The Trillion-Dollar Shift

The redirection of capital is crucial to accelerate the transition to a new, value driven economy. What we invest in, will grow, what we divest from, will phase out - and it should. A significant shift in capital is underway and the year 2016 marks the beginning of a new chapter in history. At the end of last year, the United Nations presented 17 Sustainable Development Goals (SDGs) and the COP21 Paris agreement, agreed by 195 nations, to combat climate change set a new direction and scale for global goals. Both were, to a large extent, a message from and for the business world and leading companies have set their ambitions higher than ever before for 2020 and beyond. The SDGs are already providing clear direction and inspiration in this regard, and the tide is turning.

The shift
We are already seeing an increase in the growth of sustainable capital investments and a strong divestment from fossil fuels and other polluting industries. Sustainably responsible investing is on the rise as there are increasing indications that previously considered risky investments in sectors such as cleantech, are now leading to above average returns. Over 42 billion dollars in green bonds have been issued and the amount of sustainable investments has increased over the past two years by 60%. Market value is increasing rapidly with the low carbon market worth more than 5.5 trillion dollars today, showing growth of more than 3% per year. Last year alone 270 billion dollars was invested in low-carbon clean energy solutions, in addition to at least 130 billion in energy efficiency. At the same time, divestment from polluting industries is becoming more prevalent with examples such as the move by the largest pension fund in Washington D.C. They recently announced their divestment of 6.4 billion dollars from 200 of the world's most polluting fossil fuel companies.

Business can and should be a driving force in the shift of capital. The market potential for business in the new, sustainable economy is literally a trillion-dollar business case. The new economy shows the potential to produce 1.8 trillion dollars' worth of revenue and create two million jobs in the EU alone. And we have only just begun. The report, "The Breakthrough Forecast" by John Elkington, defined the most promising developments called the 21 'breakthrough sweet spots' - from 3D printing to sustainable air conditioning and drinking water management to genomics. Opportunities for business to be a force for good are plentiful. Start-ups with innovative ideas abound, and large multinationals are coming up with their own ideas to move their corporations away from the exploitation of resources to valuing and cherishing the world's environmental, social and financial assets. Unilever, for example, is striving to not merely become CO2 neutral by 2030, but be CO2 positive. And DSM Coating aims to see bio-based binders as the worldwide norm by 2030. Nespresso has introduced 'The Positive Cup' and the Nespresso Sustainable Development Fund.

Small and large individual companies are joining the movement and it is encouraging to see the acceleration towards a sustainable economy. But the challenges we are currently facing are so extensive and so urgent that collaboration and scale are crucial. The most radical solutions, often with disruptive impact at a fast pace are attributed to small innovative start-ups. However, those value-creating start-ups often do not scale up as they should, whereas the world desperately needs their solutions. They need and deserve our support, and the support of large multinational corporations, to rapidly scale up their innovative and highly effective disruptive solutions.

Unilever is setting the right example with their establishment of a 200 million-dollar venture fund and their recently announced commitment to increase its use of crowdsourcing, with the launch of its Unilever Foundry IDEAS which enables innovative startups that are ready to scale up to partner with Unilever and its 400 brands in over 190 countries. It is important to note that Corporate Venture Capital from ambitious corporations means the world to these start-ups, not only because of the investment potential but also because of the tremendous value large corporations can offer them in terms of knowledge, global networks and other necessary means. In other words: access to crucial growth ingredients. The world needs businesses to take bold measures, scale up business solutions quickly and effectively, and collaborate to meet the challenges we face with strength and determination.

The business world can propel the shift, but governments and politics must be involved as well to facilitate the grounds for this movement. To this end, we are seeing political leaders taking a stand. Achim Steiner, director of the United Nations Environmental Program has proclaimed 2016 the 'Year of Green Finance', knowing how crucial it is to focus on capital investments. And the French energy minister Ségolène Royal announced on May 17, that they will implement a domestic carbon price floor for the French power sector. In fact, this is a move that many corporations have been literally asking for before, during and after Cop 21. This governmental levy will ensure that French power producers pay a minimum carbon price of €30/tCO2 by charging a tax on fossil fuels used for power generation. The new policy would tax fuels at a level that will make up the difference between the price floor and the carbon price generated by the EU Emissions Trading System (ETS). The main impact of the new carbon price floor on the power sector will be to increase the short-term marginal costs to uncompetitive levels, thus driving coal out of the power production mix with the goal to eliminate coal as an energy source by 2019. In the meantime, sustainable energy businesses can develop and grow. For those businesses that want to be here to stay, business for good is their future. Since that future starts now, let's get to business and see the necessity as an opportunity: a trillion-dollar business case!