This story was originally published by Grist with the headline Global warming. Inequality. COVID-19. And Al Gore is … Optimistic? on Jul 12, 2020.
This story was originally published by Wired and is reproduced here as part of the Climate Desk collaboration. Before he was the guy with the climate change PowerPoint presentation, before he lost the U.S. presidency by a nose (and a Supreme Court decision), Al Gore had a reputation for pitching ambitious policy solutions to the knottiest societal problems. From the Senate to the vice presidency, while most politicians were yelling about oil prices, Gore was talking about connecting information superhighways to public schools and taxing British Thermal Units to fight global warming. For the past decade and a half, Gore, a self-described “recovering politician,” has been a capitalist. He’s chair of Generation Investment Management, a $20 billion equity firm focusing on environmentally sustainable companies. It might seem like a tough time to put on that specific happy face — a pandemic and resurgent fights over racial and economic inequality might take cuts in the queue ahead of a global economic meltdown and planetary ecosystem collapse. Even Generation’s annual sustainability report shows that public attention toward climate change has taken a backseat to concerns about the novel coronavirus. Yet somehow now, as the firm releases this fourth annual Sustainability Trends Report, Gore seems almost … optimistic. Which — well, how could that be? It turns out that the trend lines Gore has spent a lifetime either warning people about (carbon!) or trying to goose upward (green energy! access to health care!) are finally headed in the directions he was hoping for. The COVID-19 pandemic, he says, has accelerated the kinds of systemic changes he pushed for, first with legislation and then with investments. And while Gore declined to offer specific advice for how leaders in the public sector should be handling the pandemic, he seems supremely confident that pressure from the private sector will steer governments in the right direction. He also believes the world will be “pleasantly surprised” by sooner-than-expected, safe vaccines, and that the public will somehow overcome the misinformation atrocities on that thing called the internet. As a presidential candidate in what turns out to have been a far simpler time, Gore had a reputation for prickliness — for not being the kind of person you’d want to have a beer with, as if that were a valid criterion for choosing a president. But nothing softens a person’s attitude than a book’s worth of evidence that maybe he was right all along. Gore talked to Wired reporters Adam Rogers and Lauren Goode about the business and political trends that COVID-19 has turbocharged in what he hopes are the right directions. This conversation has been edited for length and clarity. Q. Rogers: Implicit in Generation’s strategy of investing in growth-stage companies is some basic confidence you must have that a venture capital investment model is a way to push innovation. When three-quarters of venture capital investments are in software, not things like biotech or big engineering, why does venture capital seem to you to be a way to address big problems like climate and public health? Is investment the way to get the innovation that you need? A. Well, first of all, let me just note for the record that we don’t do venture capital investing. We do growth stage investing, and the larger part of our business is in global equity. What we found in our fourth annual Sustainability Trends Report is that — well, a lot of things — but first of all, in responding to the pandemic there has been a growing recognition around the world of the new political and social realities that give us a generational obligation to shift to a more sustainable world. Governments have to play a role, investors have to play a role, and businesses have to play a role, all to ensure that the short-term emergency and recovery measures lead to a better and more resilient future. Let me just say a couple of other things, Adam. We find that there is an unmistakable, rising awareness of the need for change. The pandemic accelerated fundamental changes in consumer and social behavior, and this is matched by an acceleration in innovation by governments and businesses. Secondly, we have found a growing awareness that the world’s collective social and economic faith is inextricably linked to that of the natural world. There is now a widespread, shared understanding of what an existential threat might look like. The consequences of ignoring scientific advice from epidemiologists and virologists has been brought home to us. And it is not much of a leap to realize that the dire advice from a climate scientist must be taken into account as well. In order to limit global temperature rise to no more than 1.5 degrees C, greenhouse gas emissions need to fall by roughly 7.5 percent per year for the next decade. That’s more than the drop expected this year due to COVID-19. And that sounds daunting, but we are finding fundamental changes in the global economy pushing us toward sustainability. And the report highlights the many ways in which the burden of this crisis has fallen unequally. Addressing these historical injustices reflected in the Black Lives Matter movement has to be at the center of a transition to a sustainable future. Sorry to go on too long. I wanted to get the basics out there. Q. Rogers: You’ve been known for ambitious policy solutions to really hairy problems. You’re saying that our three current crises — COVID-19, climate, and inequality — are intertwined. So I just want to ask you to make the connection between an investment fund and the policy and structural changes that seem likely to be necessary. If the real answers are, you have to rip up the way health care gets handled in the United States and the way fossil fuel gets subsidized, then how do you get there with an investment fund? A. Well, those are some of the things that need to happen, for sure. First of all, there has been a fundamental shift in thinking in the business world and in the investor world. Just in the last six months, both the Business Roundtable and the British Academy have made a fundamental change to their definition of the purpose of a corporation. They have dethroned shareholder primacy and emphasized multi-stakeholder analysis and a long-term view. That’s reflected in the new awareness of the sustainability revolution. We believe that we’re in the early stages of a sustainability revolution, one