• Ideas

Investing in an Innovative Tomorrow

How capital combats climate change.

Droughts and floods have always been a reality for Australians, but climate change is on track to escalate the challenges of an already volatile environment.

“I love a sunburnt country, A land of sweeping plains, Of ragged mountain ranges, Of droughts and flooding rains.”
– Dorothy Mackellar. ‘My Country’. 1908i.

In Dorothy Mackellar’s ‘My Country’, one of the Australian literary canon’s most iconic poems, the author pays tribute to the nation’s climatic extremes. Those extremes, however, have been worsening in ways that are far from poetic.

According to the CSIRO, the more extreme conditions experienced by Australians in recent years can be expected to continue, and become more severe, as we approach the end of the decade. Temperatures are projected to continue increasing with more extremely hot days and fewer extremely cool days. Weather with a high fire risk will increase, as will extreme weather events. The projections also forecast longer periods of drought for our already beleaguered farmers, rising sea levels and increased ocean acidification – creating a treacherous scenario for our fragile marine ecosystems.

For Australia, and the world, it’s clear that innovative solutions are urgently needed to counter the increasing toll of climate change. One mitigation strategy involves attracting more private capital into technology investments that help mitigate environmental damage. It’s an approach that could benefit both the planet and the global economy.

The good news is that entrepreneurs are embracing opportunities to invest in innovative technologies aimed at stemming the worst impacts of environmental degradation.

A recent report by Morgan Stanley’s Institute for Sustainable Investing, with The Economist Intelligence Unitii, delves into five sectors closely tied to greenhouse gas emissions, and the technologies that governments, cities and companies are utilising to mitigate the impact.

Of the five sectors addressed in the research, the energy sector stands out as a particular challenge. Mainstream concerns about finite natural resources, sky-rocketing home energy bills and the energy needed to power an increasingly digital world have contributed to an anxious and pessimistic consumer outlook.

Energy consumption accounts for 35% of the world’s greenhouse gas emissions, and industrial expansion in emerging markets will only increase that share if opportunities for mitigation technology aren’t readily embraced.

For entrepreneurs investing in new energy technologies the focus is on large-scale wind and solar power; small-scale off-grid solar where energy infrastructure is underdeveloped; and the development of efficiency technologies worldwideiii.

The flow on effects of ingenuity powered by capital across the sector has seen the use of renewable energy reach a global tipping point. The price competitiveness of solar and new technologies is driving demand for clean energy sources in both emerging and developed markets. In fact, renewables are expected to become the cheapest form of new power generation by 2020iv.

In further good news, smart-grid and Internet-of-Things technologies are making energy grids more efficient, reliable and low cost across the globe. Energy storage technology is also reaching a point where renewables can finally become a dependable source of power on electricity grids.

Innovation levels in the energy sector are on par with similar developments across other high-impact sectors. Global agriculture initiatives have introduced innovative solutions to reduce livestock methane production, while the building sector has embraced vertical farming and completed a series of structural retrofits in selected major cities.

Across the transport sector, emission reduction initiatives are taking root in low-income economies, while demand for electric vehicles continues to grow in developed markets. Estimated projections from the International Energy Association have electric vehicles accounting for 75% of all global car sales by 2050v.

In the industrial sector, carbon capture and storage technologies are being increasingly utilised, alongside innovations that decouple industrial production from emissions growth in advanced economies.

In light of these ongoing multi-sector developments, hope takes the form of human ingenuity and entrepreneurial foresight.

It’s a combination of great ideas, shared capital and a stakeholder readiness to engage new technologies that could yet provide a more poetic reimagining of the world’s shared environmental and economic future.

 

For information on investment opportunities in innovative technologies, please contact your Morgan Stanley Financial Adviser.

 

iWhen ‘My Country’ was first published in 1908 it appeared under the title: ‘Core of my Heart.’ According to the State Library of NSW.

iiThe material contained in the Climate Change Mitigation Opportunities Index (“Index”) was developed by The Economic Intelligence Unit with input from the Morgan Stanley Institute for Sustainable Investing. The data contained herein may be obtained from a variety of sources and may be subject to change. Morgan Stanley and its affiliates disclaim any and all liability for the information, including without limitation, any express or implied representations or warranties for information or errors contained in, or omissions from, the information.

iiiLarge-scale wind and solar power is a focus in the U.S., India, China and Saudi Arabia.

ivAccording to Morgan Stanley research.

vAnthony Eggert, “The Clean Transport Revolution”, Climate Works, 7 June 2016. Available at: http://www.climateworks.org/blog/the-clean-transport-revolution/