Business leaders around the world are currently focused on the discussions and negotiations taking place at the 26th Conference of the Parties (COP26) in Glasgow from October 31 to November 12. The outcome of these international negotiations will have long-lasting implications for business and its critical role in global society. In the lead-up to COP26, the Business & Environment Initiative asked HBS alumni business leaders from a wide range of sectors and disciplines what they see as the role of business and business leaders in this important moment.

Specifically, we posed the following question: The data and analysis in the latest IPCC report amplified the reality that climate change is widespread, rapidly intensifying, and attributable to human activity. It also signaled both a responsibility and a real opportunity to change course. What is the role of business leaders in this moment? What new business opportunities could come from the efforts to both mitigate and adapt to climate change?

Over the course of several days, we are releasing a selection of alumni responses in the hope that this spurs further dialogue, action, and connection among our alumni and beyond about the key role business leaders have to play in confronting climate change—and the power of HBS alumni to make a positive difference.

Jacqueline Adams (MBA 1978)
President, J Adams Strategic Communications; co-author of A Blessing: Women of Color Teaming Up to Lead, Empower and Thrive
Reasons for Optimism: Younger Black Knowledge Workers

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As global leaders prepare to meet in Glasgow, the prospects for mitigating the impact of climate change do not look very good.

A detailed new analysis from the Rhodium Group, as reported by Axios.com, predicts that it will take the equivalent of "zeroing out emissions from the entire state of Florida every year for the next nine years" for the White House, key US agencies, state capitals, business leaders, and Congress to meet the Paris Agreement goal of reducing emissions 50 percent by 2030.

At a Council on Foreign Relations briefing on climate change on October 14, experts warned that “voluntary” carbon reduction targets being set at COP26 are far from sufficient to meaningfully address climate change. Methane, which is 60 to 80 times worse than CO2, they said, isn’t even part of the discussion. And they cited an analysis by the major reinsurer, Swiss Re, which predicts that even if some mitigating actions are taken, global GDP will shrink by 14 percent by 2050… by 18 percent if no actions are taken.

Okay, the sky may really be falling.

However, research that my co-author, Bonita C. Stewart, and I conducted to complement our book, A Blessing: Women of Color Teaming Up to Lead, Empower and Thrive, paints a more optimistic picture, provided business leaders embrace our generational diversity findings.

Our study confirms others that quantify the economic benefits of diverse teams. But we urge leaders to look to younger women of color for innovative solutions, especially Black female knowledge workers. We found that 42 percent of Gen Z Black women are “the first to know when something new or cutting-edge is released.” The gap with the other races was almost two-to-one.

Jim Andrew (MBA 1986)
Chief Sustainability Officer, PepsiCo

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As a company that does business in more than 200 countries and uses more than 25 crops sourced from over 7 million acres in 60 different countries, PepsiCo has an opportunity and a responsibility to use our size and scale to help build a food system that respects the natural boundaries of the planet. That is why we introduced pep+ (PepsiCo Positive), our strategic end-to-end transformation, with sustainability at the center of how we will create value for our shareholders and all our stakeholders. Climate action across our supply chain sits at the center of the transformation, with a goal to reach net-zero emissions by 2040. In the interim, we are targeting absolute GHG reductions of more than 40 percent by 2030.

From the way we source our crops to the energy we use in creating and distributing our products, we are taking end-to-end action throughout our global value chain to advance the urgent systemic changes needed to address climate change. By doing what’s right for people and the planet, pep+ will help position our company as a consistent top market performer by generating stronger, more loyal connections with our consumers and customers; engaging more meaningfully with our associates; and building deeper roots in our communities.

Audrey Choi (MBA 2004)
Chief Sustainability Officer and CEO, Institute for Sustainable Investing, Morgan Stanley
Now Is the Time for Bold Leadership

BIO

We are at a critical moment, facing perhaps the most challenging vortex of global challenges the world has ever seen. The current climate crisis is far beyond an environmental issue—it is an existential crisis. Moreover, it converges with—and exacerbates—the crises we face in biodiversity, global health, and social justice.

As business leaders, it is not only aspirational, but indeed imperative that we engage immediately with each of these challenges—individually and collectively. The decisions we make about how to manage our investments, our business operations, our supply chains, our people, and our corporate culture all need to reflect the clear and present dangers of climate justice, health justice, and social justice. Ultimately, we need to create a new decision-making paradigm, where our business strategies and choices fully consider the short- and long-term impacts we have on the environment, on communities, and on inclusion and equity.

When the IPCC says “Code Red for humanity,” it boldly and accurately captures that the challenge ahead of us is not just about carbon emissions, but for the future of our businesses, our economy, our people and our planet. Now is the time for bold leadership, swift action, and holistic, systemic solutions.

Charmian Love (MBA 2007)
Cofounder and activist in residence, B Lab UK

Kim Coupounas (MBA/MPA 1995)
Global Ambassador, B Lab and Head of Impact, B Lab US & Canada

Business as a Tool for Activism

BIO BIO

As the recent IPCC report made clear, this is a “Code Red” moment in human history, requiring business leaders to aim higher and move faster, individually and collectively, towards a zero-carbon economy. As a major contributor to climate change, the business sector is uniquely culpable, and therefore responsible, for taking action—now. The time for “blah blah blah,” as Greta Thunberg recently put it, is over, and the biggest question we all need to ask ourselves today is what side of history do we want to be on?  

