The Russian attack on Ukraine made it clear that energy dependence could be weaponised, and that investments should flow into projects securing supply and generating clean alternatives, Shiva Dustdar said during a conference on 14 December. Natural disasters this year also highlighted that action was needed now: “it’s not about 2050 and talking about what you do in twenty years, but about what you do today,” Dustdar stated. Julie Becker—elected Luxembourg’s most influential economic decision maker, added that the climate Cop in Sharm el-Sheikh served as a reminder that pledges to reduce greenhouse emissions alone aren’t helping.
The increasing tensions between China and the US–the world’s top carbon emitters–are a double-edged sword, Becker noted too. Yes, they have a lot of potential to endanger existing climate action goals, but at the same time, their relation accelerates the race towards clean energy. “Perhaps we don’t always need cooperation,” said Becker, but can embrace innovation brought by competition.
Innovation needs cash
The urgency of investing now rather than later is clear. “When it comes to the investments, you really need to ensure that you come in early–earlier perhaps than when the private market comes–therefore take more risks,” said Dustdar who cited the EIB’s increased investments (an additional €30bn over five years), in RePowerEU. “You need the public sector to lead, with a lot of early-stage research funding,” she added.
The finance sector’s role in this is clear, said Becker: “Finance is an enabler, we need to make sure that all financial flows are compatible with [the 1.5ºC] objective. We can use finance for adaptation, to lower the cost of loss and damages… and for all of that we need money.”
But, the sector is still lacking. Tackling climate change goes further than reporting, and the issue demands that finance be rethought and redefined, as current financial models don’t capture key elements like the value of nature, said Dustdar. The social and governance components of ESG need to be developed further too, according to Becker, who conceded that finding a common definition of social and governance on an EU level remains a complex task. “I hope we will see a social taxonomy soon,” she concluded.
The convergence between tech and sustainability
The megatrend of digitalisation is tightly intertwined with that of sustainability, and they can accelerate one another. “Sustainability is becoming a much bigger concern for tech,” Becker answered when asked about the path of technology. IT is focusing more on the matter, also by reviewing the emissions it generates through data centres, digital waste and energy consumption.
Digitalisation is also useful to better understand energy consumption, for example, and can lead to a more efficient distribution across infrastructure. Investors should not, however, invest in one aspect rather another, but approach them simultaneously. “We have to find ways to scale the technologies to a point where they become readily available, and therefore, when we look at our investments–whether they are infrastructures or innovations–that tech must be built in alongside sustainability,” said Dustdar. For her, lessons can be learned from following the next generation of entrepreneurs who have a mindset of “tech for good.”