Indaba update from Sean Penrith, Gordian Knot Strategies

Take a look at Figure 1 on page 5 of the most recent Global Risks Report 2019 by the World Economic Forum. The green diamonds signifying environmental risks jump out at you. It’s worthwhile examining the definition of a “global risk.” It is defined in the report as “an uncertain event or condition that, if it occurs, can cause significant negative impact for several countries or industries” in the next decade.

Ranking the top 10 risks by likelihood, half of them are in the environmental risk category! They include (1) extreme weather events; (2) failure of climate change mitigation & adaptation; (3) natural disasters; (6) man-made environmental disasters; and (8) biodiversity loss & ecosystem collapse. That is not all. Large-scale involuntary migration (7) and water crises (9) are all exacerbated by our changing climate.

The 2018 GRR identified environmental degradation as a key area of risk. Extreme weather events and natural disasters ranked #1 and #3 in 2017.  And in 2016, failure of climate change mitigation & adaptation hit the top of the charts in terms of impact! Comparing the 2019 report to the 2018 report, there is an increase in the pace of biodiversity loss and the impact of extreme weather events that will disrupt the supply of goods and services by an additional 29%.

The total tally for 2018 in terms of economic losses from natural and man-made disasters hit $155 billion. The Institute for Public Policy Research states that further disruption in agriculture, energy, public health, immigration, and economic growth could ignite a cascading effect and create a real and present global crisis that will be dwarf anything we have seen.

GRR19 highlights the need for 20% more in financing to address the $18 trillion gap in infrastructure capital. Infrastructure, whether it is green or gray, needs to be resilient to such extreme weather events. Public sector balance sheets are simply too thin to address this need without partnering with the business community.

Hello?

I can’t think of any catastrophe with this level of forewarning that goes largely unheard. Time wasted now just translates the need from prevention to adaptation.

When Satya Nadella took the top spot as CEO for Microsoft, he tells us that he asked himself, “Why do we exist? What if we just disappeared?” A straightforward yet key question for any business whether at launch stage or mature phase. The World Economic Forum (yes, I have been reading a lot of WEF material lately) projects that in order to thrive in 2020, the most vital skill you will need is complex problem solving. Answering the evolving question of why a business exists, or what a business needs to be the best at in the world to succeed can be a complex strategic endeavor with lasting outcomes.

In this age of climate disruption that is impacting infrastructure, supply chains, food production, energy supply, public health, green spaces, and our housing, the opportunities to offer solutions to these complex and intricate problems abound. Philippe Le Houérou, CEO of the International Finance Corporation said, “There are literally trillions of dollars of opportunities for the private sector to invest in projects that will help save the planet. Our job is to go out and proactively find those opportunities, use our de-risking tools, and crowd in private sector investment.”

I have found that many times, it helps to view an endeavor from an entirely different perspective. When Alexander the Great came across the intricate (Gordian) knot that bound the Phyrgian wagon yoke to the pole on the acropolis of the city, he reasoned that it made no difference how the knot was undone. So he brandished his sword and cut through the knot in a single pass. He then rose to prominence as ruler of Asia.

These quantum leaps are what we need in the face of a changing climate. Social and environmental entrepreneurs, financiers, and investors need to slice through their own versions of Gordian knots to catapult them to success.

Let me know if I can help.