This session explores climate change and the different roles played by the public sector and private sector. While public sector is setting the frameworks for regulatory action, the private sector is also getting involved in solving the challenge. But what’s in it for them?
Saima: So my name is Saima and it is my absolute pleasure today. To welcome Malavika Jain Bambawale to talk about climate change and the role played by public and private sector. Malavika is the managing director of NJ Impact, which is an advisory arm for one of the largest clean energy producers. Without further ado, Malavika over to you.
Thank you so much for joining us. And thank you for everyone else for joining us on Saturday. I know it's a very special time as you're joining on a weekend. So thanks again. And over to you, Malavika
Malavika Jain Bambawale: Thanks so much, Saima and thanks UWC for this opportunity. Hi, everyone. I am excited to have the chance to talk to you about climate change today. It's a really hot topic these days, I guess, pun intended. And there's a lot you know, it's a very complex topic as well. And how do we address.
How do we address this topic? Is is one of the key challenges this time? A quick introduction to myself. I am actually a UWC parent. I have two kids in East and middle and high school. So special attachment there. But also, I've spent over 20 years in the industry on this topic across three continents. I worked in the U.S., I worked in Europe and EPAC and I also worked across three different sectors.
So I work primarily in the private sector, but I also worked on some of the public sector. So governments and I've worked with the development sector as well. So I kind of see this problem from all those different lenses and I hope my perspectives will be helpful to you. What I want to talk to you today about is the importance of this topic and just firstly just for us to get on the same page on what we mean by climate change.
Before I jump in, you know, why is the private sector industry interested in climate change and how do you divide the roles in the public and the private sector? And then just speaking about what actions are being taken and what are some of the challenges being faced? And I believe that after this session, there's a networking platform where you can ask me questions and you can get into that as well.
So let's get straight into it. So first, I don't think, you know, I don't know what the audience is like and how familiar they are with the topics, but I thought I'd just start with one very basic question which is often asked, which is, you know, is climate change. First of all, what is the greenhouse gas effect? And isn't that something that is normally dealt with in the course of the Earth's evolution?
And secondly, do humans really have a role to play in the climate change? Now, I want to start by saying yes, I mean, climate change is a long term problem of the environment that has been caused by widespread human activity. And the greenhouse gas effect is something that exists in the sense that, you know, it's earth's natural breathing emits carbon dioxide, which is to re-absorbed by vegetation, by the oceans, et cetera.
But what has happened over the last couple hundred years is the industrial revolution, that that natural pattern has been disturbed because of the way the population is growing really fast and because of human activity. And that absorption hasn't happened at the rate that is required to keep the global temperatures in check. And so the amount of CO2 in the atmosphere has increased by about 14%, which is leading to higher concentrations, which is part of the warming effect of the you know, this is way more than has been seen over the last 4 million years.
And this has caused this disturbance in our atmosphere and the rise in temperatures. And everything you see related to, you know, whether it's animals, whether it's you know, it's all caused by human activities of our own consumption. I mean, where is this coming from? So if you look at where these emissions are coming from, about 75% or three quarters of this is coming from fossil fuel consumption.
So we are consuming and emitting to activities such as electricity and heat transportation, manufacturing and construction buildings, et cetera. All of that constitutes for about three fourths of this greenhouse gases in the atmosphere. And then the rest of it, the primary big chunk of that is coming from agriculture so our own consumption of the way land use is used agricultural practices, including our consumption patterns, et cetera.
So that's just to put us in the perspective of what climate change is, what are the main drivers. And of course, I think we also understand now there's a lot of information on what the consequences are of increased global temperatures and here's a chart that explains how a 1.5 to 2 degree rise can have quite devastating effects on our environment.
You know, you have the permafrost melt across almost a quarter of the land, but you also have water stress, which exposes, you know, given the right type of temperature, either a quarter billion or half a billion people to water shortages, ecosystem changes, massive changes in biodiversity and flood risk increasing by three times. You know, just in the coming years. So I just want to jump straight into, you know, what are we doing about it and what can we do about it?
I mean, since this is a school platform what I thought I'd start with a little bit of economic theory. Milton Friedman, as you know, wrote a book called Capitalism and Freedom in 1962 and he said that the role of business was to use its resources and engage in activities designed to increase profits. So very clearly I mean there was a sort of very black and white view of what the private sector should be doing, increasing profits.
