CRAR: Show Me the Money
I’ll be honest, even though I’m a clean energy wonk, I haven’t even seen Al Gore’s film, An Independent Sequel. He’s right. Science convincingly backs up his argument. I’m just tired of watching the tug-of-war “debate” between the Al types and those who have unreal amounts of money to keep the status quo for their personal benefit. It’s all about the money. And ironically, money is what will ultimately create sorely needed change.
RISKY BUSINESS (SPEAKING OF TOM CRUISE MOVIES)
It’s impossible to ignore what is happening worldwide, especially with the recent hurricanes dominating the news. Houston is completely unprepared for extreme weather – read Hell or High Water from ProPublica and The Texas Tribune, outlining how we have narrowly avoided devastation to our economy with the exposed Houston Shipping Channel, a hub for oil refineries and chemicals.
For another good scare (and a good perspective of what’s coming), check out Epicenters For Climate and Security from The Center for Climate Security. Sit back with some popcorn and a glass of red wine as you read about the potential horrors resulting from a changing climate such as water conflicts/terrorism, the spread of disease, unprecedented migration, and the massive challenges coming to coastal cities. Oh, and by 2050 we may not have any good coffee left. Do I have your attention now?
But here’s the thing. Business understands risk. And the money giant is starting to wake up and ask the right questions. Harvard Business Review estimates that every year, weather variability is estimated to cost $630 billion for the U.S. alone, or 3.5% of GDP. Investors are calling for climate risk disclosure from banks. And businesses worldwide are asking the tough questions: What do these risks mean to them?
PROTECTING TACO TUESDAY
That is where (caution: shameless plug) dissigno is focused. The buzzword of the day is resiliency. And the core of being resilient starts with energy. Energy is the currency that buys work. It is the key component in not only keeping your business running, whether you need refrigeration to keep vaccines cool, temperature control to avoid food spoilage or equipment failure, or to to keep your hotel guests comfortable (and equipped with a fresh margarita).
Whether you run a hospital, a 5 star hotel, an airport, or a distribution center manufacturing sugary drinks making our kids obese and hyped up on caffeine, you need to understand your risks and protect your investment. A few hundred dollars in homeowners insurance to protect your belongings from theft or fire is the norm. If you own the best beachfront taco spot in florida, shouldn’t you have the same approach to avoid a disruption in your business? (The answer is yes. Taco Tuesday is vital to our existence).
Risk Adjusted Return a common measurement for business: it looks at the likelihood of getting the return the investor is anticipating. If you know the probability of inputs and likelihood of outputs you can calculate a Risk Adjusted Return.
We are taking that concept a step further. By thinking about the primary and secondary hyper local impacts of a changing planet to your specific business, we can outline your risks and determine how to protect your investment. We will determine the risks of your supply chain, stability of your infrastructure, and understand your energy needs to come up with a plan to mitigate those risks.
That is your Climate Risk Adjusted Return, or CRAR.
Wherever you stand on the climate change debate, it is leading to a resilient resolution. This investment lens means that you will start to invest in renewable energy solutions not because they are good for the environment but because they protect your capital and accelerate the returns. The key is to evaluate the return of being resilient. This means having a practical way to view of the world with deep thinking, data, and strategic investment in a time of perceived doubt. However, there is a clear path forward but requires different perspective in the same context. Renewable energy will help us find away in a more complex, violent, and uncertain future.
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