Prof. Trevor Williams is Former Chief Economist at Lloyds Bank Commercial banking
A few years ago, it was fashionable to talk about long-term megatrends as if they were not impacting the current moment. They were going to happen at some distant point in the future, and the effects were expected to be gradual. Instead, they’re happening today, and the effects are profound and immediate. The key long-term megatrends discussed were population change, climate change, and the pace of technological change (in no particular order). Each trend has enormous implications for the world, and together, they make it even more difficult to disentangle a complex and complicated series of international events with geopolitical ramifications. Moreover, the pace of change in each of these categories is now accelerating, and so these megatrends require immediate action to be taken, which will have an impact in the future… because the future has arrived.
The impact of these long-term trends is happening over and above the current economic, geopolitical, and other events occurring in different countries and continents, and across income levels and geographies. In a world that is more interconnected than ever before, the pace of technological changes means that communication is instantaneous across the world of eight billion people. That makes for an environment where at least the effects of some of the aforementioned become more apparent to everyone. However, the global ease of communication also means that in a 24-hour news cycle, there is always some or other disaster that catches global attention and focus.
But this does not mean that all the other issues that have faded into the background are not equally requiring action and attention by investors, businesses, governments, and individuals worldwide. That backdrop makes for greater complexity and a more nuanced and objective analysis of some of these megatrends. They act as drivers and lessons about how the global community can react in order to mitigate and turn risks into opportunities, and how to solve some of the problems that they present.
In this essay, we focus on sustainability in the context of climate change becoming increasingly apparent, particularly in how it impacts countries and populations, especially those who are less able to afford the cost of dealing with the consequences of climate change, and those seeking environments that are less susceptible to its effects.
There is a consensus among climate experts that the average temperature in the world will rise to 1.5º C above the pre-industrial average currently estimated at 1.2º C. The repercussions of that increase are now becoming more apparent. Because we — humanity at the global level — have not put enough mitigation measures in place to stop the average global temperature from rising even further by reducing carbon emissions, it will likely rise much more, towards or above 2.5º C in the decades to come.
But what is also clear is that the ability to deal with the consequences of climate change depends on each country’s level of economic development. Similarly, economic development will make it more affordable and cost-effective for the impact of climate change to be made more manageable.
Managing the results of climate change comes in two buckets: One is mitigation, and the other is adaptation. Mitigation actions will take decades to affect rising temperatures, so we must adapt now to the change that is already upon us and will continue to affect us in the foreseeable future. Both measures require investment. Therefore, at the global level, countries that can afford it the most will and should have to contribute towards helping those less able to mitigate or adapt to the aftermath of climate change.
It is important to recall that many of the less developed parts of the world, by definition, are not responsible for most of the effects of carbon emission stocks that are producing fast climate change. The burning of fossil fuels was essential to the industrial revolution, which has driven more rapid growth and generated the rise in living standards that we see around the world today. But those who developed first and fastest have also reaped most of the economic benefit and, therefore, have the most capacity to tackle with the consequences of climate change.
This point is helpful to bear in mind when looking at high-population countries that are wealthy and thus have capacity to deal with the high levels of emissions that they may potentially be releasing, like the USA, with wealth per capita of USD 198,200 according to the Henley Wealth and Sustainability Report. On the other hand, countries that may also have large populations but have lower GDP and wealth per capita (such as India at USD 6,600) do not have the same capacity of dealing with some of the repercussions of rapid climate change and the resultant issues of sustainability. This distinction is important because it helps to navigate the data gathered in the Henley Wealth and Sustainability Report.
Hence, the focus should be on what financing or investment needs there are in high-population countries, say with high or low density but low levels of income, which is synonymous with areas that have less ability to mitigate or adapt to the effects of climate change because of a lack of investment funds. One challenge is how, at the global level, to make it more straightforward for those who have the funds to locate or identify the countries that require them and to direct their investments there. And, of course, vice versa.
Many funds would want to direct investment to where they will have the most significant effect in reducing the consequences of climate change on the weakest and poorest in the world. For those who want to be able to direct investment flows and spending towards these vulnerable areas, the Henley Wealth and Sustainability Report helps to do that by identifying those parts of the world across a range of metrics.
Countries with large populations and fast growth are now among the worst emitters of current fossil fuel emissions as opposed to the rise in stock, which they are not mainly responsible for. Therefore, our analytics identify countries where investment in climate reduction is most needed, which are in large population areas with fast growth but relatively low income.
This framing allows those seeking areas where climate change is less threatening, where adaptation is occurring fastest, and as a result where threats to sustainability are lowest to relocate to achieve that goal. Through this approach, these individuals are also able to see which countries allow investors to acquire residence status through various programs, and where the opportunities for mitigation and adaptation will offer the highest returns on investment. It also shows where the best investment options are for funds that are seeking returns through sustainability and green and carbon-reducing projects and investment activities.
Moreover, companies that are in pursuit of investment from potential green or sustainability funds will be able to use this approach to identify the sorts of opportunities that they will offer to those who seek those kinds of investment and what they would need to do to be able to obtain access to that country. This will allow those looking for opportunities, either private or public, to invest in sustainability projects and other carbon-reducing mitigation and adaptation practices.
The Henley Wealth and Sustainability Report is also helpful for those who are seeking shelter and safe spaces where they can reduce the impact of climate change on their families and, from a private perspective, to be able to perhaps source alternative residence in countries where the impact of climate change is lowest and where the mitigation and adaptation is highest.