Lord Stern: Downturn won't affect climate change efforts

Being green is all well and good but how long will companies continue to worry about the environment if the financial downturn affecting the US bites harder and really impacts the UK?That was one of the questions posed to Lord Nicholas Stern, of Stern Review fame, at a business conference this week held at Wembley Stadium in London.

Being green is all well and good but how long will companies continue to worry about the environment if the financial downturn affecting the US bites harder and really impacts the UK?

That was one of the questions posed to Lord Nicholas Stern, of Stern Review fame, at a business conference this week held at Wembley Stadium in London. Stern's response was in line with the remit given to him under the terms of the Stern Review, published in 2006, which set out to look at exactly what impact climate change would have on the UK economy.

(photo credit: Nigel Stead/LSE)

Rather than agreeing that companies would indeed cast their high-minded environmental ideals to the wind, if times get harder, Stern claimed that being green is the only economically sound policy in the long run.

"I think that difficult times should not derail this. There will be some ups and downs over the next fifty years but we have to push through that," he said.

Stern's 2050 forecast refers to a time-line he presented earlier on his speech to around 1000 business leaders at the event organised by US software-maker SAS. The Lord and London School of Economics professor claims that rich counties will need to commit to around an 80 percent cut in carbon emissions by 2050 to avoid the 5 degree rise in temperatures that scientists have forecast for the end of the century if we continue to produce carbon at the present rates of growth.

When economies being to shrink, sensible companies look to do two things according to Stern – look hard costs and protect their assets. Reputation is a big asset for many firms and abandoning environmental commitments can have a big impact on how a company is perceived – not something that any firm wants to attract when facing financial pressures.

For its part, business intelligence vendor SAS is hoping to that it will be able to sell its analytics tools to companies who want clearer metrics on how energy efficient there businesses actually are - so is firmly on-side with Stern's message that green doesn't have to be mean when it comes to making money.

Stern's speech at software conference came on the same day that he published a set of proposals for a global deal on climate change at the London School of Economics and Political Science.

The report, Key Elements of a Global Deal, includes input from HSBC, IdeaCarbon, Cambridge University, Lehman Brothers and consultants McKinsey and suggests a set of proposals to "advance the climate change debate" ahead of the United Nations Framework Convention on Climate Change 15th Conference of the Parties in Copenhagen in December 2009.

According a statement issues by the LSE, the report examines the implications of the commitment to cut global greenhouse gas emissions in half by 2050 (taken at the G8 summit in Heiligendamm in June 2007).

Tackling climate change is the only sensible course open for businesses, Stern claimed in his conference speech. Doing nothing would have far more impact on the global economy than spending to tackle climate change, he argued.

"It is not doing anything about climate change that will affect growth. I don't think that this has a negative story, it can be a very positive strategy," he said.

And rather than being the fault of rapacious corporations who have bled the world dry in an extricable drive for shareholder returns, the beast of commerce and financial markets actually hold the key to tackling climate change, says Stern.

"The right reaction is not to abandon markets but fix the problems," he said. The problem is that markets have not been working properly up until now – the underlying economics of business have directly contributed to climate change and global warming by not making polluters pay. "People do not pay for the damage that they do," said Stern.

The other contributing factor is that the last 10 to 15 years have been a period of unparalleled growth. However during this prosperous period, companies have got sloppy when it comes to managing risk. This can be seen in the recent sub-prime mortgage collapse, which was basically built on financial institutions ignoring risk. The same goes for climate change. Just like selling mortgages to people who can't pay them back, businesses and individuals have been generating carbons with no thought about how it might impact them in the long term.

"During periods of growth people get careless. What is happening now is that people are taking risk much more seriously," said Stern.

Stern also couldn't help but use the forum to take a swipe at some of the figures that he wasn't able to comment on when acting on behalf of the government – having discharged his duties to the government and returned to his role as a professor at the London School of Economics. Top of the list was ex-Australian Prime Minister John Howard who Stern described as "appalling" during a panel debate following on from his keynote at the conference. "It's really nice to be outside of politics so you can refer to people like John Howard as appalling."

Stern's views on Howard no doubt stem from the former Australian PM's poor record on the environment – including joining the US in not signing up to Kyoto - which many claim played a big part in his Conservative governments party losing an election last November after 11 years in power.