How WRI is giving companies the jump on green investment

The Gunther Report

How WRI is giving companies the jump on green investment

"I'm an economist," said Andrew Steer. I'm not an environmentalist by training."

This is a good thing because, unlike some U.S. environmental leaders, Steer, who is the new president and CEO of the World Resources Institute (WRI), is willing to deliver some straight talk about economic growth, environmental protection and the costs of clean energy. He’s also committed to WRI’s global, fact-based, business-friendly approach to addressing big environmental problems.

Over lunch the other day, Steer met with a group of reporters for the first time since joining WRI last month. A 60-year-old Brit, he is only the third president of the Washington-based nonprofit, following James "Gus" Speth, a lawyer and academic, and Jonathan Lash a lawyer and former regulator who is now president of Hampshire College. By contrast, Steer spent most of his career at the World Bank, working in international development and as the bank's climate change envoy.

While living in Vietnam, Steer saw first-hand how the past two decades have brought material progress along with environmental degradation. Not one of the bank's 100 Vietnamese employees owned a car when he arrived in Hanoi in 1997, he told us. Today, nearly all do. They are better off, but the city is more polluted and global greenhouse gas emissions continue to rise.

"Per capita income in developing countries is twice what it was. More people have been lifted out of poverty in the past 20 years than in the prior 100 years," he said. "But the price that we've paid, in terms of environmental debt, if you will, has been much too high. We have incurred a massive environmental debt."

But while economic growth can drive increases in pollution in the short run, history suggests that as poor countries become richer, they grow more willing and able to pay for cleaner water and air. China, of course, has invested heavily in solar and wind power, hoping to build export markets. According to Steer, Morocco is investing in solar thermal power, hoping to export electricity to Europe; India and South Africa are seeking alternatives to coal; the Indonesian government raised gasoline taxes and rebated the proceeds to the poor; and even Ethiopia devised a "green plan" with help from consulting firm McKinsey.

Image of Collage with a money tree and young business man by Sergej Khakimullin via Shutterstock.

But just as there's no free lunch (although WRI paid for ours), there are no free -- and very few unsubsidized -- solar panels, wind farms or electric-car batteries. The transition from fossil fuels to clean energy, Steer acknowledged, will require businesses and consumers to spend more now to guard against climate risks in the future.

This might seem obvious, but many greens continue to insist that moving from coal and oil to renewable power will (1) help avert catastrophic climate change, (2) clean the air, (3)  improve human health and (4) spur economic growth. All are true except (4), at least for now. Paying for more expensive energy will create a small, but real, drag on the economy. (For one of many examples of the absurdly rosy view, see this poll, which says a green economy will deliver more economic growth in the short and long run.)

For his part, Steer characterized the tradeoffs between clean energy and economic growths as “very modest” but real. “We need to be honest about this,” he said. “We mustn’t over-promise.”

Business will be key to driving the transition, both by investing in cleaner technologies and advocating for better government policy. WRI was a key player in the U.S. Climate Action Partnership, which argued for climate regulation in the U.S. back in the 2007-2009 period. It now shares its research with a select group of companies that are seeking ways to “to protect and grow shareholder value and steer business to better protect the environment.” WRI has a project called Aqueduct that measures and maps water risk with partners including GE, Dow and Coca-Cola.

Companies want to work with WRI to better understand risks to their supply chains created by climate change or water scarcity, as well as opportunities to profitably help solve environmental programs. “There clearly is something to be said for getting ahead of the curve,” said Steer.

While government action will almost surely be required to deal with the climate crisis, Steer generally avoided questions about politics. When I asked him whether he thought nuclear power was a climate solution, he declined to offer an opinion. He didn’t want to be quoted on the progress (or the distressing lack thereof) in international climate talks. He did, however, note it has been nearly a century since British economist Arthur Pigou developed the idea of imposing taxes on negative externalities, such as pollution, in order to discourage them. Even some market-friendly economists embrace the idea of carbon taxes to help curb climate change.

WRI’s sweet spot, though, remains research, data and coalition-building, so it is likely to, uh, steer clear of politics. “The ratio of opinion to analysis is much too high,” Steer said. “WRI aims to reverse that.