Banking for 7 billion and 7 million

GLOBAL INVESTOR 3.06 Basics — 22
“Climate change, deforestation, the voracious drain on
natural resources cannot be ignored. Unchecked,
these forces will hinder the economic development of
the most vulnerable nations first and, ultimately,
all nations.” Tony Blair, UK Prime Minister, Address to US Congress, July 2003
As the LA Times aptly puts it, “Global warming is a deadly threat
precisely because it fails to trip the brain’s alarm, leaving us soundly
asleep in a burning bed.” 1 The earth’s temperature could rise
under the impact of global warming to levels far higher than previously
predicted, according to the United Nations’ team of climate
experts. Since 1960, the average global temperature has risen by
one degree Celsius, and it is expected to continue to rise. The
National Academy of Sciences recently presented to Congress a
study indicating that the earth’s temperature is now the hottest it
has been in 2,000 years, and humans are responsible for much of
the warming. In addition to the implications of a rise in global average
temperatures, secondary effects will include rising sea levels
and a rise in extreme weather patterns. In some regions, damage
from climate change has become glaringly visible, with stronger
hurricanes, floods and disintegrating ice sheets as testament to its
merciless severity. Climate change may well be the greatest threat
and challenge facing our generation, putting tremendous strains on
the environment, the world economy and individual businesses. We
believe global warming will have both negative and positive implications
for global economies and regard climate change as a clear
risk. Long-term planning is one way of mitigating its potentially irreversible
effects. Global warming has been linked to growing
emissions of greenhouse gases (GHGs) caused by human activities.
According to Eurostat, a vast majority of GHGs are from CO 2 (CO 2 :
83%, methane: 8.8% and nitrous oxide: 6%). CO 2 concentration
in the atmosphere has shot up by 11% since the beginning of industrialization
and is expected to double this century. According to a
recent International Energy Agency (IEA) report, carbon dioxide
emissions and oil demand will continue to grow rapidly over the
next 25 years, and this worrisome trend is likely to worsen, extending
this outlook beyond 2030 (see figures 1, 2 and 3).
The climate problem cannot be solved piecemeal. The challenge
is to create new energy systems that not only protect the climate
but are also economically superior. The burgeoning markets for
energy-efficient technologies – such as solar panels, wind turbines
and biofuels – show what can happen when strong national policies
are enacted. The global market for renewable energy technologies
topped USD 25 billion in 2004, and is already helping to reduce
greenhouse gas emissions in countries such as Germany and Spain.
Scientific and political pressures are leading to better policies on
climate change, while social changes and corporate action are producing
a wide range of private-sector solutions as well. We believe
these dynamics will affect most companies and create many investment
opportunities. Many governments consider technology the
best means to combat climate change.
Renewable energy: The way to the future
Renewable energy is the fastest-growing energy sector in terms of
annual percentage increase, and has significant potential in helping
to achieve global environmental, economic, safety, social and sustainability
goals. According to a report released by the Renewable
Energy Policy Network for the 21st Century (REN21), global investment
in the clean energy sector (excluding large hydropower plants)
reached a record of USD 30 billion in 2004, pushing renewable
energy capacity to 160 GW and representing 4% of global capacity.
It is becoming a big business, attracting some of the world’s largest
companies, including Sharp, Siemens, General Electric and
Royal Dutch Shell. Market leaders championing renewable energy
in 2004 included China (solar hot water), Germany (solar electricity),
Brazil (biofuels) and Spain (wind power) (see table 3). The fastestgrowing
energy technology is grid-connected solar photovoltaic
(PV) systems, whose capacity has increased by 60% per year from
2000 to 2004. Other renewable energy power generation technologies
include biomass, geothermal and small hydro facilities,
which are mature technologies and growing at rates of 2% – 4%
per year. Some claim that renewable energy is not cost-effective,