Innovations key to solving climate

The private sector’s expertise in developing new products will need to be harnessed if we’re to meet targets for sustainable development. It’s hardly news to say the world is facing numerous urgent challenges. The experience of the global pandemic highlighted how vulnerable we all are to transmissible illnesses. The effects of climate change became more obvious than ever this year, from wildfires in Canada to floods in Germany. Toxic emissions and weather patterns combined this autumn in India, forcing Delhi into a form of lockdown due to air pollution. The challenges don’t end there. We could add protecting biodiversity, improving health and education, and spurring economic growth to the mix. All are crucial for sustainable development as the global population grows. These are big challenges but they’re not insurmountable. The political will is there as we can see from the increasing emphasis policymakers are putting on the UN’s Sustainable Development Goals (SDGs). This is an opportunity for the private sector to show its value in coming up with new products and solutions to make a sustainable future a reality. Innovation will be crucial. And investors in innovative companies could benefit. Innovation turns goals into reality Governments and policymakers have an important role to play in helping to set the agenda. We saw this last month at COP26 as countries firmed up their climate change commitments. But setting a target is one thing; achieving it is another. The development of Covid-19 vaccines is an illustration of this. Public sector support was an essential part of the picture but ultimately it was private companies who had the scientific expertise to turn their cutting edge mRNA capabilities into an effective vaccine against the virus. And then they needed to partner with other private sector companies to test, produce, and package these vaccines at scale. The success of the mRNA vaccines shows the importance of innovation. If we, as a society, are going to meet the SDGs, we can’t simply rely on tried and tested solutions. This is where the private sector comes in. To our minds, the Boston Consulting Group expressed it well: “Of all the forces that the private sector can bring to bear in attempting to advance the 2030 SDGs, by far the most powerful is its unique capacity to innovate quickly, attract capital to innovative solutions, and drive innovations at scale. That combination is hard to find in the public sector or the social sector, but it’s the private sector’s lifeblood.” Once-in-a-lifetime opportunity for investors Achieving the SDGs will require the development of entirely new technologies that don’t currently exist, or not yet at scalable levels. The climate crisis in particular, and the target of reaching net zero by 2050, means innovation is urgently needed right now. Developing new technology and products always contains an element of risk but taking risk – in anticipation of potential future reward – is what equity investing is all about: “When a social need can be tackled with a profitable business model, the magic of capitalism is unleashed. Answers to the many deeply rooted societal problems we face become self-sustaining and scalable.” (from Where ESG Fails, Porter, Serafaim and Kramer, Harvard Business School) Investors can make a positive impact by using their capital to support companies who contribute to finding these answers. We see a huge commercial opportunity for innovative businesses as demand for solutions to global problems will only intensify.