The Stern report has finally put climate change firmly on the economic agenda – but business will find it difficult to implement change without political leadership. By STEVE HEMSLEY  Of all the business leaders, politicians, scientists, academics and even pop stars schmoozing at the World Economic Forum at Davos in January, one man is likely to grab the limelight. Sir Nicholas Stern has been invited to the Forum's annual meeting in Switzerland to update delegates on his 600-page report into the economic consequences of global warming which raised so many eyebrows when it was published last October.
Stern was asked to produce the study by the UK government during 2005's G8 summit at Gleneagles in Scotland. The idea was to spur the business and political communities into responding more rapidly to climate change, especially as the Kyoto agreement to reduce greenhouse gases expires in 2012. Stern's findings were shocking and they grabbed the attention of global decision-makers as well as the media because the author is neither a green champion nor a politician with an agenda to push. As an economist – he is a former World Bank chief economist – he could coolly survey the scientific evidence and concentrate on the financial implications of failing to act now to slow climate change.
If Stern does address the Forum he will outline again the potential impact on gross domestic product (GDP) if nothing is done. He claims a 2ºC-3ºC rise in temperatures could reduce global output by 3% or by 10% if temperatures rise by 5ºC. His worst-case scenario paints a bleak picture of a cut in global consumption per head of 20%. His view is that carbon emissions must stabilise over the next 20 years and then fall by between 1% and 3% a year after that. Such mitigation will cost the world the equivalent of 1% of GDP per year – in today's money, approximately €400bn. Stern's report may encourage concrete decision making to mitigate climate change at this year's World Economic Forum, which in the past has been criticised as a rich man's talking shop.
The world's business media will also be out in force in Switzerland. Financial and business news channel CNBC Europe will cover the event in depth and produce a special programme, explaining how business can invest effectively in green policies. Last year, CNBC Europe ran a series of programmes called Start Talking: Alternative Energy, in association with BP, which discussed green issues such as the globe's carbon addiction. It also explored the benefits of alternative power sources such as solar, wind and geothermal.
Dan Scott is the channel's Zurich-based reporter and he has moderated a number of green debates attended by business leaders and climate change experts. He says the Stern Report has had a major impact on how the financial markets and individual businesses across Europe are thinking and this will be reflected at the World Economic Forum's annual meeting.
"It is the first report into climate change to be taken seriously by the markets because the cost analysis is clear," he says. "It shows how it is in the interest of business to change things now rather than later. The impact of climate change is something companies will see on their bottom line and is an issue shareholders will increasingly want their directors to respond to."
One of the experts interviewed by Scott for CNBC Europe is Reto Ringger, the founder and CEO of the Zurich-based Sustainable Asset Management Group which is seeing a rise in interest in its products from investors. The SAM Sustainable Water Fund, for instance, is growing by around 20% a year, while its other products include a Smart Energy Fund which focuses on renewables, and a Smart Materials Fund which invests in the efficient use of resources and the recycling of raw materials in the production process.
Ringger says mainstream investors appreciate the long-term benefits and opportunities of green funds: "There is growing awareness among the general public as well as in political and economic circles of the problem of global warming. The trend is to invest in companies that offer products, technologies and services designed to limit the effects of climate change as society comes to terms with the adjustments that must be made." |
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