Stern Imperatives

Lord Nicholas Stern

Lord Nicolas Stern delivered another inspiring speech. Opening the Investor Day for Abengoa, where he is an International Advisory Board member, he described the future risks caused by climate change and said that it should spark a  New Industrial Revolution.

However, to mitigate the risks inherent in climate change he gave some practical advice:

  • Take a long-term view. Short term volatility will be great.
  • Risk management will favour low carbon energies
  • Future trends will be policy-led
  • International agreements/treaties defining   targets  to reduce emissions will be less significant than changes to competition brought on by individual countries
  • Most importantly of all, watch China.

In China recently, Stern was clearly impressed by the boldness of the 12th Five-Year Plan which sets out to completely change China’s economic development.  He was equally impressed by the attendance  of so many of the world’s  great economists  Joseph Stiglitz, Michael Spence as well as the presence of virtually all the most important western corporate leaders and politicians.

The goal of the plan is straight forward: make China the world’s technological innovator. To this end trillions of investment RMB are earmarked for seven key industries. Energy savings practices will be implemented and alternative energy sources to hydrocarbon will be found. The energy target is 900GW of additional power over the next 20 years.

He then went on to mention India’s renewable energy target which is to have  72.4GW of installed capacity and solar grid parity (with coal) by 2022.  Next to ambition of that magnitude, Europe’s target for 20% renewables by 2020 now looks timid.

We were left with the impression that China’s Five-Year plan is a game changer that must not be ignored in Risk Management models.



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