So, how do we get future rich amid climate change?

'Capital deepening' is the technical answer, but the business investment drought and cuts to tech-advancing research are major roadblocks.

Us trying to stop climate change wrecking our wealth using tools from last century because business isn’t investing and research is being cut

You would not be alone if you felt like the path we’re on is inevitable.

For whatever reason.

I often hear laments like:

• Humans are foolish or irrational

• We never act till it’s too late

• It’s unfair for the developed world to restrict energy access to developing nations

Then you’ve got ‘drill baby drill’ coming out of the US. Asset managers leaving their green alliance (including BlackRock incidentally).

Certainly there’s enough noise in the media to think any attempt to slow climate change is pushing the proverbial up an inclined slope.

But, remember: if it bleeds, it leads.

I can’t tell you how many smart folks I’ve seen sharing rubbish about how China doesn’t care about clean energy when China is actually knocking it out of the park when it comes to the renewable energy transition.

Which is why I recommend an information diet.

Be careful what you consume when it comes to media, but that’s an aside.

I look at Fix the News. It’s actually where I borrowed the ‘information diet’ idea from (thanks team!)

FTN publishes all the good news that doesn’t make headlines because it doesn’t bleed. We are making excellent progress on the energy transition. We need to do more, and swiftly, but there is progress already. Don’t buy any of the BS. The key point is, we need to do more and swiftly.

But we already know what we need to do.

We just lack impetus and we get distracted by furphies.

So, what needs to happen?

Quoting Dr Ken Henry: we need to rebuild nature.

Now, the kicker…

Rebuilding nature is not just combating climate change, it’s not just phasing out fossil fuels faster.

It’s BIG.

If you want to play with just how big, there’s an awesome interactive causal loop diagram online called En-ROADS. It lets you play with all the dials to see what needs to happen to get warming below 1.5 deg C.

But, climate change makes everything we’re trying to fix worse.

For example, if we take the three areas BlackRock is targeting in their stewardship paper – deforestation, water and biodiversity – they all suffer as climate change ramps up.

And, climate change is not completely predictable.

It’s possible we haven’t fully understood the negative effects, or we’re underestimating how quickly they’ll happen. Though any comfort you feel at ‘maybe it’s not as bad as we thought’ just means you’re not going to pass Risk Management 101 any time soon. Sorry darl.

So, rebuilding nature is going to require a swift energy transition to renewables.

And we need energy – the correlation between energy supply and economic growth is intrinsic. Which is why we hear ‘energy is the economy.’

While we transition, we can’t turn fossil fuels off overnight.

We use it in too many places and for too many things.

But we definitely should not be expanding fossil fuel capacity.

Which means no new approvals, no exploration, to force markets to allocate capital to renewables.

We have to make what we’ve already got last longer, and we’ve got to switch to alternatives in every arena – plastics, energy etc – as soon as we can.

But how do we transition and remain productive?

I asked the very same question of Dr Ken Henry when I saw him speak on this, so I’ll share his answer to how we keep improving productivity in this environment:

He reckons it’s capital deepening.

This is basically tech advancement. Replacing a farmer’s shovel with a tractor was the example he gave. Dr Henry reckons this is the answer.

But there are two big challenges worrying me in this area:

First, which Dr Henry fully admits, there’s been a business investment drought in Australia for over a decade.

The investment needed to produce these widespread capital deepening effects has not been happening.

So, we have to incentivise business to invest. (I probably should caveat that with the right businesses). Not sure how we’ll change the direction we’ve been going there.

We effectively have an investment debt to repay. Because it’s stalled for so long, it’ll take more energy to get the momentum going again, to regain the knowledge and skills we need to make it happen.

Secondly, almost every technological leap has come from billions or even trillions of investment in research by governments.

The commercialisation of the technologies might happen in businesses, but the tech itself doesn’t become feasible without that money sunk into research.

Companies simply won’t fund that much research on a possibility. There’s just not enough incentive for them to do so.

So, we need more investment in research, with acceptance that some of it won’t work out.

And guess what’s being cut? Research funding.

In the US it’s been prolific, and the bloodletting has started with CSIRO in Australia. We are making capital deepening harder to achieve, which seems pretty damned foolish to me.

No doubt about it, individual action is needed.

Organisations like governments and companies have had long enough to solve this, and they’re dragging their feet. If you want to see your wealth preserved, it’s time to take personal action.

So, what can we as individuals do?

Well, that’s where it’s time to Move APACE!

As customers, we can vote for the future we want with our money.

Your banking, retirement fund and shares are all ready to be deployed in a way that makes you future rich instead of future poor.

Onto the Move APACE posts!