Economic growth and climate change

The climate's changing For the economy Lightspring /shutterstock.com

Business leaders from India and China outline why climate action matters for businesses in both Asian giants

Taking action on climate change is important for businesses in India, China and emerging markets, because with the right direction from government, our countries can be the global engines of low-carbon growth.

Over the next 15 years, most of the world’s economic growth will come from emerging markets. According to the World Bank, the Chinese and Indian economies both grew at 7.4 per cent in 2014 while the economies of the US and the UK grew at just 2.4 per cent and 2.6 per cent respectively.

The World Bank also forecasts that 38 per cent of the global gross investment in 2030 will come from China and India. Another forecast – by PwC – predicts that by 2050 China and India will be the world’s two biggest economies.

At the same time, a large part of the world’s future greenhouse emissions will come from China, India and emerging market regions. China’s own political leaders have noted that the country’s past economic model was “unbalanced, uncoordinated and unsustainable”.

Impacting change

It is undeniable that the developed world is responsible for the vast majority of greenhouse gas emissions today and must significantly reduce its per capita emissions. The INDCs show that even in 2030 the per capita emissions of the developed world will be higher than that of the developing world. Clearly this indicates the need for joint action.

At the same time, it is clear that what we do in China and India will have a significant impact on the world and the climate, and in return, climate change will have a significant impact on what we do — as businesses and as societies. Climate change is real and the threat is urgent. This is especially true for developing countries.

For example, extreme climatic conditions over the last decade have resulted in economic losses of nearly $200 billion a year. Over time this is expected to intensify, with India experiencing a horrendous monsoon this year.

Therefore we need a new direction.

This is why, as CEOs and chairs of major businesses based in India and China, we support climate action by national governments, businesses, provinces and cities. We have joined a group of 78 global CEOs to sign the CEO Climate Leaders’ statement and support climate action.

The CEOs represent companies from almost all economic sectors and from Asia, Latin America, North America and Europe. Action may take different forms in different regions — but we know that globally, we need to act.

Big opportunities

In India and China, as in many emerging markets, business leaders now recognise the business case for sustainable, low-carbon development. We see the benefit of a shift towards low-carbon, climate-resilient growth, driven by innovation, cleaner energy and greater efficiency. By driving investment in more productive infrastructure, such growth can help us regain our growth momentum, from the years before the global financial crisis.

Indeed, the opportunities are immense.

Take the example of urbanisation. To date, the expansion of cities in India and China has gone hand-in-hand with strong economic growth. And this urbanisation is a global trend, which will continue over the next several decades, and most especially in developing countries.

To give a sense of scale, the world’s urban population is expected to grow by 2.5 billion between now and 2050 — more than a quarter of these will be in India and China. Around 25 million Chinese are currently moving to cities every year — that’s around three times the population of New York or London moving to cities every year.

Urbanisation has been, and will continue to be, an engine of emerging market growth. But the present model is posing a threat to the very cities we are creating. Problems such as air and water pollution have been well documented; if unaddressed they can undermine health, quality of life, and productivity.

By building low-carbon cities, using smarter electric and mass public transit, by investing in buildings efficiency and a digital, decentralised electric grid, by growing in a planned way, to help people commute and live more safely, we will create more jobs, cut poverty, reduce investment costs, and improve air and water quality. These are cities where people will want to bring their talent. They will be more competitive.

Innovation challenges

But there are challenges to harness this innovation, create these jobs and build these cities. It won’t happen automatically — it will need both public and private sectors working together. Ambitious policy and smart business decisions can accelerate and scale the needed transformations.

And as business leaders, we must mobilise capital and divert resources. For this, we will need direction. A new climate agreement, to be reached next month in Paris, can give that direction we need, if governments can agree national and global, short and long-term goals to cut carbon emissions, and a commitment to review and strengthen emissions targets over time.

If governments can show that a low-carbon transition has already started and is inevitable, we can show them the innovation, know-how, skills and investment to make it happen, both more swiftly and with greater benefits, both to the economy and climate.

As global businesses, we are taking action and we stand ready to support this ongoing action through 2016 and beyond.

Mahindra is chairman of the Mahindra Group. Kurien is CEO and member of the board, Wipro. Zhang (CEO) and Pan (chairman) are co-founders of SOHO Foundation, China

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Published on December 13, 2015
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