LAST YEAR will be remembered for the succession of weather-linked disasters that hit communities and economies around the globe. There was Hurricane Harvey in the US, Typhoon Hato in southern China, and Ophelia in Ireland and the UK. Wildfires raged in California, Spain and Portugal. Flooding wrought devastation in India, Bangladesh and Nepal.
As we go into 2018, the message is clear: the impact of climate change is severe and intensifying, and it requires urgent and multi-pronged global action.
This challenge is enormous. Most scientists believe that it is essential to keep global temperatures from rising more than 2 degrees Celsius compared to pre-industrial times. In essence, that now requires us to rewire and reinvent a lot of the economic activity that has been built up over the past century and a half.
Infrastructure is at the heart of this transition – and the infrastructure investment decisions being taken now will play a key role for decades to come.
The good news is that the world, as a whole, needs to invest in infrastructure anyway. Economies around the globe are constantly evolving and striving to raise the productivity of workers and companies.
More and more people are moving into cities. And in many parts of the world – notably Asia and Africa – populations are expanding. All of this means a constant demand for more energy, transport, housing and telecoms and IT networks.
Clearly, the way forward is to invest in infrastructure that meets both sets of challenges at the same time – in other words, that unlocks productivity and delivers growth, but that does so in a way that minimises future carbon emissions, and helps economies and communities to adapt to the effects of climate change.
This comes with price tag. Roughly US$ 100 trillion will need to be invested in infrastructure around the globe over the next 15 years, both to replace ageing systems, and to accommodate growth.
Addressing the needs of climate change will only add to those financing needs, so the more infrastructure is “green” from the get-go, the better.
Perhaps the most urgent -- and potentially impactful – change needs to happen in energy infrastructure.
The power systems that generate and transmit electricity, as well as the transport systems, buildings and cities that consume it, need to do two things: they need to reduce emissions (both by using low-carbon alternatives like solar and wind power, and by consuming less power; and they have to become more resilient to the impacts of climate change.
Thankfully, more money is now flowing into technologies and projects that deliver greater energy efficiency.
Global investment in energy efficiency-related activities rose 9 per cent in 2016, reaching US$231 billion (Bt7.2 trillion).
Likewise, investments in renewable energy sources reached almost $300 billion in 2016, more than double the amount invested in coal, gas and oil power capacity, according to the International Energy Agency.
China is now spearheading much of this change, with big investments in alternative energy at home, in particular.
Much of the activity linked to the country’s Belt and Road Initiative will also be made with sustainable criteria in mind, providing an extra impetus to green financing and investing.
Governments around the world are confronted with a huge array of needs: population growth, urbanisation, the need for economic advancement and productivity growth – and climate change.
Infrastructure that is low on emissions, high on efficiency, and adapted to the future impacts of global temperature rises is the common key to addressing these challenges. Recent technological advances mean that many “green” alternatives now make not just environmental sense, but economic and business sense too. But the urgency for action is great – and today’s decisions will be critical to minimising tomorrow’s challenges.
ZOE KNIGHT is managing director, HSBC Centre of Sustainable Finance