For those of us who invest in emerging markets, the speed of economic change can be intoxicating. It offers huge opportunities, but also presents significant challenges; we can’t ignore these social and cultural issues because only by overcoming them can we hope to sustain the growth we want to see.
There is no greater challenge than the impact of global warming. More than seven million people die prematurely every year from environmental pollution; more than one in four premature child deaths are linked to broad environmental causes. Global temperatures in 2016 were the hottest on record for the third year in a row, with global surface temperatures nearly 1C warmer than in the mid-twentieth century.
But global warming is not only the single biggest threat to human health, it also has the potential to become the single biggest driver of economic transformation in human history. The decarbonisation of our economies affects every aspect of our world, encompassing not just the way we generate power, but how we grow our food, travel and live our everyday lives.
It is often said that the sins of developed economies, whose factories belched out fossil fuels throughout the twentieth century, are being visited on emerging markets at the very point they are experiencing stellar economic growth for the first time. They are being required to decarbonise just as demand from a nascent, voracious middle-class is taking off.
But, as an entrepreneur and investor, I look at every problem as a potential opportunity. The Emerging Markets Symposium brings together great minds from around the world to debate the challenges faced by developing societies. The 2017 symposium, the eighth since it first met at Green Templeton College in Oxford in 2008, considered the issue of health and environment in emerging markets.
What struck me during the opening session was the sense of optimism despite the scale of the challenge. The symposium’s chairman, Shaukat Aziz, the former Prime Minister of Pakistan, hailed the Paris Accord as a historic, watershed moment, presaging a new era of global collaboration and an acknowledgement that environmental health is an issue that doesn’t have borders. Not only is the right to breathe clean air a basic human right, but it is also essential to increase productivity and thus prosperity.
Interestingly, the innovation curve is moving east to west and north to south, with the most dramatic shifts in approach coming from emerging markets themselves, according to Achim Steiner, former Executive Director of the United Nations Environment Programme, who gave the opening address. Thailand advertises itself as a ‘sufficiency economy’, Bhutan talks of ‘gross national happiness’ – but these are not merely theoretical concepts, they are national branding strategies which feed through to political implementation.
In China, a new narrative of ‘ecological happiness’ is embedded in public policy and has formally entered the language of its Five-Year Plan. It is recalibrating every aspect of the country’s infrastructure and will play a role in shaping the next stage of China’s economic development. It is also shaping the political debate; the environment minister recently issued a public apology to the Chinese people for unacceptable pollution levels, an event that would have been unimaginable not so long ago.
Mr Steiner believes emerging markets are now at the forefront of innovation – eight years ago, Kenya decided that it would generate at least 75% of its electricity from renewables – but only if treasuries do not define their investment choices too narrowly. The debate about renewables cannot focus solely on the cost per kilowatt hour, it must also include the cost to human health. This is the circular economy: the cost of reducing air pollution is outweighed by the benefits to human health.
As an investor, it is obvious that an explosion in green finance will be needed to fund the transformation of infrastructure. Hundreds of billions of pounds will have to be committed to overhauling transport systems and digitising energy networks. That too is an opportunity, provided we have the imagination to embrace it.
Once, we thought we could use our wealth and technology to make ourselves independent of nature. Now, we are more dependent on it than ever and we recognise that we need to protect nature in order to survive.