The Business of Climate Change Challenges and Opportunities (Feb 2007)
Lehman Brothers decided to take a hard look at global warming, starting with the scientific and climatological evidence, then proceeding to the economic consequences and implications for policy; and finally – with significant help from the Firm’s equity analysts – considering potential impacts on major business sectors. The result is this publication: The Business of Climate Change: Challenges and opportunities. It reaches a number of broad conclusions. Global warming, we judge, is likely to prove one of those tectonic forces that – like globalization or the ageing of populations – gradually but powerfully changes the economic landscape in which our clients operate, and one that causes periodic sharp movements in asset prices.
And, as the title indicates, we consider that climate change poses many challenges but also presents many business opportunities. Firms that recognise the challenge early, and respond imaginatively and constructively, will create opportunities for themselves and thereby prosper. Others, slower to realise what is going on or electing to ignore it, will likely do markedly less well.
This study is far from the last word: indeed, we see it as just the starting point for adialogue with our investing and corporate clients. As the discussions with our clients and policy experts progress, we will take this work further.
Dr John Llewellyn
Senior Economic Policy Advisor
Lehman Brothers
There was followup to the previous report The Business of Climate Change II Policy is accelerating, with major implications for companies and investors (Sep 2007)
There is, in our view, a particular sense in this. Until recently, many – and in some countries most – climate change policy proposals have originated mainly outside government. Today, however, governments themselves are increasingly becoming directly involved in policy proposal and design. Thus far, in most national administrations, responsibility has come in as far as ministries of environment, technology, energy, and industry. However, we judge that ultimately the nexus of responsibility, at least for key climate change policies, will move inwards still further – into treasuries and ministries of finance. And when these ministries take over responsibility, policymaking will acquire a harder edge: the objective of policy design will be not only to reduce greenhouse gas emissions, but to reduce them at the lowest possible cost.
Thus economic considerations are poised to assume their greatest weight yet in policy debate and design. A year or two from now, of course, the debate will have moved on: client concern will likely be with analysing the consequences of actual policies, or at least of more concrete policy proposals. But that is for tomorrow.
We trust that this volume will be a constructive sequel to The Business of Climate Change: Challenges and Opportunities, for clients and others who seek clues about how policy may look, a year or two from now, and about what some of the implications may be for business.