that will be larger than the Industrial Revolution, with the speed of the digital revolution. We believe it’s the biggest investing opportunity in the history of the world, and the biggest business opportunity in the history of the world. But to get a little more granular, on the subject of health, we are right at a tipping point in the adoption of personalized health care. Interest in direct-to-consumer health care has quadrupled over the last five years. And in April of this year COVID-19 became one of the top five drivers of telehealth. Now weaknesses and preparedness and the capacity to respond to this crisis have relevance beyond health care, because it is triggering a new awareness of the need for change and improvements in social safety nets in the role of essential workers. And to address the unequal access to health care that I mentioned earlier, it has a huge impact on life expectancy for different groups. Also in some countries, like the U.S., administrative costs now account for nearly 10 percent of total health spending. That is unacceptable. Q. Rogers: You just said that was a huge opportunity for investing and a business opportunity. Do you not see a tension between so-called Environmental, Social, and Governance investing and the fiduciary responsibility that institutional investors and executives have to maximize returns? Or do you think that responsibility now actually includes ESG investing? A. Yes, I believe that is the case. First of all, there is now voluminous research showing that businesses that fully integrate ESG factors into their business plans are more profitable in almost every sector of the global economy. And the research also shows very clearly that investors that fully integrate ESG factors into their investment models perform better. So as this reality becomes more widely known and understood, asset managers who do not integrate ESG factors are definitely at high risk of violating their fiduciary responsibility to their clients. And there’s some irony in that, because during an earlier period those who ignored ESG — including some that diminished the importance of ESG factors that used to often claim, “Well, you can’t use those factors because you might violate your fiduciary responsibility” — that’s been turned on its head now. Q. Goode: In going through your portfolio companies, it struck me how some of them appear to be rather prescient and some less so. I’m sure that’s something that a lot of investors are going through right now, since the world has dramatically changed in a short amount of time. You’ve invested in Toast, which is restaurant management technology; ProTerra, for electric buses; Convoy was another — so a couple there in the transit and transportation sector. So, we’re living in a connected world in the time of COVID-19, but also at the same time things like the point-of-sale experience has changed in the pandemic, and public transit is being cut or even questioned in terms of public safety. I’m wondering how COVID-19 has changed your investment thinking and what may be some areas or companies you’re eyeing right now that you weren’t looking at just four to six months ago. A. OK, if you have your pencil, I’ll give you the top 10 companies that we’re just about to invest in. Q. Goode: Please. Just pull back the curtain! A. No, I’m probably not going to do that, but it’s a very thoughtful question. We were founded 16 years ago, and we’ve been managing assets for 15 years. And our goal throughout our existence has been to get the best return for our clients, and to do it in a way that proves the business case for sustainable investing. We only invest in businesses that we believe produce goods and services that are consistent with the emergence of a clean, prosperous, healthy, fair world. And we have had, for all of that time, a conviction that the world was moving in this direction. That’s kind of been driven by the laws of physics. We’re putting 150 million tons of global warming pollution into the sky every day, and the cumulative amount is trapping enough heat to equal the energy release by 500,000 Hiroshima-class atomic explosions every day. I won’t go through the rest of the bill of particulars, but it’s been obvious for quite a while that the world is changing because human activities are changing the world. And as those changes mount up, we’re going to have to to deal with them. We’re going to have to mitigate the climate crisis and the broader ecological crisis, the collision between the way we’ve organized the global economy and the natural world. I will say that the pandemic has actually accelerated those changes, and I think that the pandemic is also driving people to take these sustainability factors into account in the planning for a post-pandemic world. So that the emergency response, the recovery plans, will drive us toward a better world. That’s what people want, and our findings show very clearly that these attitudes have changed dramatically all around the world. Q. Goode: So what I’m hearing you say, I think, is that you’re really thinking about this long term. That even if some of these investments and the companies themselves are maybe weakened in the short-term because of the pandemic, you’re willing to make that investment toward sustainability for that timeline in the future when we actually are post-COVID-19. And if I’m hearing that correctly, when you look at that, what is that timeline for you? Are you looking five to seven years from now? When do you think that we reemerge from this? A. Yeah, well, first of all, we don’t know and no one knows. My guess is that the maturation and strength of the global biotech community has advanced so much that there’s a real chance there — that we will be pleasantly surprised with the arrival of efficacious and safe vaccines sooner than the experts have told us to expect. I’m not an expert on that, but we listen to those who have been following it and it’s very impressive what these groups have done. Of course, it will take as much time as it’ll take, because you have to do the large safety studies and they take some time. But in any case, whenever we emerge, I think that these trends are producing a new world. And we think that it’s the biggest business and investing opportunity in history. Q. Goode: You’ve been clamoring for the public to pay attention to climate change for decades now. But as your own report highlights, people are more concerned about the coronavirus than they are about climate change. The younger groups care a little bit more about climate change, but