are making progress in bringing these ESG investments into clean energy markets. A spring 2018 report from Ceres, "In Sight of the Clean Trillion," points to significant opportunities for investors to scale up their clean energy investments while simultaneously meeting their risk-return requirements. Alternatively, ACORE’s "$1T 2030" campaign lays out the policy reforms and market drivers required to grow private investment to $1 trillion by 2030.
Accelerating and exceeding funding becomes possible as we begin to address many inefficiencies inhibiting investments in clean energy markets. The Climate Finance Playbook recently published by Ceres (PDF) outlines the various sources for capital to fund this clean energy transformation, while acknowledging the current gap between finance and investment. This transformation should come with financial gains: a recent report from the Global Commission on the Economy and Climate found that bold climate action could deliver at least $26 trillion in economic benefits through to 2030, compared with business as usual.
The only thing determining our future when it comes to addressing climate change and the creation of a robust and lucrative clean energy economy is what we do today.
As the latest IPCC report states, "Future impacts and risks from climate change are directly tied to decisions made in the present."
Climate change can either be the greatest wealth creation opportunity in human history or it will trigger the largest economic blow since the recession of early 2000s. Evidence shows that time is running out to make that choice, so action is needed now. Burying our heads in the sand is no longer an option.