The Transition Risk-O-Meter, by Laura Ramirez, Jakob Thoma, Jean-Christian Bruncke, Nicole Rottmer, Marco Granzow and Mark Fulton, Publishers: 2Degree Investing Initiative and The CO Firm GmbH, London and Berlin (2017), a public service offered online free, addresses the needed additional financial models, scenarios, algorithms and compares their alternative assumptions with traditional risk-analyses, and identifies how transition risks and opportunities can be plugged into existing algos and portfolios. Since Michael Bloomberg and Mark Carney of Britain’s Bank of England, issued the final report of their Task Force on Climate-Related Financial Disclosure (TCFD) on June 29, 2017, institutional asset managers are responding. So far, pension funds with some $25 trillion AUM have thrown their weight behind the TCFD recommendations that these new risks require mandatory disclosure in all main financial filings, as they are material to investors, "Investors urge widespread adoption of TCFD climate reporting framework", (IPE, June 29, 2017). Others, including Paul Fisher former Bank of England official, are worried that the speed of this ongoing global energy transition may cause the next financial crisis. Fisher says "in all these scenarios, banks, insurance companies and large institutional investors may face existence-threatening losses,"Could climate cause the next financial crisis?" (IPE, June 29, 2017).
The authors of The Transition Risk-O-Meter address all these concerns. They compare all the different forecasts and scenarios: sea level rise, floods, more violent hurricanes, drought, fires, and devise risk-assessment tools to update financial models, which may be blind to both these risks and new opportunities, such as those we cover in our 2017 Green Transition Scoreboard (NYSE:GTS) "Deepening Green Finance® (also a free download).
The authors use a financial lens to examine how all the major scenarios by governments, corporations, scientific and multilateral agencies view climate risks mostly in physical terms. Like the TCFD they acknowledge that the use of scenarios, as futurist like me employ, are the preferred tool for assessing longer-term options. The authors embrace and compare current scenarios applied to eight major sectors (with more in the works): fossil reserves still categorized as "fuels" (not more accurately as "feedstocks" as I propose), Assessing Risks of Fossil Reserves: Are They Fuel or Feedstocks? as well as automobiles, cement, steel, aviation and shipping. This work goes beyond traditional reference decarbonization scenarios such as those of IEA, which are not designed for financial analysis. This free, downloadable public service report was funded by the European Union’s Horizon 2020 programme.
The complementary physical worldview in Drawdown, edited by Paul Hawken, and a scientific team offers practical examples. Penguin Books,New York,(2017). Is compiled by a staff of 17 researchers and steered by notable scientists and experts from many disciplines including Janine Benyus of the Biomimicry Institute and her consultancy Biomimicry.3.8 (for full disclosure, I am an investor). This research was funded by private donations and foundations in this beautifully illustrated coffee-table sized book. It covers innovations and practical examples worldwide in: energy, food, building and cities, land-use, transport, materials, women and girls family-planning and education, as well as "Coming Attractions" which looks at promising "outside-the-box" research, opportunities and potential risks.
All these approaches are ranked as solutions for their viability, scalability, cultural and social acceptance---complementing the financial analyses of the Transition Risk-O-Meter. Many of Drawdown’s approaches are already proven and far advanced, some profitably-applied in many countries, including: electric vehicles (unfortunately they conflated with autonomous vehicles), LED lighting, wind generators, solar farms and rooftops, microgrids, energy efficiency and storage, ocean wave and tidal power, waste-to-energy, smart glass, recycling, bioplastics, land-use, re-forestation, retrofitting, net-zero buildings and other well-known technologies, all of which we cover in our annual Green Transition Scoreboard® reports.
In their "Coming Attractions" I would have liked to see: halophyte agriculture using saltwater to irrigate the 10,000 varieties of salt-loving plants, now hybridized for human food, materials and biofuels, using deserts and scrublands worldwide to replace our over-reliance on fresh water plants (glycophytes) grown on agricultural lands. We cover halophyte agriculture in our Green Transition Scoreboard® 2014, "Plenty of Water" and in our TV show, Investing in Desert-Greening with NASA Chief Scientist Dennis Bushnell and Dr. Carl Hodges, President of the Seawater Foundation. Other proven technologies missing from Drawdown include composting toilets, e.g. Clivus Multrum, solar-powered EV charging stations requiring no digging or permitting, which complement batteries in vehicle drive-trains and address drivers’ "range anxiety". These EV charging stations such as those from Envision Solar (OTCQB:EVSI) are now employed in many cities including New York (for full disclosure I am an early investor). Too much focus on battery storage is leading to "peak lithium", as we have reported in GTS.
I would also like to have seen more focus on routine teleconferencing, now ubiquitous globally on many commercial platforms, rather than the section on more esoteric and less necessary Telepresence. In the book’s section on Transport, I would have added the many alternative propulsion modes for smaller-sized aircraft and ships, which allow electric motors, wind generators, solar panels and sails ( Event-Operating Specialist Wind Vessels). Also overlooked is disruptive, science-based industrial diamond production and the chemically-identical lab-created gems now widely available. These substitute for the cruel, polluting global gem-mining industry and its cartelized prices, which is obsolete and can now be phased out (see our EthicMark GEMS standard which certifies only gems not mined from the Earth at www.ethicmarkgems.com).
These two wonderful books fill a void in both policy and real-world business opportunities. They are a sure way for financial players to upgrade their models, algos, assumptions and risk-analyses.
Disclosure: I am/we are long EVSI.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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