We’re inspired by businesses willing to engage in activism. Here are five practices worth tracking:

1. Truth-telling. The system is broken. We know this. Science affirms it. We can feel it. Businesses around the world are declaring a climate emergency and a growing number of whistleblowers are coming out to tell the truth. What would telling the truth mean for your business? 
2. Supporting people to engage in social movements. Ecosia pays the legal fees for their employees who are arrested due to non-violent civil disobedience. This really matters—as Erica Chenworth’s research has shown, no government can withstand a challenge of 3.5 percent of its population without either accommodating the movement or (in extreme cases) disintegrating.  How could you support your people to engage in movements of change?
3. Taking a Stand. Patagonia pulled its advertising from Facebook and has recently renewed its call on other firms to boycott the platform until Facebook can make sure its products do no harm.  What would taking a stand look like for your business?
4. Joining Forces. At B Lab, we’re supporting both a global and a series of regional B Climate Collectives designed to support businesses to share what they are learning on topics such as how to move to a regenerative business model. How might you explore ways to reimagine your business model with others? 
5. Supporting System Change. We need to change the rules of the game. In the B Corp movement, we’re working to advance fundamental economic system reform. For example, B Lab UK is pushing for the Better Business Act to make it mandatory for all businesses to advance the benefit of both shareholders and stakeholders. And many business leaders are supporting the Global Citizens Assembly (for more on this, check out this piece by former HBS professor Bob Eccles in Forbes). How can your business support fundamental systems change?

What unites these businesses and the leaders within them is a drive to do what the science tells us is needed, rather than feel limited by what seems possible. They are also clear that this is a moment for their business to be used as a tool for activism, not activism as a tool for business. 

Carl Ferenbach (MBA 1972)
Chairman and cofounder, High Meadows Foundation and High Meadows Fund
Climate Change Is Driving Business Change and Adaptation

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The environment needs fixing — but by whom?

At the onset of the COVID pandemic, a narrative emerged that, as we would pass through the experience of it “everything would change,” this without much definition to “everything.” At the other end (whenever that may come), our institutions and our approaches to managing ourselves will have meaningfully evolved. And in fact, 20 months later we have seen and are seeing rapid acceleration of innovations of all kinds that—pre-pandemic—were moving slowly and non-disruptively in our core businesses. Climate change and our response to it, particularly in the developed economies, fits this description.

Environmentalism, as we have known it since the 1960s, has been grounded in the physical sciences, law, economics, and public policy. Advocates for strong environmental policies arose during this period, organizing and building not-for-profit groups to pursue their mission. Businesses in this era focused on compliance with a rising body of legislation and public policies designed to mitigate what were then seen as environmental excesses. The social sciences and humanitarian and social justice issues were not then a part of their purpose. And, climate and the science of climate change were not yet developed.

Fast forward to today and we are seeing, with the presence of multiple generations in our workplaces, internal advocacy at the employee level pushing employers to address the entirety of the climate problem. We see a strong push from customers and investors to adopt climate-positive policies and products. And we see movement to adopt policies that emphasize human consequences, these in addition to traditional approaches to compliance with environmental law and practice. In other words, giving employees, customers, investors, and communities a voice and a place at the table when corporate leaders address the climate issues their organizations face.

This has manifested in over $30 trillion in investment product under the ESG “label,” numerous commitments to meeting net zero emissions by 2050, and numerous undertakings to roll out no- or low-emission products and processes in multiple sectors. Hence, the major auto producers, globally, have announced commitments to phase out production of new internal combustion engines by 2035 to be replaced by electric vehicles. This has generated large, new venture commitments to developing battery technologies to meet the coming automotive demand, as well as the needs of countless smart devices. Truck transport, especially diesel-powered trucks, too are a major focus, opening the door to the development of electric and driverless trucking.

As office technologies enable remote work environments, our use of large buildings powered by fossil energy is also facing change, with worker preferences for cleaner and more flexible “digital”-enabled work environments. Traditional approaches to farming, ranching, animal husbandry, and food production are all being disrupted as we retool and refuel machinery, as the dietary preferences of younger generations become more vegetable-based and as we learn to produce our needs with less labor, less equipment, and fewer emissions.

Within sectors that remain dependent on fossil fuel, energy efficiency (also lower emissions) is becoming the focus of operators. Consumers are shifting their product preferences and investors are incorporating these in their asset allocations and specific investment decisions. There will be large changes in the electric grid, as utilities and other power resources seek to reliably meet the demand generated by these evolving clean energy technologies.

These are but a few of the many opportunities corporate leadership will need to bring into its deliberations on strategy and resource allocation. Also, in these 20 months we have seen donor capital to NGOs and not-for-profits for environmental science, law, economics, innovation, and advocacy increase at far greater than historical rates. Capital for new clean tech ventures has also increased at a rate commensurate with the resulting needs.

To conclude, the demands climate change is making on us for many product and process solutions has become clear. And it is driving new business creation, as well as traditional business adaptation, at far higher than previous rates. With the evolution of our great industrial and financial base, we may at last be addressing the many demands the changing climate is and will make on us.