And then it's the role of others to sort of manage other things. However, that view has constantly evolved over time. I mean, you know, the economist Hardin actually wrote in his book later in the same decade that the tragedy of the commons stands for the dilemma in which multiple individuals acting independently in their own self-interest can ultimately destroy a shared resource.
And that's what we've been seeing that unfortunately, these resources that come without a price tag, which are often in the public goods get depleted very quickly. And that's what is leading for example, to climate change. And climate change is not the only problem that we're facing. There is water shortages, there's biodiversity, there's plastics in the ocean there are many other problems.
But this one is what I would be focusing on today.
Further down, there was also the Brundtland Commission that was set up by the U.N. in 1980 that also wrote a report which and I like this quote very much which sort of put's this whole sustainability by the private sector in a framework. Right it says sustainable development is development that meets the needs of our present without compromising the ability of future generations to meet their needs.
So I think, I think that's a very nice way of putting it. But, but having said that, and given that we are operating in a capitalist environment, how does it practically change the way that companies behave? Right. I mean, what is causing because at the end of the day, the key metric that companies are measured on is their account to shareholders.
But what is happening is that there are different forces that are kind of putting the companies in a bit of a pressure cooker situation. So first of all, there's the public sector so you have forums like the Paris 2015 meeting that took place seven years ago. You have the U.N. Sustainable Goals and the frameworks that are put together by multilateral organizations, but also governments that have signed up to these agreements to say, you know what, there's action that needs to be taken.
This is a serious issue. And you also have investors that have been putting pressure on companies. And here I have a quote from Larry Fink, BlackRock talks about how they are asking companies to disclose a plan for how their business model would be compatible with energy requirements. And on that slide, it's not just the investors, but also shareholders of companies that are starting to pressure.
And I think a recent example of you might be the shareholders of McDonald's and said, McDonald's how you're treating your pregnant pigs that we need to know what's happening with that. I mean, so that's an example of how shareholder activism is becoming more, more and more common. And then finally, you have customers who are also voting with their dollars.
And I don't have data here, but, you know, I would just like to see those sets of customers that are some that are rich and some that are not so rich, but with different levels of ability to work with their dollars. And that is putting pressure on companies as well to be responsible and to answer how their products are made and what impact they have.
So moving on to the next slide, what are the established frameworks that the private sector is starting to adopt? I mean, the first and the most well-known is ESG. And I'm sure, again, all of you have heard of this Environemnt and Social and Governance as a three pillars of sustainability. And then the second is also the SDGs.
So a lot of companies are starting to provide reports on how their actions are impacting and which of the goals of the U.N. SDGs they align with in their annual reports, for example? So let me go a little bit deeper now into what these actions are and what are the actions that the public sector is taking and what are the actions that the private sector is doing.
So first of all, you know, just a quick recap of what happened with the Paris Agreement in 2015. Now this was a bit of a wake up call on the need to decarbonise now. You know, before that it was the IPCC and the U.N. who were putting out reports saying, you know what, 2020 is going to be the watershed year by which we have to do X, Y and Z.
But not a lot of attention was paid. And I think Paris kind of created that wake up call. It was signed by the first legally binding global agreement on climate change. And 190 parties signed the agreement, which is really incredible. And it what it does is, of course, there was a lot of controversy around how exactly it's going to be implemented.
And some of the phrases today like Article Six, et cetera, are still being drafted. But it created that framework to limit our warming to well below two degrees with the aim to limit the rise to 1.5 degrees. Now, what is this 1.5? What is this meaning? So there's a little bit of a chart on the left which shows you that we are currently between 2000 and 2020 and we are moving up in terms of our temperature changes.
As you can see, the blue line is steadily, you know, straight up direction. What happens is if we continue down this business as usual trajectory, we're going to hit 1.5 degrees warming in the next about 15 years or so very quickly. And the idea is that if you we can cap that, if we can actually turn the trajectory around cap it and then we should try and do that because the faster you take action on climate change, the better it is.
And the less the damage that is caused. So the idea is to, you know, realistically we will probably not be probably see 1.5. We will get to two degrees. So let's try and cap this at 2 segrees, sign the legally binding agreement there, but then let's try and aim for 1.5 now what exactly is happening? What is everyone doing? SO we've signed these legal agreements, but what's happening with countries?
