Tikehau Capital: Navigating our planet's unprecedented climate crisis, it is time to transition!
By Pierre Abadie, Group Climate Director & Private Equity Managing Director at Tikehau Capital
Over the past 12,000 years, the conditions on our planet have been remarkably favourable for our development. We've enjoyed a stable climate, abundant water, clean air, rich biodiversity, and a protective ozone layer. However, our trajectory took an unforeseen turn as we stumbled upon fossil fuels, which powered the machinery we invented.
This discovery propelled us to drastically increase our ability to extract natural resources and transform them into the material goods we use and discard. The industrial revolution of the last 150 years undeniably enhanced our quality of life, evident in the doubling of our average life expectancy during this period.
Yet, a critical element has been overlooked in this progress. Our economy relies entirely on the stability of our biosphere and the nature it encompasses. Regrettably, on our path of development, we severed our connection to the natural world and the living systems around us.
Through a collective lack of discernment, we, 'humans', have emerged as the primary force of change on Earth, even surpassing the influence of geophysical forces.Today, as we stand in the midst of the summer of 2023, our planet is grappling with an unprecedented climate crisis.
With the average temperature already having risen by 1.2°C since the preindustrial era, the American, European, and Asian continents are simultaneously enduring extreme heatwaves. Thermometers are soaring past 45 degrees Celsius, leading to water shortages, electricity cuts, and uncontrollable forest fires. Polar glaciers are melting at an alarming pace, and ocean temperatures are reaching record highs.
These dramatic events were foreseen by the scientists of the Intergovernmental Panel on Climate Change (IPCC). According to their latest assessment report, human activity undeniably bears responsibility for global warming, which, at the current rate, is projected to reach 1.5°C by the early 2030s.
Meanwhile, we continue to sing the tune that a technology from the fantastical realm of 'unicorns' will magically solve the climate crisis with a wave of its wand.
Ironically, the very workings of our economy birthed this climate crisis. Yet, it is through the economy that we can adapt, master this crisis, and find solutions. Decarbonizing our economy is pivotal to stabilizing, if not slowing down, the pace of warming.
Let's remain pragmatic. In the short term, veering away from a market economy is not reasonable. It has fostered development and elevated the living standards of billions. However, let's ensure it's not disconnected from reality. Let's re-anchor it to the real world and wield it in service of ecological transition.
The path to carbon neutrality is already illuminated. It doesn't hinge on a new technology, a new law, or a new tax. It hinges on reducing the carbon footprint of our existing systems and assets. This calls for insulating buildings, enhancing factory efficiency, proliferating electric vehicles, and expanding renewable energy capacity. Decarbonization and economic adaptation form the most significant structural growth vector of the next decade. According to the IMF, this segment alone accounts for 6 to 10% of the upcoming global GDP and has the potential to create over 30 million jobs.
The direction is clear, and the goal is precise: halve our emissions in under three thousand days. It is no longer time to procrastinate or wait for miraculous solutions. Every economic actor must assume their share of responsibility. Companies must become pioneers of this transformation by actively reducing their emissions. Financial institutions must also play a crucial role by directing 4 to 6 trillion dollars of global savings annually towards financing the transition to a decarbonized economy.
The challenges we face are immense, but they are not insurmountable. The crises we see unfolding today are the result of our actions as a collective human society. Our innovation, growth, and development have had unintended consequences on the environment that sustains us.
Yet, there is hope, for it is within our power to change the course we are on. By recognizing the interdependence between our economy, the biosphere, and the natural world, we can forge a new path forward—one that harnesses the potential of the market economy to drive sustainable change.
Through decarbonization, adaptation, and a collective commitment to preserving our planet, we can navigate the challenges of the present and ensure a more stable and harmonious future for all life on Earth.