Tom Ferguson (MBA 2014)
Managing Partner, Burnt Island Ventures
Bake Sustainability into the Core of What You Do

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The role of business leaders is to see the writing on the wall and act accordingly. The transition to a clean economy is fully in progress, and if you want to stay relevant, even just stay out of trouble, your organizations need to bake sustainability into the core of what you do.

You don’t have far to look to see where growth will come from in the coming decades. Year to date, sustainable US equity funds have taken in more than half the flows of non-sustainability-related funds ($25.7bn), despite the asset base of the latter being 60x the size.

In venture (my neck of the woods), $40bn has gone into climate tech from January 2020 to August 2021. This is versus the $25bn that went into clean tech between 2006 and 2011. Version 1.0 was early, and being early is the same as being wrong, but key lessons have been learned, and the enabling infrastructure (and expertise, frankly) is very, very different than it was before. Oh, and if Version 2.0 is wrong, humanity is basically toast.

Current business leaders need to drop the short-termism and lead. Because those that do will win, and those that don’t will lose. It’s as simple as that.

To the future business leaders, the role is simply to seize the opportunity at hand. The irresponsible unwillingness of most of the world’s legacy business leaders to adapt is an invitation to eat their lunch. The world’s largest fortune belongs to an electric car, space, solar, peer-to-peer finance, and infrastructure entrepreneur. He got there by working on things that matter. Hopefully soon we’ll be saying that she got there by scaling portable nuclear power, or biological plastics, or infinitely recyclable energy storage, or scaling global water recycling.

The great thing about opportunities in the climate arena is that they all matter. In water, my sphere of action, I and the founders who are generous enough to let Burnt Island Ventures be a part of their journey are working on securing humanity’s most basic requirement. We are running around in a trillion-dollar industry at the bottom of the bottom of Maslow’s hierarchy of needs.

If you’re curious about where you can feel good about what you do, where would be a good place to spend your limited time once you graduate from HBS, look no further. The opportunities in water, the only commodity that every human needs at least every three days, are extremely large. But even if you don’t choose water, make no mistake—the climate question is not an Aldrich academic nicety. It’s a fight for our lives. And those of us in the trenches need all the help we can get.

Alan Horn (MBA 1971)
Chief Creative Officer, Disney Studios Content
Business Should Lead the Way

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It is time for business leaders to respond to the challenge of climate change in a powerful and effective way.

It is clear—and widely believed—that the political process has failed us in addressing this critical issue and is quite simply broken. HBS’s own Professor Rebecca Henderson has emphasized this fact and underscored the conclusion that “business is central to finding a solution.”

A parallel may be drawn to the experience of the last two years with COVID-19. Despite overwhelming evidence, there is still a segment of our population that will not accept the validity of the science relating to this. So it is with climate change. Despite clear scientific consensus, there is still a reluctance on the part of too many to embrace the facts.

With regard to businesses, we cannot let short-term, bottom line thinking drive decisions contrary to the best interests of that business (and society) over the long term. Frankly, the threat that is posed by climate change to our planet must now be thought of as short-term.

Finding a purpose-driven solution is hard, but there is money to be made. For example, in my business (motion pictures), film and television product can deliver important climate messages without “hitting people over the head with them.” There is a balance to be struck and we must find it.

Scott Jacobs (MBA 2007)
CEO and cofounder, Generate
Sustainable Infrastructure Is a Gateway to a ‘Resource Revolution’

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As business leaders, achieving stakeholder alignment is our license to operate and our best opportunity to halt the tragedy of the commons scenario playing out in climate change. We must think across the time horizon in which we believe our companies will operate, recognizing that’s decades not quarters. This requires considering our current and future customers, communities, employees, and shareholders—not just the people we are working with today.

The externalities of business-as-usual are a constraint to our future. Runaway pollution and expensive natural disasters risk the planet on which we depend, and are already triggering immense geopolitical ramifications and population displacement amid costs to human health, food security, and water availability. Weigh that against simply internalizing these risks into our decisions. We can look to my industry—sustainable infrastructure—as a beacon of the immense opportunity to mitigate and adapt to climate change. Clean energy, waste reduction, energy efficiency, green transport, and the circular economy offer the world’s largest economic opportunity in the coming two decades. If we can increase the productivity of our land and raw materials, what’s ahead of us is a fourth industrial revolution—a “resource revolution” that creates more alignment, stability and resiliency in our world.

Elizabeth Lewis (MBA 2006)
Managing Director of ESG, Blackstone
We Have Never Had More Power to Fight Climate Change than We Do Right Now

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Climate change is the crisis of our time. We have under a decade to get our planetary carbon emissions under control. But we have never had more power to fight it than we do right now. Business leaders have an especially important role to play. We can drive innovation to develop technologies that create energy using the earth’s renewable resources. We can move quickly when a solution is promising. We can deploy capital in flexible ways to scale solutions across the globe. And, we can do all of this while creating well-paying jobs of the future. 

At my firm, Blackstone, we are focused on creating economic growth by confronting climate change over this critical decade. We’ve committed to a goal of reducing carbon emissions by 15 percent in aggregate for all new investments where we control the energy use over the first three years of ownership—an emissions reduction trajectory that is guided by climate science to enhance value. 