What's happening with the companies, right? So far about 83 countries, which is more than three quarters we represent more than three quarters of global emissions have set long term net zero carbon targets we have everyone, including the US, the EU, China, the three biggest emitters, India as well, who have signed up to create net zero right in varying degrees of time. Secondly, what is interesting is that you also have cities, a lot of cities who act sort of independent jurisdictions have also signed up for these targets.
So you have a small number of 40 cities in 2010 that signed up independently and now that number has reached over a thousand this year. But then you also have companies who are putting in science based targets. So I talk a little bit about what science based targets mean and what companies are doing. But there's approximately 3000, so about 2,884 companies that have signed up to create science based reductions or science based net zero targets.
Now, before I go into what these guys are doing, what I want to say is that interestingly, despite all of these plans, our GHG emissions are projected to still increase by 14% by 2030. And if you recall, I was saying that if we want to get to 1.5, we have to halve emissions by 2030 over the next eight years.
So all of this is great, but it's still far from enough in terms of what is needed. So now going into what countries are green. Right, so I talked about these 83 countries that have signed up on energy targets and there's various levels of plans that are being put in place in our own you know, in our own region.
Singapore doesn't yet have a net zero target, but Singapore is on its way. Singapore has created a carbon price which has actually raised now and it probably hit $50 by the end of this decade, which is quite impressive. But you also have Indonesia, for example, that has said no coal by 2050. We also have Thailand, we have Vietnam. So a lot of countries are starting to move in this direction.
But this is a chart. I mean I don't want anyone read through the font size, but basically what this is saying is that there's a bunch of mandatory carbon markets and jurisdictions around the world that are developing and over 40 countries and about 20 cities are covered by carbon pricing mechanisms and this could be either carbon tax or an emissions trading scheme there are two different types of mechanism.
One that caps the price, one that caps the volume, and there's been an upward surge of carbon prices thanks to all this action and there's also about, yeah, this I think this is about 20 to 30% of greenhouse gas emissions. Now what's the private sector doing? So the private sector has what's called voluntary carbon, so that was mandatory. But there's also a voluntary carbon market developing.
I mean what the private sector is starting to do first and foremost is measure and report. There's a huge complexity of measurement reporting frameworks. But then the second action that the private sector is doing is sort of incorporating this whole thinking into their business model. You know, how do we I think it's increasingly becoming clear to the private sector that it's harder and harder to make money if you're not compliant with what your investors want, what your customers want and where the government is headed.
So it makes business sense to be climate active. And that's where a lot of the things that big businesses are starting to create going carbon prices, they're starting to convene stakeholders, they're starting to push and appear in voluntary carbon markets, for example. And then finally, so all of that is good now it's all about planning and all of that.
But then the big gap is also between the plans and the actions and finally, we are seeing action on decarbonising, right? So first of all, just I mean, this is just a snapshot and not meant for anyone to read this, but what I wanted to show is that just in terms of measuring and reporting, it's it's not a simple task to measure what carbon footprints are.
There's a lot of different standards out there, a lot of different reporting frameworks out there, sometimes a lot of confusion. And people really need help, a lot of technical expertise to be able to do this properly. You know, you have GRI, CDP, SASB TCFD. And the way the standards are typically evolving is that the earlier standards used to be very much focused on the measurement of the problem.
And the new standards are also starting to incorporate like TCFD which is task force on climate financial disclosures. It's about what are the risks from climate change and how are you capturing that in your valuation. So there's a transition that's happening on the standard side of things I also wanted to briefly talk about the science based target initiative, which some of you may have heard of, which is really it's becoming the most popular way for companies to set targets, because what was happening was that, you know, in the last so maybe two years ago, companies were starting to put their hand up and say, you know what, I'm going to be carbon neutral or I'm going
to be net zero. And there wasn't a common standard that defined what that meant. What does that term mean? And what are you promising? Is that even credible so the science based target initiative CGI was a welcome initiative set up by CDB and and WRI and a couple of different bodies coming together and strongly represented by the private sector, by the industry, which is which is fantastic, which provides a credible standardised framework for organisations to set their decarbonisation goals, which is you always want to you know, you want to promise something.
Here's what you have to do. You sign up for what is VDI and then, you know, steps you have to follow and then you figure out if you actually did them right. So so currently we have 2800 companies to sign up for this and they've got a range of different things. You either sign up for the below 2 degrees pathway or you sign up for a 1.5, which is even more stringent.
