Climate change is upon us

Blog by David Winckler, Kingswood Senior Investment Analyst

Humans have ignored the impact of global warming for far too long. We are now faced with the immense challenge of turning it all around before it’s too late. Most climatologists agree that humans are putting greenhouse gases into the atmosphere at almost twice the rate that natural processes can remove them.

A simple way to think about this is by considering a bathtub. If water flows into the tub faster than it flows out, then it will overflow at some point. The same applies when we think of the tub as our planet’s atmosphere and the water as Carbon Dioxide (CO2) and other greenhouse gases.

Unfortunately, we cannot simply turn off the tap and/or open the plug. The transition to sustainable energy sources with no CO2 emissions will take decades and, in the meantime, we need to burn fossil fuels to keep our economies running and essentially, keep on living. When it comes to pulling out the bathtub plug, our environment is not equipped to absorb sufficient emissions and we do not yet have technologies to remove large quantities of CO2 from our atmosphere.

As a result, humanity is faced with its biggest challenge yet. We need to reach net-zero greenhouse gas emissions by 2050 to keep the rise in global temperatures to no more than 1.5°C. Even after COP26, where corporates and governments pledged to do more to speed up the energy transition, the world looks likely to be at least 1.8°C warmer by 2050.

So, the BIG question is: How do we achieve net-zero and slow the rise of global temperatures? The basic answer is for companies and governments to invest in best-in-class solutions that either slow the flow into the tub or increase the speed of outflows.

Policymakers are trying to encourage investment into climate-related assets by developing frameworks such as the UN Sustainable Development Goals, which are useful for directing capital appropriately.

However, it is also up to all of us 7.9 billion people on this planet to do our part in driving change. One way is by raising awareness and ensuring policy makers, companies and other people like you or me are conscious of global warming and the devastating impact it could have on all our lives. Because, if we don’t act now, then who knows what state our fragile planet will be in for the next generations.

David Winckler, Kingswood Senior Investment Analyst

Picture Source: National Geographic, 2009