Capturing the upside of a low-carbon future

Last week, I had the pleasure of participating in a panel discussion at Energy Disruptors United (#EDU2018) on the economic opportunity of a low-carbon future. Joined by Dan McGraw (ICIS), Teresa Ehman (Air Canada), Alastair Handley (Carbon Credit Solutions Inc.) and Simon Currie (Norton Rose Fulbright), we discussed the challenges and opportunities in today’s energy landscape. 

Right off the bat, it was clear we all agreed that organizations shouldn’t wait around for governments to pursue market frameworks, but should be moving forward with innovative and collaborative ways to drive emission reduction and investments in renewable energy.

Here are some of my #EDU2018 takeaways for organizations looking to capture the upside of a future low-carbon economy.

Navigate with innovation, collaboration

First things first: we need to drive the change, not be disrupted by it. It’s clear we’re in a bit of a state of uncertainty, with policy debates in Canada and beyond continuing to add an extra level of complexity to how organizations and governments progress with long-term investments. Without fully knowing what’s going to happen we need to be exploring a wide range of solutions that will meet future sustainable development goals regardless of where policies are headed.

Two tactics that come to mind for me are around the power of innovation andcollaboration, as outlined in the recent EY Energy Reimagined report:

• Seize the power of digital. Data offers a huge opportunity to optimize the energy mix. Increasing automation can unearth the data needed to help identify ways to manage operations, people and energy consumption more efficiently, and proactively identify future trends.
• Collaborate. Identify opportunities for collaboration between public and private sources of capital, innovation between energy users and suppliers, and to capitalize on successes from other parts of the world. Partnerships with, or investment in, entrepreneurial start-ups are also great avenues to produce new results with minimal risk.

Understand the cost of carbon

One of the largest hurdles we are facing in Canada is the finding a way to develop a common understanding of how a price on carbon is contributing to environmental benefit. It’s likely that the average Canadian understands the potential risks of climate change, yet doesn’t want to pay for them. For Canadians to fully embrace and support climate change policy, they need to understand the varying costs and benefits – including environmental, economic and social.

An example of a social benefit that panelists honed in on was the importance of job creation – that the future of energy is not job-neutral, but job positive. This will come naturally as greater public and private investments are made in research and development, and the creation of renewable energy production.

By engaging in these types of conversations, Canadians are more likely to support the long-term investment and legitimacy of carbon pricing policies.

Get boards on board

Two years into the Paris Climate agreement and we’re still seeing a mix of boards that are either pushing things forward or holding things back. The reality is that boards need to be faster and less comfortable with the status quo when it comes to responding and reporting on climate change risk – climate change isn’t going anywhere, so it needs to be a long-term priority.

Plus, it’s not just regulators that boards need to please, it’s investors, too. As public knowledge and support of climate change policies increases, so does pressure from investors to make disclosure and governance top-of-mind for Canada’s boards. An EY survey of institutional investors found an increased appetite for companies to disclose their environmental, social and governance risks.

With non-financial performance playing a larger role in investment decisions, organizations should take this as an opportunity to demonstrate how they are managing uncertainty. Boards should be telling investors how they’re addressing risks associated with the energy transition, and how they’re positioning the organization to adapt and thrive in the new energy ecosystem.

The higher investor confidence rises, the higher the capital returns. There is no one-size-fits-all approach to consider, but by having enough flexibility in corporate planning, coupled with the right support from the public and investors, organizations will be well-positioned to navigate a low-carbon economy.

As everyone who participated in last week’s #EDU2018 event will know, we are at a time where our biggest energy challenges are our greatest opportunities. Now is the time to think differently and act boldly.

Missed Energy Disruptors? Here are the top EY moments.