That means that if you're in "Sector X" manufacturing of automobiles, you have to follow a certain path towards decarbonisation that involves X percent reduction in your carbon emissions. And so that's that's what it does. What the CPI did very well at the beginning established a strong credibility and set rule setting. And I'm going to talk about that later on.
But they've now created a new standard for the next vital science based, which incorporates offsetting of emissions, but in a more responsible way. So let me talk about that when I come to the next page, which is how do you decarbonise or what what are the key levers to decarbonise for these companies? So the first one is that you measure your footprint and then you start reducing your footprint.
So you look at your Scope 1 Scope 2 Scope 3 emissions. Scope 1 is what your directive is, your actions, your body, a certain amount of fossil fuel or you have refrigerants or buildings or whatever it might be. The second scope is indirect purchases of electricity. And then the third scoop is your suppliers emissions that you are encouraging as a result of what you've implemented.
So three levels removed from your direct actions. So the first thing you can do is reduce. But then the second thing you can do is also offset, which means that you invest in activity or you sponsor activities that allow others to reduce carbon or to remove it or avoid carbon generation. So this is typically a lot of this nature based solutions
NBS as some of you may have heard, there's a lot of activity around forestry, for example, in the measurement and sponsorship of forestry activities. But offsets are controversial or have been controversial because they should not be seen as a license to continue doing what you're doing. And that was the argument about the science based, the SBDI initiative, that this is being used by companies to continue doing the activities.
And what's happening is in the environment the carbon is coming out anyway. So how do we prevent that from coming out? First have to reduce and then you can offset. So there's a hierarchy of decarbonisation as you can see on the right hand side of the V chart is first thing to do is to eliminate through design. It's kind of similar to the Three R's.
First reduce, before you start creating new stuff. You first start to eliminate through design. Things like if you're a chocolate factory, which is using low grade heat to cook cocoa and or you make together chocolate, do you really need to boil up your steam 200 degrees and then cool it down to 35 in order to create low grade heat?
Because that's what's happening right now in a lot of these factories. And so you really need to find ways maybe there are ways to actually reduce heat by reusing a lot of the heat that's being generated, waste heat or whatever that is already sufficient to cook that chocolate, for example. The second is reduce efficiencies. So again, if I use the same example of a chocolate factory, you know, can I actually replace the boiler over the heat because he was actually using again, not it's a better way of utilising energy because it's not reaching those high levels.
Taking cool air from the atmosphere and making a chemical reaction and changing to the right level, for example. But these investments cost money so you really have to be able to find a business case for these investments. And then the third is around on substitution. So if I am using energy in all of my processes, right, if I'm smoking or if I'm cooking, how do I create how do I use cleaner sources of energy rather than the principles of energy?
So that's a thought. And then finally, you compensate through offsets. It's because you've done everything you possibly can. Then you compensate through offsets. The issue with offsets, the issue with especially nature based offsets, at the very high level is that there is if everybody said I would offset, we would only have about the only be able to decarbonise by about 30% so there's not enough opportunity to offset.
So so what do we need to do to tackle this problem is to throw everything at it right? So we have to do the reductions and we have to do the offsetting and that's why that hierarchy is so important. Moving to the next slide I just want to give an example of, you know, companies that are sort of ahead in the game.
And I think Microsoft was one of those that made an announcement around becoming carbon negative by 2013. But they've also committed to remove all carbon from the environment by 2050 that they ever created since they were founded in 1975. So what is really interesting what I like about the way that Microsoft is done this is that they're actually very open about reporting what they're doing.
So you can find all the initiatives that they're taking on their website and you know, they've got a clear path towards what their emissions are like, what the emissions across the supply chain are like, how they can reduce that. And if they can't reduce then how do they offset it, through what types of projects, removal projects et cetera. Looking at a quick time check here.
I think I've only got a few minutes left. I just want to end by saying that you know, as I mentioned, this is a complex problem and it's not the private sector in its current form is not geared to be solving these global problems on its own. And there are a lot of challenges that are faced. And I work a lot across various sectors.
I work with the mining sector, I work with the tech sector. I work with manufacturing I work with the real estate, et cetera. And the complexity of often lies in the first problem, which is hard to find a business case and to secure funding I mean, that is rapidly changing now in the last two years. But before that, it was hard to find a business case for making these types of investments.