Confronting climate change will also require massive investment. The world will need over $3.5 trillion in annual capital investments in order to reach net-zero emissions. Most of these investments will need to be from private investors. Many of these solutions don’t exist, and this is why we need the private sector’s innovation, drive, and scale focused on scaling solutions. I’m excited that Blackstone is helping to play a significant role in financing the energy transition and climate solutions. As one example, we worked for over a decade on a renewable energy transmission project that will deliver 1,250 MW of clean energy to New York by 2025, enough to power over 1 million homes and decrease CO2 emissions by an estimated average of 3.9M metric tons per year, the equivalent to removing an estimated 44 percent of cars from the city. We also completed a significant recapitalization of Altus Power, a market-leading solar power company that provides clean electricity to clients across the United States. We know that every sector of our economy must decarbonize, and so our climate solutions investments go far beyond renewable energy – into batteries, software, grid modernization, and food.

I’m optimistic because the world’s business leaders are now focused on climate change. We all have a tremendous opportunity to drive economic growth by making a positive impact, inspiring employees and customers in the process, and I can’t wait to see the results.

Barbara Littlefield (MBA 1988)
Chairwoman and Lead Operating Officer, Resilient Infrastructure Group
Collaborate Globally with Governments

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“We all need to work to put together common to all, clear, fair, and transparent climate regulation rules to be applied globally,” said the president.

This president’s identity may be a surprise—Vladimir Putin. Hopefully, we can we take him at his word? Global action is required to harness the resources and commitments necessary to combat a climate that is dramatically changing, and at a rapidly accelerating rate. While the urgency to act is widely acknowledged, we need to ask, “do people truly grasp the consequences of not reigning in carbon emissions to avoid crossing the global warming level of 1.5°C in the immediate future?” Delaying serious action is not an alternative; we will not have a second chance. We are responsible for and witnesses to permanent and irreversible damage to our climate, and it is our collective responsibility to respond.

As business leaders, we must collaborate with governments at the global, national, state, and local level to lead and to:

• educate all constituents about how each of us contributes to and can address climate change,
• invest in public private partnerships to accelerate deploying existing and to promote new technologies addressing climate change,
• implement carbon taxes, and
• arrange for richer nations to fund a pathway to renewable energy for poorer, emerging economies to curtail their fossil fuel use.

Yumiko Murakami (MBA 1994)
General Partner, MPower Partners
Maximizing What Japan Has to Offer

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As manifestations of climate change intensify around the world, Japan’s invaluable know-how in disaster preparedness and management is underutilized. Historically, Japan has disproportionately suffered from natural disasters. Coupled with that, within Japan’s large corporations are skilled engineers and high-quality, advanced technologies.

As a business leader based in Japan, it is our responsibility to maximize what Japan can offer, and as a VC investor, I believe we can be a catalyst.

In this path, the first step is to educate, and at MPower Partners, Japan’s first ESG-integrated, global VC fund, we work with startups to help them understand that even as a technology company, they can play a role in reaching net zero. We believe that ESG factors, including management of carbon emissions, will create value for startups in the long-run.

There are some tailwinds in this mission, such as from April 2022, Japan’s Financial Services Agency will require public companies listed in the “prime” segment of the Tokyo Stock Exchange to make climate-related disclosures.

At MPower, we can also bring leading global players to Japan. Our most recent investment is in Jupiter Intelligence, a US-headquartered climate risk technology company, and Jupiter plans to expand their presence in Japan.

We are excited and eager to work with entrepreneurs to make Japan a more visible, global player in finding solutions to fight climate change. 

Girish Nadkarni (MBA 1988)
President, TotalEnergies Ventures
A Cri de Coeur

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Whether it is because of COP 26 or whether it is because of the almost daily news of the impact of climate change on our lives, it is difficult to escape coverage of climate change in the media today.

With many countries as well as companies declaring their net-zero ambitions, it is tempting to think that business leaders have accepted the inevitable and are at the forefront of fighting climate change. Unfortunately, the picture is far more mixed than it may appear.

Except for some business leaders in the asset management and energy sectors, by and far there is a resounding silence at worst, and warmed-over platitudes at best, from most of the business leaders globally.

I sense a high level of scientific illiteracy around the causes and implications of climate change among business leaders. I also see an unwillingness to take the hard decisions for the long-term, for fear of hurting the stock price in the short-term. As “leaders,” they need to be honest with their customers, politicians, and climate deniers about the existential risk we face and the narrowing window to address it.

It is true that we cannot address climate change without each of the consumer, government, and business sectors playing their full and proper role. At the simplest level, the role of business leaders is to do all they can to address their Scope 1, 2, and 3 emissions, create and offer “green” products, and be willing to pay a “green premium” for what they buy.

On the plus side of the ledger, I do see green shoots of hope emerging. More businesses, such as Tesco and Stella McCartney, are willing to pay a green premium for buying bioplastics, and more and more airlines are doing the same with Sustainable Aviation Fuel.

New regulations and financial reporting rules are being drafted to force companies to disclose climate risks they face.

The investment community is starting to focus on sustainability as an investment imperative and penalizing companies that do not have a credible decarbonizing strategy.

