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Remy de Tonnac, partner with ETF Partners, considers the pivotal role of green finance in limiting global warming and ensuring a sustainable future for people and the planet.


The press release announcing the Intergovernmental Panel on Climate Change’s (IPCC) latest report gets straight to the point when it says that "without immediate and deep emissions reductions across all sectors, limiting global warming to 1.5°C is beyond reach".


It makes for a sobering read. The targets set out in the Paris Agreement are rapidly becoming unobtainable. If we carry on down the current road, we will have lost the opportunity to save the planet.


We are already seeing the effects of our disregard for the world we live in. Wildfires, flooding, droughts, and temperature extremes; are not happening in obscure places on the other side of the world, but on our doorsteps.


But is that enough to prompt us into action, and take the steps needed to limit global warming and bring us back from the brink?

From trauma to transformation

Perhaps. But probably not. While there have certainly been advances in understanding, commitment, innovation and investment when it comes to becoming more sustainable, they are incremental changes that will only truly pay out over time – a luxury we no longer have.


Throughout history, rapid transformation only truly comes about after significant trauma. It is likely that it will take a cataclysmic climate event in a developed world country to do something similar to sustainability. This is hard to imagine, but the only thing worse than witnessing such a moment would be it to be repeated because we did not learn our lesson.


So, we need to ensure that we are ready for this event, no matter what form it takes. Not just in being responsive and mitigating the initial impact, but having the systems, tools and mindset in place to cement the change that follows.

This foundation will be based on three things: implement a meaningful carbon tax, create an accounting system that incorporates depleting natural resources, and increase investments in clean technologies.

First: a meaningful carbon tax

What do I mean by a meaningful carbon tax? One that actually forces polluters to pay while getting money to those groups committed to improving our world. One that creates a virtuous cycle by hurting those that profit from destruction while incentivising good behaviour. Have the right impact, and get the right rewards.


Why do we need this? Because so often we hear that sustainability isn’t profitable, or at least isn’t as profitable as business-as-usual. While that’s a simplification, and frankly wrong, it does highlight a core issue: why would anyone, whether business or government, knowingly restrict itself if competitors are not?


That’s why we need a carbon tax. To get those that are focused purely on profit over the line, while still rewarding those that have committed to sustainable ways of working and having a positive impact.


Right now, we have some pricing mechanisms in existence, but they are inconsistent in their application, enforcement and impact. The International Monetary Fund estimates that four-fifths of global emissions remain unpriced, with the global average emissions price just $3 per ton. This is well below the $75 per ton price required by 2030.


To implement a meaningful carbon tax, we need global consensus driven by clear leadership. This is an area I passionately believe Europe can take charge of. As a region, it leads the world in environmental legislation and innovation, which creates a framework and precedence to create a carbon tax that the continent’s countries could get behind. Through the European Union, there is an experience in moulding the competing priorities and opinions of different nations into a collective focus – something that has to be done successfully if carbon taxes are to become a reality.

Second: a new approach to accounting

To inform that carbon tax requires a deeper understanding of the true cost of our use of natural resources.


That means looking at our accounting systems. These have not changed in centuries. While technology has meant that we can do more, faster, with our money, we are using a process that was conceived based on a number of assumptions, including that we would not exhaust the world’s natural resources.


This is clearly not the case anymore. Therefore, it is imperative we introduce new accounting systems that consider the remaining capacity of a given resource when it is used to support our way of life. For example, when we extract and refine oil, the cost of doing so is currently contained to those processes. What we should be doing is adding to those costs what it means for remaining reserves and the impact the use of that oil will have on the planet (such as through emissions pollution).


This information could be fed into a new accounting system that does not allow corporations to put those expenses towards writing down taxes, for example. Instead, those costs are used to inform oil companies’ contribution to the carbon tax – hitting the polluters where it hurts.

Third: massively increase investments in clean technology

As mentioned before, as well as hurting those that would continue to operate in an environmentally unsustainable manner, we also need to be supporting those committed to having a positive impact.


We are already seeing unprecedented levels of investment in clean technology, but this needs to increase dramatically, by a factor of ten, if not twenty. That might sound fanciful, yet this is not about throwing money at theoretical concepts, but innovations that are already having an impact. If we look at what is contributing to the majority of greenhouse gases, we can see that there are three main culprits: agriculture, transport and energy.


In each of those, there are already businesses making huge strides to change how each of these sectors operates. In agriculture, companies like the Modern Milkman are helping to change the distribution model and the impact of consumer packaging, directly impacting the industry’s emissions. How we travel is being shaped by trends such as mobility-as-a-service and autonomous vehicles, with the likes of Vulog helping to make MaaS a reality, and businesses such as Basemark doing their parts to make self-driving electric cars a mainstream reality.


Of course, it is energy that has the biggest impact, with our current addiction to fossil fuels doing so much to cripple the planet. That’s why companies like QOS Energy, which supports the optimisation of solar and wind farms at scale, and Greenbird, which helps utility companies create sustainable value through the better use of data, are so important; through their efforts, and that of businesses like them, we should be able to speed up the replacement of fossil fuels with renewable energy.

Make changes today to prepare for the future

As the saying goes, the best time to plant a tree was decades ago. The second-best time is now. It’s the same with sustainability – we need to make changes today if we are to have any hope of saving the planet for future generations to enjoy. That means transforming the structures, systems and processes that currently support environmentally unsustainable ways of doing business and making it unprofitable to continue in such a pattern.


In doing so, we can be better prepared to react to major environmental events and ensure that whatever trauma they inflict is not in vain.


ETF (Environmental Technology Fund) Partners is based in London. It boasts a fifteen-year track record in backing high-impact, high-potential startups for positive climate impact.


Further Information: ETF Partners