Bill Gates and Hank Paulson Talk Climate Change

Written by Rita Silvan

When you bring two powerhouse voices from the business world together to talk climate change, it's a good bet that economics and policy will play into the conversation.

In a recent video event hosted by the Economic Club of New York, Microsoft co-founder Bill Gates and former U.S. Treasury secretary Hank Paulson (who also happens to be a Wall Street veteran) shared their thoughts on why the next 10 years are critical in tackling the challenges of climate change and what they believe needs to happen.

It's a topic that's at the forefront of many conversations these days as countries and corporations continue striving to align to the Paris Agreement goal of a climate-neutral world by mid-century. RBC, for example, recently set an increased sustainable finance target of $500 billion to help accelerate clean economic growth and support clients in the transition to net-zero. And for investors, responsible investing, with its focus on environmental, social and governance (ESG) integration, has continued to gain traction.

Gates and Paulson are both active in pushing for change. Gates is founder of Breakthrough Energy, which supports innovations that will help the world reach net-zero emissions, and recently released a new book on climate change, How to Avoid a Climate Disaster. Paulson last year was tapped to lead TPG Rise Climate, a new global investment fund focused on combating climate change.

Here's some of what they had to say in their recent conversation.

The time is right…

“I've been calling three to four CEOs every day for a couple of months and there's been an amazing change," Paulson told the Economic Club of New York audience. “A few years ago, they all said climate was important, but sometimes it was lip service, and a lot of the work was delegated to sustainability officers. The markets look to the future. CEOs see there's massive change coming as we are going to rewire society. They are putting real dollars behind it for two reasons: some are driven by the tremendous opportunity to make money; others are looking at it as a threat."

“It didn't take a lot of convincing when I saw what was happening around the world," Paulson said, to explain why he came on board to lead the new TPG Rise Climate fund. “The time is right…I think the next 10 years are going to be absolutely critical. We're losing the race against time and there are important technologies that are ready to be scaled and are commercially viable."

Similarly, Gates commented, “This year, the interest in climate has achieved a whole new level. People are really trying to come up with a plan."

While many CEOs cared about climate change before, noted Paulson, “investing at a loss is not a sustainable business model." Multi-billion-dollar funds have “a generational opportunity to make significant private equity profits and avoid carbon…the profits are important in and of themselves, but I hope they pave the way for more capital to come."

Technology is key…

Gates and Paulson agreed that technology will be key in advancing the fight against climate change.

“This is extremely hard," Gates said. “Most of the physical and industrial capital that's out there is going to have to change. Almost every industrial process has emissions," he added, pointing to steel and cement as two of the biggest. “Having a 30-year deadline [to 2050] to invent something and get it out to scale is unprecedented…it's only through innovation that we could say to a country like India, 'in 2050 make cement the green way', even though they are providing basic shelter for their citizens and are not responsible for historic emissions."

The overarching goal of Gates' Breakthrough Energy is to support innovations that will lead the world to net-zero emissions by 2050. “I asked myself whether there was an intersection between my history in innovation and climate change," Gates commented. “That's where Breakthrough Energy Ventures was created." Gates noted the investor-led fund has invested in 40 companies that can bring green premiums* down “pretty dramatically." (*A green premium is the additional cost of choosing a clean technology over one that emits a greater amount of greenhouse gases.)

Paulson explained that TPG Rise Climate has identified 80 investable areas underpinned by technology, with half of them viable today. “Also, many corporations have their own little venture arms and invest in technologies for green industrial processes, blue hydrogen, green hydrogen and steelmaking processes…," he says. “Think back on the internet revolution. Remember the day when AOL was the first internet leader? It's going to be very interesting as it plays out."

A call to the next generation…

Both Gates and Paulson called on the younger generation to educate themselves on climate change and mobilize to save the planet. Paulson said it doesn't matter whether it's in a democracy or an authoritarian government, “leaders act when the public sentiment is strong and the public demands it…climate change is the ultimate issue of generational equity. By far the best hope is the younger generation. They are going to have to become a real force at the ballot box."

“Young generation engagement on this issue is the absolute necessary and sufficient force here and it's got to be more bipartisan," added Gates. “Also, there are some people who believe in green things that are a little leery of technology, so we have to help them understand where we're being careful about that."

According to Paulson, during the pandemic people are caring more about “nature, birds, trees, and wildlife… With species extinction rates 1,000 times the normal level, it is expected that half of the species will be gone by 2050." He stressed, “Green finance puts an economic value on natural capital. If you don't put any value on [nature], politicians treat it as valueless."