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Why is the Earth Getting Warmer? A Climate Risk Assessment

The changes we’re experiencing now are not sustainable. neither from a survival nor a financial perspective.

Why is the Earth Getting Warmer? A Climate Risk Assessment

Is the world really getting hotter? The number of climate change deniers seems to be increasing like the temperatures in Europe last summer, deadly for some, yet not convincing enough. Nevertheless, there’s no denial that the earth is ancient, and it has experienced sudden climate changes over the years. So, why is this time different? Why should we be concerned now that our planet's weather is naturally changing?

Well, because the changes we’re experiencing now are not sustainable. neither from a survival nor a financial perspective. There’s a reason why the word "sustainability" is usually linked to the environment, as a balanced environment helps the economy grow sustainably and ensures economic and social well-being in the long run.

However, it’s certainly easier to deny climate change than to guarantee sustainable growth, and as the problems we’re facing now cannot be solved overnight, we need to act now. But, how do we even start?

Let’s start by understanding one of the main causes of concern: carbon emissions.

Carbon is transferred through the environment in several ways. It enters the air and is absorbed by plants and animals, then returns to the atmosphere. Carbon has been circling the earth's surface for millions of years.

However, something (arguably) new has been added to the equation. People have changed the carbon cycle. As a result of human activities, like burning coal, oil, and natural gas, there is now more carbon in the environment than before, and therefore more carbon is being released into the atmosphere than before. The ecosystem cannot absorb all of the carbon emissions we generate, creating an excess in the environment and contaminating it.

As a result, we generate a steady increase in the carbon in the atmosphere, which doesn't look like much from a year over year standpoint, but when looked at in the context of history, it's considerably alarming. For example, urban population hubs with over 5 million people doubled from 1950 to 2015.

So, small changes result in huge effects. For example, the temperature of New York City under ice is usually -5 degrees, but a temperature of +5 degrees relative to absolute zero would indicate that the city is underwater.A plus or minus 2% would mean an extreme change in weather conditions. The planet's sensitivity to climate change is extremely high.

We've essentially designed civilization to be super sensitive to climate change by building our cities on the coastline. Of course, countries that are very low-lying would be completely underwater in a climate crisis.

Climate Finance Risk: What New Investors Need to Know.

What options do we have to fight climate? A climate risk assessment

Carbon is a limited resource, which means that we’ll eventually run out of carbon to burn and will exit the fossil fuels era.

Previously in humanity's history, producing carbon led to the industrial revolution that helped advance the world and truly make it a better place, but the times have changed, and like children becoming adults, humanity needs to get past the coal phase and move on.

If we want to live forever, we can’t be forever young.

Contrary to popular belief, being sustainable does not mean moving back on innovation or progress, it means we are moving forward. We can rebuild all the legacy parts of our businesses in a better way.

There are two options we face:

  1. Make positive changes and address climate change.
  2. Do not change.

97% of scientists believe that climate change is an extinction-level threat to our species, whereas 3% of scientists disagree. Some people in our societies, like tobacco companies, rely on the 3% of scientists who believe smoking does not kill people.We will survive as a species if we address the issue even if 97% of scientists are wrong. But if we do nothing and the 3% are wrong, then everything we know will be lost. It seems like betting against climate change is a silly bet.

Let tech lead the way

There are many companies out there promising to be carbon neutral in a few years. Even countries committed to reducing carbon emissions, such as the United States, which plans to reduce emissions by at least 50% by 2030, or Sweden, which has made carbon neutrality a legal requirement,

However, there’s so much lawmakers can do to fight climate change, as the tools are elsewhere.

If you run a business that makes $10 in profit but produces garbage that costs $4 to clean up, your profit is reduced to $6. Now, what if you didn't have to pay for the $4 clean-up fee? What If you just dumped it in a river, it's now everyone's problem. Everyone has to pay $4 to clean up the garbage, while I keep all the $10.

There are tools like 15Rock that bring the numbers to the table, highlighting companies that profit $10 after cleaning up and assisting companies that profit $6 to figure out and solve their environmental losses.

Using the 15Rock models, we believe the 2-degree increase (the basis of the Paris agreement is to stay below 2-degrees) will occur given our current trajectory. The question will be how much will be over? and as time passes how desperate will our solution be.

We believe there is a major incentive for change not to occur and things to remain the same. Yet, there’s a smart way to shift away from unsuitable solutions through smart capital allocation in the direction the planet needs to go.

The future is hopeful!

For those of us who are working on this issue, we're not just fighting against climate change. Our mission is also about creating a better world where people can live in peace and prosperity without harming others or their environment. If any of these concepts resonate with you, please reach out so you can learn how your company can generate positive environmental change now.

Reach us out or click here to learn more.

Gautam Bakshi

Head of Product & Engineering

Former: MD - Private Markets, Wealth & Asset Management, Manulife. Education: Ryerson University, Seneca College

Reach out and let's discuss how we can help!

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