Right. So the one I talked about, to switch from a boiler to a heat pump for example, a very simple example, how do you justify an investment that takes five, six years to pay off? That was hard. And frankly, it leads to the second problem, which is how to find the right type of technology. I mean, that that technology is proven, but there are other technologies that are not.
So I you know, I've been working in the sector for 20 years. And 12 years ago, solar was way more expensive than today, and about ten years ago, I think in 2012 or so, the prices crashed and solar started to become really, really cheap. China stepped in and started making finance, etc. And now we have solar, which is in most parts of the world, cheaper than the grid.
So but nobody would anticipate that ten years ago. And so would you have made an investment in this technology not knowing that it's going to be, you know, one 10th of the price or whatever it is now. So that's the that's the challenge. Now it's the same thing with green hydrogen. We're working on green hydrogen, we're working on carbon capture, working on methanol, ammonia, you know, green fleet, battery operated fleet, et cetera.
How do you know when the price is going to come down to a level that you can meet? That's, you know, what is the role of the private sector, the role of consortium kind of activity that's happening to simplify and to reduce risks? The third issue is it's hard to operate in immature markets with unclear regulation. And I see that a lot here in Southeast Asia, where it's still not clear how you can purchase green power..
For example, just to give you an example. Green PPAs is basically how deregulated is you a power market and can you actually create private sector agreements and produce green energy even if you're willing to do that? That itself is complicated when the regulation is changing rapidly. And currently around here, a lot of regulation is being formulated and changing.
And so it's a little bit hard for companies to place bets. And then also on to add on top of that, the carbon price is changing rapidly as well. And, you know, every every new global fossil fuel, when you create more of you know, the carbon prices started falling and nobody understood why. And it's now starting to rise back against the carbon price has fluctuated dramatically in the last two years, risen like crazy and started falling and it's rising again.
So it's also complicated to take those factors into account when you're studying. And then there's a couple of other issues, like, for example, hard to implement change across the supply chain. So if you're you know, if you're a fast moving consumer goods company, how you know, most of the leading companies are starting to take action, but a lot of them don't know what's happening with that.
And very quickly, you reach a level in the supply chain where you're working with small farmer or you're working with a small factory that is still operating with paper and pencil. So you don't have you know, you don't have the privilege of asking them, hey, can you improve your technology and the ways you operate and let me know how you reducing carbon emissions because they don't have they're not exactly capturing their carbon footprint.
So that's that's another complication. And then finally, I think that, you know, the last two I mean, the last one is cultural transformation and convincing people. I think this is a global problem. However, different countries with different levels of income, you know, have different views of the importance of this issue. And I think that leads to a lot of cultural debate around, you know, who should be taking responsibility for this et cetera.
And then finally, it's hard to access data. It's all this is easier said than done. It's very hard to be able to measure and talk about standards. It's hard and complex to measure carbon emissions in the first place. So those are some of the challenges that the private sector faces. And I just wanted to end with that. So just maybe a quick recap of you know, the fact that this is a highly complex problem.
And, you know, initially it was in the realm of far more in the sort of development sector in Europe that was leading this conversation. It's now become you know, they've been recognised globally and a lot more actions taking place from all corners, which is really amazing. Challenges remain, but we are hopefully accpeting those challenges. And I think just finally say that as a parent, you know, for me, I think it's really important that we do the right thing.
We're on the right side of history. So I personally invest in making sure that we come out of this with some level of success. Thanks a lot and thanks again to UWC.
Saima: Thank you so much, Malavika. That was a wonderful presentation. Congratulations. I think your points about offsetting carbon generation and how there's a lack of opportunities really struck with me. And I think there's a lot of stimulation and there might be lots of questions. I have not had any raised hand here. But may I please take this opportunity to remind everybody, all of the participants that there's an online networking that's been specifically set for this purpose so that can be reached at going into the session page of in the agenda page where you're where you probably saw Malavika's session name and everything.
So there's an icon. If you press that icon, it'll take you to the online networking. It'll ask you to join. So please join, join the button and you can see my and myself there.
Malavika Jain Bambawale: Thanks. I'm listening to this.
Saima: Yes, signing off here too. Thank you. Thank you, everyone. Bye. Have a nice evening, everybody. Bye.