20 May 2024
Against the backdrop of three days of magnificent spring weather, the University of Edinburgh’s Centre for Business, Climate Change and Sustainability recently hosted the Energy, Climate and Finance workshop. This workshop is the third in a series, following the 2023 gathering held in Oslo. The workshop brought together a diverse and passionate group of multidisciplinary experts including academics, central bank economists, and finance industry professionals whom despite their varying perspectives and expertise, commonly recognise the need to address the impacts of climate change, and collaboratively. In this context, as a student of the University of Edinburgh Business School’s MSc Climate Change, Finance and Investment programme, immersing myself in this ecosystem for three days was illuminating and will remain a highlight of my programme experience.
Among my key takeaways were an infinitely greater appreciation for the breadth, depth and cutting-edge nature of the climate change research being conducted across disciplines; the practical challenges and implications related to financing the energy transition and critically, as highlighted by several speakers, the enduring need for a common language to bridge the gap between all stakeholders.
Considering the conclusions of the first Global Stocktake (2023) and calls for greater ambition in the energy transition, this workshop halfway between COPs 28 and 29 was an interesting moment to reflect collectively on the challenges and opportunities within and across fields. As a layperson, kicking-off the workshop with a deep dive into the use of detailed weather forecasting for the optimisation of power system models revealed a complex yet encouraging reality. Dr Hannah Bloomfield, of the University of Newcastle, demonstrated through data models that the choices we make about our future energy systems and particularly through furthering investment in advancing storage technology, can in fact significantly lessen the impact of renewable energy supply intermittency, an often-discussed limitation which has recently hindered investment. In a great closing of the loop, the final talk of the workshop by Dr Goncalo dos Reis of the University of Edinburgh’s School of Mathematics, then gave a comprehensive overview of the latest battery ecosystem trends. The talk also explored the geopolitical and policy landscape underpinning their development, and offered an introduction to the highly innovative work ongoing to reduce uncertainty around the battery degradation process and investigate how machine learning could be used to better understand and manage this.
Shifting focus slightly to discuss another type of storage, Dr Stuart Haszeldine of the University of Edinburgh’s School of Geosciences gave a comprehensive and compelling introduction to Carbon Capture Storage (CCS). The session helpfully located the technology within the context of the evolution of carbon pricing, and highlighted the critical role that CCS has been modelled to play in delivering Net Zero. It was striking to see a side-by-side comparison of the carbon capture potential of nature versus geology and to see scientific evidence linked seamlessly back to a discounted cash flow argument for further investment in geological carbon capture- a well-executed example of cross-disciplinary communication.
Just as I was reflecting on the role for nature then and how investors might be considering this, Dr Glen Gostlow, of the University of Zurich, presented an interesting and timely view of ongoing research into whether nature matters for stock returns. Although explored through a set of publicly listed firms headquartered across the US’s diverse eco-regions, it was telling that this presentation prompted a wider discussion: do investors yet have a true appreciation of the interconnectedness of firms’ operations with nature and is there already an appropriate pricing in of the significant physical risk exposure that firms face across their supply chains, domestic and international?
Demonstrating once again the interdisciplinary links between talks, insurance became a recurring theme as a tool to manage not only the physical climate risk exposure of firms but also of the most vulnerable. Approached through the central banking lens of securing the stability of the financial system, Dr Margherita Giuzio shared an innovative view on bridging the “climate protection gap” and enabling the most efficient use of public funds through catastrophe insurance and risk sharing. This made for a lively discussion later as the financial sector industry panel chaired by the B-CCAS’s Wendy McCallum also included a world leading insurance brokerage firm which emphasised the need for collaboration with technical experts to develop robust scenario analysis to reduce volatility in model-based decision making.
Reflecting on the recurring theme of collaboration, I do think interesting additions to subsequent workshops could be to invite policymakers to share their thoughts and experiences, as well as to widen industry participation beyond the panel and particularly to include representatives from the notoriously ‘hardest to abate’ sectors. The context of a university can potentially be an ideal environment in which to host such a dialogue that acknowledges differing perspectives and facilitates constructive discussion with a view to a better outcome at the next Global Stocktake and beyond. Further food for thought, from my perspective as a Zimbabwean, was how to leverage the vast information technology tools at our disposal to allow such dialogues to transcend national and continental boundaries and create a more globally representative real-time collaboration.
Overall, after three days of bearing witness to the interplay between academic thought and industry practice, my ultimate impressions were that progress will demand of us not only technological innovation and scientific research, but also efficient financial models, robust risk management strategies, and an inclusive shift in mindset across sectors. The workshop served as a potent reminder that we cannot tackle climate change in silos but that only through concerted efforts, informed by a spirit of collaboration and knowledge sharing, can we bridge the gap between the urgency of the crisis and the solutions we need to implement.