The end of summer 2017 has been notably fraught with natural disasters, but we at Boundless fear this is only just the beginning of Mother Nature’s reminder that climate change is real and fraught with unprecedented risk. The most destructive hurricane to hit the United States in more than a decade, Hurricane Harvey left Houston reeling. According to Forbes, the amount of rain that was dumped on parts of Southeast Texas set a new record of 51.88 inches. Analysts with Risk Management Solutions (RMS) believe economic losses caused by wind, storm surge, and inland flood from Hurricane Harvey could be as high as $70-90 billion, making it the costliest natural disaster in the history of the United States. This storm, which was once claimed as a once-in-500-year flood, hit landfall only days before Hurricane Irma battered the Caribbean and western Florida, reaching wind speeds of over 185mph. Collier County in southwestern Florida sustained winds of 115 mph and a subsequent storm surge that devastated municipal infrastructure and left hundreds of thousands without power or potable drinking water. That catastrophe was followed shortly by Hurricane Maria, which plowed through several Caribbean islands then Puerto Rico, leaving more than 70% of households on the island without power.
It would be difficult to argue that this summer has not been littered with more natural disasters than usual, as devastating wildfires continue to rampage across the West, and Mexico City still in rubble from Wednesday’s earthquake, which claimed more than 200 lives, including 30 children who died in a school collapse.
However, one thing is clear, “hurricanes get their destructive energy from the warmth of the ocean, and [water] temperatures are super elevated,” said Anders Levermann, a climate scientist at the Potsdam Institute for Climate Impact Research in a statement to Bloomberg. Likewise, global warming and its effects on temperature and precipitation are contributing greatly to the prevalence of wildfires across the American West, increasing the intensity and devastation. It has become difficult to ignore the costs of climate change, that we incur for not only financially, but also in human suffering.
This provides an opportune time for savvy impact investors to truly create substantial social and environmental impact. According to Ernst & Young, “before factoring in climate shocks, closing the infrastructure gap by 2030 requires investment estimated at $40-50 trillion… (and) mounting climate threats on infrastructure assets is only going to increase this already significant shortfall.” The need to consider changes in infrastructure, energy, resilience and the way in which it is funded is more urgent than ever before. As temperatures rise, the cost of adapting to and mitigating the impact of these disasters is rapidly outpacing current methods of funding, creating a growing need for private capital to step in. Impact investors should consider how their portfolio could mitigate the risks of climate change and drive capital towards innovative business models that address it. A portfolio-wide response to climate change includes diversified, low-carbon investments, ranging from water management, to wind-and solar energy. Executive Director of UN Environment, Erik Solheim, reports “ever-cheaper clean tech provides a real opportunity for investors to get more for less. This is exactly the kind of situation, where the needs of profit and people meet, that will drive the shift to a better world for all.”
The renewable energy market is ripe for impact investors, with the potential to drive capital towards the changemakers that will become even more profitable as the world tackles climate change and the necessity of these models grows. The reasons to invest in renewable energy infrastructure and climate change mitigation are as compelling as they are diverse. First, renewable energy is targeted to represent the single largest source of global electricity growth, in net energy additions, over the next five years, including in developed nations. Second, the levelized cost of renewable energy sources, is approaching and in some circumstances meeting traditional power sources, including without subsidies. Likewise the innovation and technologies for measuring their success are growing more sophisticated, making them scalable and more profitable. Finally, renewable energy is bidding into traded markets, with solar generation now cheaper than conventional energy sources like coal and natural gas.
What lags for renewable energy infrastructure is adequate financing, hindering the growth of the sector. These financing gaps reflect serious systemic considerations that private investors are able to remedy. There are opportunities for investors to drive capital towards smart grid technologies, sustainable ag solutions, energy storage, and other emerging industries that can prevent the rapid acceleration of climate change, and help mankind adapt to Mother Nature’s powerful revenge.
It is no longer time to ask, “What is causing these storms?” as the trends have already indicated “once-in-a-lifetime” disasters will no longer be few and far between. It is time to consider how we can be proactive and combat these kinds of disasters, with all indicators pointing to private capital driving the change.