Consumers are increasingly demanding green products and are becoming sensitive to their carbon footprint, with many apps allowing them to keep track of it and even compensate for it.

As one of the leaders in the space of climate tech investing, I am cautiously optimistic about the future, but we will need constant vigilance and continuous and unrelenting effort to address the climate change challenge.

Richard Needham, Jr. (MBA 2002)
Partner, Energy Sector Lead, TPG/The Rise Fund
Setting the Course for Long-Term Success

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In this time, where the evidence of climate change is all around us, and the damage to people, property, and business is ever-more tangible, business leaders play a critical role in thoughtfully navigating these challenges and setting the course for long-term success of their organizations. 

As world leaders meet to discuss climate at COP26 in Glasgow, there is also a large, growing, and more vocal presence of the private sector. The business world has fundamentally changed since 2015, with greater demand from customers and employees for more sustainable approaches, and with climate risk disclosures and decarbonization strategies as must-haves for any company seeking to raise smart capital. It is telling that corporate net-zero pledges covered just 16 percent of the global economy in 2019, but today stand at nearly 70 percent—with most of those pledges made during one of the worst global pandemics.  

We are likely facing one of the largest industrial transformations in our lifetime, from the massive deployment of clean energy and electrification of transport, to the shift to more sustainable agriculture and greener industrials. Business leaders, whether in these sectors or beyond, need to understand the physical and transition risks, but like any other transformation should consider and seize the enormous opportunities—not only because it will make their companies stronger, but because we, as a global community, have to.

Ronald P. O’Hanley (MBA 1986)
Chairman and CEO, State Street
Investing in Climate Remediation

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Business leaders have a critical role to play in climate change. Climate is a unique problem in that it is truly global—issues and solutions transcend borders. Though we live in a world that is increasingly deglobalizing, climate will be best addressed by optimized global actions. Business leaders, even those running small businesses, typically have a global mindset and can comprehend the global nature of the problem and solution.

Specifically, business leaders can play the following roles:

• Drive their own business toward a net-zero goal
• Develop and sequence an optimal plan to manage through the transitions
• Challenge/require suppliers to do the same
• Collaborate within industries/sectors to identify and employ best practices
• Partner with policymakers to identify and address roadblocks to net-zero
• Support employees and communities in this journey

The business opportunities likely to arise out of remediating climate change are myriad. Moreover, these opportunities are not just about new or emerging technologies. For example, given that gas is an important fuel in the transition as a better fuel than coal, new opportunities in clean gas will arise. The transition from gasoline/diesel to electric transportation will provide numerous new business opportunities.

As a global investor and as a service provider to global investors, the business opportunities for State Street revolve around helping investors effectively steward existing capital and deploy new capital toward climate remediation and the associated transition. This entails new stewardship services, curated products, and performance and risk management tools. Additionally, we are focused on investing and supporting the investment of others in emerging markets, which face the most significant capital and infrastructure needs to achieve net zero by 2050.

Most importantly, business leaders have to act now to position their own companies for the transition to net-zero. Though 2050 seems like the distant future—and well beyond the tenure of current management—most believe the world is behind where it should be to achieve net-zero by 2050. Therefore, it is incumbent on all business leaders to aggressively execute against their companies’ net-zero plan.

Aris Papadopoulos (MBA 1985)
Founding Chair, Resilience Action Fund
Unlocking the Emerging Market for Consumer Resilience

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True sustainability is both green (energy/environment) and resilient (hazard-resistant/continuing). Destroyed green assets are a double loss. Non-resilient development burdens environment, economy, and society.

Business leaders’ decisions affect sustainability. Through marketing they influence consumer choices. They innovate and develop new opportunities. Resilience offers many, not just in data/analysis, but in products, services, insurance, and finance.

The 2015 Paris Agreement highlighted adaptation. That same year, 187 countries signed the UN Sendai Framework 2015-30, setting a process for hazard resilience. Administered by UN Office for Disaster Risk Reduction, I was first to chair its private sector initiative, known as ARISE.

As a retired construction CEO and WTC 9-11 survivor, I questioned why assets are weak, rather than why hazards are strong. We control what we build, more than hazards. Yet vulnerable development remains legal, profitable, and most consumers don’t know the difference.

Many policies indirectly encourage it. Look how the National Flood Insurance Program spurred floodplain development since 1968. US building codes remain a fragmented, inconsistent patchwork. They’re still set at minimum levels, giving occupants time to escape but not saving properties. Homes are the core of most people’s wealth and the most vulnerable assets.

How do we ignite a sense of “micro-resilience” in consumers? We did so for safer cars, greener goods, and organic products. Most are resilient-blind when buying or renovating homes. They’re marketed size, views, and cosmetics. Many pack pricy “smart” and green products into otherwise hazard-vulnerable structures.

As some climate impacts are inevitable, resilience is essential. Governments have been slow to educate and empower consumers. The task has been assumed by a few pioneering nonprofits, such as Resilience Action Fund (RAF) that I founded. It’s time for business to step in.

My book, Resilience - The Ultimate Sustainability, explains why the US has the world’s largest disaster losses and inspired the PBS documentary Built to Last?. RAF initiatives include the Buyer’s Guide to Resilient Homes, Building Resilience Index with World Bank/IFC, and Resilience Youth Network.