everyone else, right now the attention has totally shifted. How do you propose that people essentially care about these dual crises right now? And it’s not just a dual crisis, of course — we’re experiencing a new civil rights movement. We’ve talked about inequality. I guess I wonder if climate change is destined to always take a backseat even as all of these events are intertwined. How do you propose to keep climate change in the center of attention? A. Well, first of all, I would be surprised if the COVID-19 pandemic was not the principal concern occupying most people’s thoughts right now, because of the obvious consequences and the fact that in some countries — including the U.S. — the case numbers are still rising. We had a botched reopening, and the predictable consequences are unfolding now. But I don’t see it as a competition for attention and awareness. I see it as a natural relationship, and I do think that there’s some real evidence of a broader general awakening. I don’t want to sound Pollyannaish on this point, but if you think back a few years, the awakening to the incredible injustice that was suffered for so long by the LGBTQ community led to a startling change in the demand for marriage equality and for an end to discrimination in employment, recently codified in a Supreme Court decision. And the gains of the LGBTQ community are being consolidated. They’re not going away. Similarly, the gender equity demands of the last few years are being consolidated. One magazine referred to our present time as the “Great Awokening,” and I won’t necessarily endorse that glib phrase, but I think that it does carry some meaning. No kidding. I think that the general lesson is that when scientists are setting their hair on fire, so to speak, to try to warn us of something, it’s best to pay attention. When both the pandemic and the climate crisis reveal for all to see the incredible injustices suffered by communities of color. I mean, how in God’s name could the majority in our country — and I include myself in this indictment — how could we have tolerated for so long a situation where the earnings gap between Black workers and white workers is the same now as it was 50 years ago? How could we tolerate the fact that the net worth of the so-called typical Black family, compared to the net worth of a typical white family, it takes 11.5 Black families to make up the net worth of one white family? How could we have looked the other way and not been more focused on changing that? Now, the general awakening to these factors, driven home by George Floyd’s murder and by the horrible excess death rate from COVID-19, has driven a more general awareness — not only of the need to put the fighting of these injustices at the center of our country, but it has also sensitized people to the fact that the climate scientists are growing ever more dire in their warnings. And the business community is seeing that the opportunity for more sustainable profits and more job creation, by going in a green recovery direction, is the way we should go. Q. Goode: As one of a few people living who have served in the Senate and at the highest levels of the country’s government, and also at incredibly high executive levels, how would you propose that U.S. leaders fix the problem we’re in right now? How would you be addressing the coronavirus pandemic? A. Well, as luck would have it, we have elections on a regular basis and they often present an opportunity for fundamental change. I’m a recovering politician now and don’t want to get into the politics of the situation. But when there is a need for significant change that people are broadly aware of, it can sometimes lead to results in elections that lead to a change in policies. But these changes need to take place around the world. And ultimately when business is on board, when business makes a fundamental change, when investors make a fundamental change, when people generally are demanding that fundamental change, then it becomes much more likely that governments will change the policies to facilitate the emergence of this new, more sustainable, more prosperous, fair, healthy, just world. I see it coming. Q. Goode: It sounds to me like you’re saying you see this change being led by the private sector. A. It requires both. It requires policy changes. We need to stop subsidizing fossil fuels. We need to incorporate sustainability values in the ways in which we measure and compensate for value in our economy. Investors need to respond to the new realities. And businesses already are beginning to respond to this new reality. Q. Rogers: It struck me as you were talking about that — as you called it — glib phrase the “Great Awokening” that while people are more and more aware of these things that need to get changed, at the same time, there’s more resistance. Some of that is even driven by overt disinformation via the internet, some by the politics that you say you’re recovering from. Can the change you’re talking about overcome that kind of resistance? A. No worthwhile change comes without a struggle. It’s true that the resistance is often ferocious, but those resisting have the burden of the reality against them. Where social media is concerned, we’re even beginning to see some changes there. Look at the changes on Twitter and even Reddit. Just recently, look at the pressure that Facebook is under to change its atrocious practices. On the positive side, look at the leadership that many tech companies have provided. Look at the demands from employees, at some other tech companies that haven’t yet changed enough, where their employees are demanding that they change. People want to work for a place where they make a good income, but they also want to work for a firm that is helping to make the world a better place. They want to tell their friends and peers and family that it’s not just about money; they’re helping in a more general way to move the world in the right direction. Two-thirds of Americans now support the Black Lives Matter movement. That is a dramatic change in just a few weeks. When you match that with the technology drivers, with cost reduction curves and sustainability technologies that are so impressive — whether solar batteries or EVs or hundreds of sustainability technologies that are not as well known — that is putting the wind at our backs. When you match that with this research, that those investors who fully integrate ESG factors are getting better results, then, yeah, I think it supports our pretty strong belief that the world is moving into a sustainability revolution.