The world has undergone a massive shift over the last few years. Debt crisis is mounting in most countries alongside the growing challenges of climate change that needs to be tackled.
The sixth assessment report by the Intergovernmental Panel on Climate Change reveals that the 1.5°C warming target can be achieved, with a push from collaborative stakeholders. Unfortunately, the report also highlights we are currently headed towards a 2.2°C-3.5°C spike over pre-industrial levels. This is likely to have a direct impact on everything, from food security to human health and the global economy.
“Almost half of the world’s population lives in regions that are highly vulnerable. In the last decade, deaths from floods, droughts and storms were 15 times higher in these regions,” reveals Aditi Mukherji, one of the authors of the report. India is also on the radar. While there is no dearth of global capital, there is still a greater need for climate financing. This can only be realised if investment barriers are eliminated from the path.
Rethinking business strategies
It’s a positive sign that governments across the world have stepped up to minimise emissions. India too, is committed to reduce emission intensity of its GDP by 45 per cent in 2030 as compared to 2005 levels. Furthermore, the country is targeting to achieve about 50 per cent cumulative electric power installed capacity from non-fossil fuel energy resources by 2030. This can be done with the help of transfer of technology and low-cost international finance.
A joint analysis by the IEA and the IMF states that, investments in the clean energy transition will add an additional 0.4 per cent to the global GDP annually. Under these circumstances, it is imperative to lean on new financing paradigms that help accelerate decarbonisation by removing the capital barrier.
This is where performance or outcome based financing models like Net Zero as a Service or Connected Chillers as a Service can assist. They help remove the upfront (capex) financing hurdle, allowing companies to start using sustainable technology immediately. This way, they can pay an opex fee over time, often based on guaranteed outcomes.
scale of building new financing paradigms
As per a white paper by Tata Consultancy Services , companies are increasingly investing in technologies including electrification, carbon capture and storage, bioenergy with carbon capture and storage, and more. However, it is important to select business models that accelerate energy transition. Decarbonisation-as-a-service offers it and focuses on helping businesses reduce emissions from their suppliers.
One of the most pressing challenges is to procure data on emissions. Even if there is access, it is available in a range of formats. With decarbonisation-as-a-service, it is made simpler and offers a granular perspective that will help produce a consolidated picture. The technology can also ensure accuracy and provide intelligent insights to reach net zero.
Similarly, leveraging something like Connected Chillers as a Service, ensures companies are only paying for the outcome without spending on equipment. In a nutshell, it is pertinent to look at pooling costs, so that projects can achieve social, environmental and economic impact, while generating revenue.
Central net zero management system
Building on intelligent Environmental and Social Standards (ESS) requires coming together of various verticals. From setting up a net zero management centre that forms the centrepiece of a sustainable enterprise to having access to the total scope of emissions and driving action with corrective measures and creating a technological base that ensures everything synergises to integrate sustainability into external and internal ecosystems.
These steps will also ensure the seamless collaboration of investors and insurers, providing them with a framework to accelerate theri plans. The final accelerators are how banks and governments can add incentives to the financing instruments if they are applied to net zero plans.
Adopting such a performance-based model is not the answer but only the first step. Organisations must work on building discipline, a well-structured culture and ensure upskilling of employees to achieve the desired targets.