Some predict that a “Great Repricing” looms ahead for properties, when markets and consumers awaken to the reality that vulnerable assets are less valuable. Businesses that act ahead of the herd can both capitalize on the opportunities that change will bring and reduce its impact on society. 

Kyung-Ah Park (MBA 1998)
Managing Director ESG Investment Management, Temasek International
Act on Opportunities Where There Are Challenges

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The COVID-19 pandemic has been a global tragedy that continues to affect tens of millions around the world. Some call it a black swan event. However, through this adversity, we have seen remarkable examples of human ingenuity and collaboration that have, for example, led to vaccines developed with record speed. The rapid adoption of technology has opened opportunities, even during global lockdowns, and many businesses have stepped up to take care of their broader stakeholders.

Climate change is analogous. We’re already seeing the devastation from a 1.2-degree world with the growing likelihood of further black swan events. But with ingenuity and resolve, businesses and governments can mitigate risks and accelerate opportunities from the tectonic decarbonization shift that is underway. The transition will not be an easy one, however the adoption of technology and innovation, as spirited as it has been during COVID-19, offers significant potential now to help curb the carbon trajectory and accelerate a more sustainable future.

Even with the disruptions from COVID, we’re seeing capital flows of over $500 billion in energy transition in 2020; green bond markets exceeding $1 trillion; and ESG fund flows totaling $330 billion YTD, with a third deployed to low-carbon funds.  

However, another $100 trillion is needed to achieve net-zero by 2050. Importantly, businesses that do not step up and manage the transition will be disrupted and left behind.

At Temasek, I am fortunate to have a front-row seat seeing how investing to accelerate net-zero enables us to do well, do good, and do right. In addition to an internal carbon price across our investments, we are harnessing three key levers.

• Investing in decarbonization technologies, ranging from clean energy and storage to green cement and alternative proteins. In addition, partnering to scale next-gen decarbonization solutions through Decarbonization Partners, a fund partnership we have established with BlackRock.
• Enabling carbon-negative solutions through technologies that remove carbon from the atmosphere and by harnessing nature-based solutions, such as afforestation and reforestation.
• Engaging with our existing portfolio companies to accelerate their transition to low-carbon business models, even in hard-to-abate sectors, for instance by supporting Sustainable Aviation Fuels and hydrogen. This is an important part of the equation to ensure systems wide decarbonization.

My time at HBS laid the foundation that has helped me navigate uncertainty and see opportunity where there are challenges.  

We are at a critical juncture, where business leaders can and must step up. We saw this with COVID-19; now we need to do this again at scale to address the climate emergency and seize the opportunities that come with it.

Stephen Renter (MBA 2013)
Chief Operating Officer, Commonwealth Fusion Systems
Seize the Opportunities

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IPCC's AR6 is yet another indicator that the global energy industry needs to—and will be—entirely reinvented during our lifetimes. This presents both a responsibility and an opportunity for business leaders. The responsibility is clear: we must preserve the environment for future generations. The opportunity comes from the trillions of dollars that will be deployed towards carbon-free electricity generation, transportation, and industrial technologies over the next decades. The earliest companies to incorporate sustainable technologies, products, and practices into their strategies will become the de facto leaders in this new landscape across all sectors, and those who don't will fall behind. As a recent speaker at COP26 stated: being an early adopter is hard, but being late could be catastrophic.

Ray A. Rothrock (MBA 1988)
Founder, FiftySix Investments LLC
Turn Climate Challenges into a Competitive Advantage

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HBS has asked: What new business opportunities could come from the efforts to both mitigate and adapt to climate change? What is the role of business leaders in this moment?

I look at this problem/opportunity in broad time frames. Present through 2050 and then after 2050.

It is not a surprise that the IPCC came out where it came out on climate impact of CO2. Any reasonable person, not even a technical person, could connect the dots of previous IPCC reports and see the conclusion coming... the question was when. Further, the technologies required to immediately address production of CO2 are well in-hand. On the electricity production front: nuclear fission, solar, wind, wave, and possible geothermal and hydro, work really well. We have also made great strides in building materials that are CO2 dense, food that is CO2 dense, and animal husbandry that is CO2 dense. So, I would argue that it’s all about economics and scale when delivered to the consumer—electricity, fuel, food, infrastructure materials.

As for the future, we must now start serious R&D efforts to advance technologies in all these areas, so that when 2050 rolls around, they are proven to work, are scalable, and are society acceptable. This is real sustainability and requires certain leadership across the planet to make it happen. I’m sure we’ll find something wrong with our current technology set, the unintended consequence if you will.

As for business, my view is that business will do what is in their best interest. That may be profit, that may be better products resulting in more consumers and market share, or both. And, for companies that provide these technologies mentioned above to other companies that consume products, they too must deal with the basic economics, utility, and acceptability.

Policy is interesting, but without economic teeth, policy changes will always be on the margin unless there is huge support within the public. Major changes in a business occur when major economics are demonstrated—new markets with new products, innovation, business model. These were well highlighted in many articles and publications when UPS, the package delivery company, programmed the routes for the trucks to turn right as much as possible therefore not waiting for clear left turns, thus reducing ICE idle. The fuel savings were huge—profit, and the reduced CO2 contribution likewise. And Coca Cola, which figured out how to change their water consumption in the bottling processes by 20x, at least. Both of these actions reduced variable expenses for these companies and therefore improved gross margins. Both of these actions are good examples of software and process changes that reduce emissions and increased profits. Both required R&D, trials, and deployment in scale to have an impact. It is industry that knows how to scale things—not government, and not the public.

