[NEW YORK] Initial expectations that New York Climate Week – widely regarded as the largest climate gathering in the world outside the annual United Nations (UN) climate change conference – would be muted turned out to be quite the opposite.
Despite the US’ slowdown on climate action since the administration under US President Donald Trump took office nine months ago, Climate Week’s main organiser Climate Group estimated that more than 1,000 events were held across the city over the past week, up from about 900 the previous year.
Running in parallel with the UN General Assembly, it is estimated that over 100,000 participants – including government officials, investors and non-profits – have descended upon the Big Apple to talk climate.
How climate is being talked about, in the meantime, is undergoing an evolution.
While observers told The Business Times that there remains strong interest across governments, investors and corporations on the energy transition, discussions around financing the transition are no longer centred on reducing carbon emissions.
What has emerged during New York Climate Week is that non-climate positive outcomes around energy security and affordability, as well as the need to meet the surging power demands of artificial intelligence (AI) are increasingly shaping discussions on sustainability investing.
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In fact, some have reframed the narrative such that climate-positive outcomes are now seen as co-benefits arising from clean energy solutions developed to meet the AI-driven energy demand.
For Shunondo Basu, director for energy technology and innovation at the Rockefeller Foundation, it is about framing such investments in terms of outcomes.
“Whether you call it climate or you call it something else, the outcome doesn’t change. We are fortunate that we can use the surge behind AI and data centres right now as an impetus for creating demand for many of these solutions, which have a huge positive externality for climate-positive outcomes. And so, that’s kind of what we’re dialling into,” said Basu, who was speaking at an investor summit in New York organised by cleantech-focused venture capital firm Atlas Capital.
“We don’t have to blare the climate message super loudly, and that’s okay. But we’re still doing the work. The work hasn’t stopped. In fact, the work is probably accelerated,” he added.
A relabelling exercise
Whether prompted by a desire to avoid scrutiny under the Trump administration, the demands of AI, or the need to demonstrate the business case for sustainability investing, discussions throughout New York Climate Week suggest that a relabelling exercise is well under way.
Pitch decks with the words “green” or “climate” have been scratched out and replaced with “energy”, said Kyle McEneaney, who leads strategic and sustainability initiatives at The Schmidt Family Foundation, and was also speaking at the same investor summit as Basu.
Companies focusing on frontier clean energy technology solutions have generally emphasised on their ability to meet the demand of the AI boom, he added.
Rekha Unnithan, global head of private equity impact at Nuveen, said that there still are opportunities in energy transition businesses that see immediate returns from customers, such as energy efficiency consulting firms or businesses that build frameworks to create energy supply on-site.
“In the short term, I think there’s a lot we can do with businesses that are doing that work quietly and maybe are not necessarily leading with ‘Hey, this is emissions reduction, but this is like affordability, access, efficiency,’” she said.
These business models are unlike conventional clean energy projects, such as solar, that have high upfront capital expenditure, and are now more expensive to develop under current US regulations.
“The demand side of the meter continues to grow. So the power really has to be provided in a more efficient way, consumed in a more efficient way. So I think those are going to continue… These things are not going away because the US administration is anti-green transition,” she added.
Rationalisation of the climate movement
For some, this shift away from a purely “saving the Earth” narrative is a welcome one, and in fact, may have come a little too late.
There would probably have been greater support and buy-in from governments, financial institutions and corporations for the climate agenda if it was talked about in this manner years ago, said Tonilyn Lim, chief of programmes at the UN Global Compact, which works with businesses to adopt sustainable and socially responsible practices.
That is because businesses only know how to address and quantify climate action through market-based instruments. Approaching it from the scientific or moral lens makes it harder for businesses to relate.
“It’s more important to quantify the action that’s needed to be done in terms of the business case for it. Rather than saying ‘The world is boiling, we need to act.’… If investors and financiers understand the dollar-level implications of their actions, it’s easier for them to act on that, rather than very abstract things,” said Lim.
“This transition needs to be financed. Therefore, the quantification to dollar terms was needed. Advocacy is good. Awareness is good. But to move technology, to move infrastructure towards the green and digital transition that would lead us to net zero and to a more efficient economy, (this shift) needed to happen,” she added.
Given the current macroeconomic pressures arising from tariffs imposed by the US and geopolitical tensions, it is all the more important that climate investments show tangible benefits to local communities, be it in the form of lower prices or better outcomes, said Frederick Teo, chief executive officer of decarbonisation-focused investment platform GenZero, which is backed by Singapore investment company Temasek.
“We see this as a strategic reframing, not a retreat… Investors are leaning into this narrative because it makes environmental and business sense. They know that climate-positive investments must also deliver economic and social dividends,” he added.
Of course, this shift in language is only possible now, in part because the cost of renewables have come down so much over the last decade, helping to strengthen the economic case for going green.
“The renewables brigade are no longer the crazy people turning up. They have the rational arguments, and people have bought that. But I think the question now is, getting from here to there,” said Julia Skorupska, head of the secretariat of the Powering Past Coal Alliance, a coalition of over 100 national and local governments aiming to phase out coal-fired power plants.
Co-benefits for emerging markets
The change in discourse is all the more crucial for emerging markets, which make up the bulk of South-east Asia, as these jurisdictions are reliant on fossil fuels not only to power its growing economy, but also to maintain energy accessibility and affordability for its mostly low-income population.
So the conversation should not be about stopping the use of fossil fuels, but transforming countries’ entire energy systems to one that is not only more environmentally friendly, but also has benefits in the form of energy savings, improved health and more jobs, said Skorupska.
“Energy demand is really great at the moment. So you come along and say, ‘We want you to take something off your grid.’ You can’t take something off without adding something. So we need to be clear it’s about a coal-to-clean transition. It’s not just about getting rid of coal,” she added.
“You have to have a realistic conversation about the ‘how’ as well. You have to accept that governments need to deliver growth, they need to deliver security, they need to deliver a predictable life for their citizens.”
Regardless of how sustainability investing is being couched, the way risk perceptions are being structured in financial markets is the main obstacle preventing more private capital from being deployed into sustainable investments in emerging markets, according to Associate Professor Lisa Sachs, director of the Columbia Center on Sustainable Investment at Columbia University.
“That’s not to blame Trump, that’s to blame the rating agencies and the perversity of their rating systems that suggests that the fastest growing regions are inherently bad investments,” said Prof Sachs.
“I think the challenge is the financial architecture, the perceptions of risk, the real lack of support for building pipelines of real projects, for deploying smart, catalytic capital and de-risking mechanisms,” she added.
At the end of the day, allocating capital towards where the needs are greatest is what matters.
“So much of what needs to be financed does have these co-benefits. It happens to be the case in Asean, as in many parts of the world, that what is best for climate is also best for the region because it is the most secure, affordable and resilient energy system. It supports the competitiveness of the economy,” she said.
“If we just thought about the transitions we need, and how financing that means financing climate action, then we wouldn’t obsess about these labels.”
