The global recession in the wake of COVID-19 has continued to rage on. At the onset, various governments and authorities, worldwide, have tried to cushion its foreboding impact by announcing fiscal stimulus packages. However, these packages are falling short of financial relief owing to the prevailing sentiment – that it is premature and unrealistic to think that the pandemic will be over anytime soon.

As businesses struggle to gain some semblance of a “new normal,” many organisations have moved to cut back on non-essential expenditures. They have re-evaluated staffing levels, and new investments have all but ceased. The pandemic’s broad implications have resulted in cash flow issues, scarce liquidity and a weak outlook on earnings.

Moheet Vishwas

Climate change is the other pressing issue of our time, and its challenges are now intertwined with the pandemic’s outcome. This realisation has caused further stress to scientific communities and corporates, worldwide. It has put their ambitious pledges to improve sustainability credentials to the task, and the previous piecemeal approach is no longer going to cut it.

The prevailing situation is perhaps most conducive for ESCOs (energy service companies), though, to play a remedial role in the infrastructure-related verticals. ESCOs have the potential to spur economic activities and deliver on the aforementioned sustainability pledges. By realising this potential, ESCOs can also serve progressive climate-change objectives and transform countries into green economies.

An ESCO, by its very nature, provides a broad range of energy solutions, from decarbonised power generation to retro-commissioning. ESCOs commit to the success of environment-friendly projects by demonstrating environmental benefits and commercial gains. The environmental benefit is a reduction of the building’s carbon footprint by lowering its energy consumption.

The commercial gain is an attractive and guaranteed return on investment (ROI) over a fixed period. During this payback period, if the ESCO falls short on its ROI commitment to the investor, the ESCO then covers the monetary difference via a payment. ESCOs can also address an owner’s lack of capital by self-funding and recover the project costs from a shared savings model. The intent here is to foster a low-risk environment to encourage owners to start green projects.

Innovative ideas, like green bonds and crowdsourcing, can also raise funds for green projects. Green bonds, also known as climate bonds, encourage sustainable development in markets by raising money for environmentally friendly projects. They return a fixed income to the investors and provide tax exemptions. The tax relief drives a monetary incentive to tackle climate change and supports the movement for renewables. The other idea – crowdsourcing – is very much in vogue and is perhaps more interesting.

It allows the general population a chance to invest in such projects. Authorities can further explore this approach by enabling tenants to contribute collectively to reduce their carbon footprint. The landlords or owners could, in return, offer multi-year rental agreements with rebates via the promised energy savings. Involving society to contribute will raise a moral awareness about the importance of climate change issues.

Crowdsourcing for such projects is an exciting concept, and local authorities perhaps can provide the impetus by removing barriers and developing the rules around it. As we advance, significant private- and public-sector partnerships are needed to drive tangible greenhouse gas reductions. The key is to incentivise all stakeholders and contribute a practical social value to society through education and facilitation.

Investing in environmentally friendly projects has an undeniable potential to address the impact of climate change. The right amount of stimulus can encourage sustainable growth in markets, spark businesses to flourish and lower carbon emissions. Green investments would eventually lead us to become carbon-neutral. To get there, we have to be brave enough to embrace innovative policies and new technologies.

But our mission doesn’t end there, and the next step would be to become carbon-negative. Major corporates have already taken responsibility for their carbon footprint. Microsoft’s bold-bet to become carbon-negative from 2030 onwards means the company would have removed all the carbon they emitted from the environment by 2050. To amplify the seriousness of climate change, Elon Musk of Tesla had recently advocated a carbon tax idea.

A suggestion both economists and environmentalists have overwhelmingly supported in their bid to drive aggressive policies for reducing greenhouse gas emissions. Post-pandemic, when a new-normal eventually settles, experts will evaluate the health crisis’ socio-economic impact on climate change. A positive financial impact through green investments in ESCOs and environmentally friendly projects will go a long way in safeguarding our assets and, in return, leave a sustainable world for posterity. Hopefully, in the future, we will look back at this turbulent time, like a time capsule buried in sand, and appreciate the world’s collective onus to fulfill pledges for a sustainable tomorrow.

Moheet Vishwas is Sales Manager, Energy and Performance Services, Siemens. He may be contacted at Moheet.vishwas@siemens.com.