My final comment about these actions—they required leadership and desire on the part of the business management. They could do both of these things without policy and both motivated by improved business operations and profits.

So, my answer to your question would be for business leaders to require their teams to address, at a very minute level, processes for delivering of their products—soft and hard—that will improve gross margins and hopefully reduce emissions. Better gross margin provides cash for more R&D, and profits for market reception and possible capital market access. In essence, this is a competitive response to the market and demand for more climate-friendly products. Consumers will drive this, of course, but a business leader, a CEO if you will, can get ahead and make this competitive advantage. It’ll take a R&D view, near and long term, but is quite doable as was demonstrated and discussed for UPS and Coca Cola. I bet, though I don’t know, that there are hundreds if not thousands of examples of exactly these outcomes for business. In America at least, it is perfectly good, if not essential, to make a profit while also doing good for the world.

Guy Rubenstein (MBA 1994)
CEO, Aveeram Wind
Being Responsible Towards the Environment Is a Great Financial Investment

BIO

Issues of sustainability, responsibility, and climate change have always been a high priority in my mind. The interest became a calling that evolved into a huge opportunity. Twelve years ago, I founded a business that develops wind farms that generate clean, renewable energy.

I am active in two markets, the UK and Israel (where I live). These markets had different regulatory environments that shaped the commercial opportunity. The UK offered a framework that provided an incentive of around 50 percent of your income. Israel offered a feed-in-tariff approach. Through dedication, we have become the largest developer of wind farms in Israel, where we will build nearly 500MW of wind assets by 2024. In the UK, we have built five wind farms and are now at the rate of building two large wind farms a year. We will have an installed capacity of 400MW by 2025 and hopefully double that by 2027 with new developments. My aim is that, within five years, we will produce enough energy for one million homes.

In the past 12 years, I have seen technology rise to the opportunity. A 1.5 MW machine that was the standard platform in the past has since evolved into a machine that produces six times more today. This has allowed the wind sector to achieve grid parity. Grid parity occurs when the use of alternative energies—like wind—costs less than, or equal to, the price of using power from conventional fossil fuel.
We have just commissioned a 46MW project in Scotland installing just 10 turbines that will produce enough energy to power 45,000 homes—with zero subsidies. That is the challenge going forward in my mind—how do we get to a net-zero carbon society with zero subsidies? How do we create a new energy mix that will be reliable and readily available while not imposing “green taxes”? In some respects, the renewable energy sector has achieved this. Over the last 10 years, solar energy has become cheap enough to compete with gas and coal. Wind energy is typically more effective than solar, and due to advances in engineering, more wind locations provide grid-parity green energy. Solar and wind will continue their impressive evolution and attractive economics.

The next major challenge in the race to stop global warming is storage and network management. Hydrogen is likely to be the major source of storage. Industry will hopefully have a cost-effective renewable energy storage technology within 10 years, which will cause coal and gas to fade away. Just as subsidies were crucial to jump-start renewable generation, a similar path is now needed to insure we develop storage technologies that will be cost-effective. If one believes, like me, that we are rapidly nearing a catastrophic period, we will need to find ways to rapidly deploy both renewable and augmented storage to really change the energy mix. Time is of the essence here.

The electric car revolution, the electrification of rail, and soon the deployment of hydrogen in trucks will enable society to mitigate the harmful effects of emissions from internal combustion engines—a massive challenge. Eventually, all needs to be energized through renewable sources.

Building on our success, in 2020 I established a fund called Wind’in Capital, with a charter to invest in renewable energy projects in other markets. We managed to change the mindset of institutional investors to take a more responsible role in how they invest. I am proud to say that we managed to demonstrate that being responsible towards the environment can also be a great financial investment.

What can business leaders do? Well, make sure your organization sources renewable energy. Make sure your homes consume clean energy. Install solar solutions in all of your business locations and your homes. Drive with 100 percent renewable energy!! If a slight premium is paid—it will be a marginal cost relative to the gains it achieves for all of us.    

Jennifer Tisdel Schorsch (MBA 1992)
President, Water.org
Integrate Water Strategy into Business Strategy

BIO

As business leaders, we have the opportunity—and obligation—to create a more sustainable, equitable, and inclusive world by elevating people and planet alongside profit.

The best and most urgent opportunity to do so is water. Today, 3.6 billion people live in water-stressed areas; by 2030, with no action, half the world’s population will live with water stress. These communities house our employees and customers, fuel our supply chains, and sustain our operations.

To mitigate climate impacts, we must integrate water strategy into business strategy.

Why water? Why us?

• Water and climate are inextricably linked. Climate disruption leads to water disruption. Nine out of 10 natural disasters are water-related—too much or too little water. By 2050, global flood damage is estimated to cost $1 trillion per year.
• Water is a business imperative. Two-thirds of all freshwater consumption goes into producing ingredients for corporate supply chains. Sustainable business requires sustainable resources.
• Business leaders have a powerful opportunity for impact. Today, 150 companies influence one-third of global freshwater use. By prioritizing water resilience—quantity, quality, and accessibility—business leaders can deliver triple bottom line impact.
• Business Opportunity. Today, two billion people—one in three—lack access to safe water and a toilet. COVID has accelerated demand for these services. Opportunity abounds in water and sanitation service, supply chain, and financing.

Collective Action: 1 + 1 = 3
The scale of the challenge demands collective action. Where to start? The Water Resilience Coalition. This CEO-led initiative, founded in 2020, is now comprised of 25 corporations with $3 trillion in market capitalization. Together with hand-selected advisors, these companies have accelerated action towards ambitious water resilience outcomes. Learn more and join.

Closing:
Water is imperative to human existence and to business success. We are the leaders who can ensure its sustainability. The time is now. Doing so drives business and benefits people and planet.

Michael Skelly (MBA 1991)
CEO, Grid United
Rise Above Corporate Interests

BIO

Climate change is upon us. If we are lucky, governments will pull together and create policies to reduce emissions and bend the curve of ever-increasing greenhouse gas so that we can move towards a low- and even zero-carbon economy.

As governments grapple with the right set of policies, business leaders must come together to engage in the political system to help drive solutions achievable at the lowest cost in the shortest amount of time. Public policy makers need business leaders willing to rise above whatever corporate interest they might have to push for policies most broadly beneficial. No doubt many businesses will be able to justify to themselves via the doctrine of shareholder capitalism a fealty to one’s narrow interest, but we must cast aside parochial interests. We will all be better off.

Tackling climate change will require the massive mobilization of huge pools of capital from across the globe—up and down value chains and across risk spectrums. Business leaders have vast experience in precisely this area. One of the sometimes-unsung features of modern capitalism is that companies can morph their capital structures and switch capital providers as technology evolution and project systems evolve and scale.

Great businesses identify, train, mobilize, and inspire their workforces to achieve tasks that individually seem impossible. Meeting the climate challenge is only doable if we marshal all of our society’s talents and strengths. Focused business leaders are uniquely positioned for this massive mobilization of society’s diverse talent pool.

Businesses can move fast—and the challenge at hand demands fast action. Business leaders should set the tempo.

Erik Snyder (MBA 2009)
Founder and CEO, Drawdown Fund
Investing in Climate Opportunities

BIO

Business leaders need to recognize that the actions that created the climate crisis will not solve the climate crisis. Once they draw this distinction, it is time to begin the real work of realigning operations with a commitment to effectuate lasting change. Anything short of definitive action will be too little, too late. It is time we rethink incentives to drive desired behaviors and intended outcomes.

It is now clear that we must price in externalities and redefine fiduciary duty to include duty to people and planet, not just shareholders. This is our approach at the Drawdown Fund. We have designed and implemented the first impact-driven carried-interest structure aligned to CO2 equivalent sequestered or emissions reduced, and we fully underwrite our investments to tie in climate goals alongside financial ones. Our personal incentives and firm-level commitments are fully in sync with our vision to mitigate climate change.

There is an opportunity in the face of this crisis. In fact, solving the climate crisis is the single largest investment opportunity of our lifetimes. The world needs to be redesigned and redeveloped for a low-carbon economy, and this new global economy requires innovative and high-growth companies. For context, there is a $22T market opportunity solely within the three investment sectors—renewable energy, sustainable cities, and food and agriculture—of the Drawdown Fund. Investing in climate opportunities will be an alpha generator, likely the ultimate alpha generator, in the years to come.

Sarah Keohane Williamson (MBA 1989)
Chief Executive Officer, FCLTGlobal
Climate is the New Digital

BIO

A digital strategy today is a core element of any business. Imagine a company in 2021 with no website, no databases, no advertising or online marketplace—the business would be a relic, stuck in a bygone era. In a few years’ time, a company without a climate change strategy will be viewed the same way.

Like digitization, climate change has both risks and opportunities for businesses—and will create winners and losers. Forward-thinking, carbon-intensive businesses may be the furthest along because climate change is an existential threat. But any company with a proven willingness to transition toward net zero, regardless of sector, is in a position to profit from innovation if they act now.

Likewise, investors are very focused on the transition, with most large investors understanding that the goal is decarbonization of the planet, not dressing up their own portfolios. In a recent discussion with Mark Carney on the Going Long podcast, I asked why investors continue to invest in high-emitting sectors—“Because that’s where the emissions are.” Investors are ready to seize the opportunities that come with climate change if companies are ready to adapt.

The new focus on sustainable accounting that is material for investors is a critical step, and the announcement at COP26 of the creation of the International Sustainability Standards Board marks real progress. Consistent data and disclosures will help clarify decision-making within companies, and with their shareholders and other key stakeholders. As bp CEO Bernard Looney recently said, “transparency is the currency for trust.” While global regulators may take action in time, the best companies are implementing sustainable accounting now, rather than waiting and playing catch-up later.

Whether focused on energy, agriculture, infrastructure, or less obvious sectors that will be disrupted by the climate transition, integrating climate considerations into core strategy—not treating it as distinct from the business—will be key to both company success and real impact on the climate.

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