Interview with Dominic Waughray*
National planners are looking for private investors to help finance low-carbon development plans. At the heart of these decisions is the ability to determine probable climate risks for a range of economic sectors – not just energy and transportation, but also food, agro-processing, financial services and other sectors, notes Dominic Waughray, special guest at this year’s World Meteorological Day celebration in Geneva.
Q. You’ve been in contact with a wide range of industry leaders on environment issues. Which industry sectors express the greatest need for climate information to shape their business decisions and why?
Dominic Waughray: The answer might not be as obvious as it first seems. Clearly, those in the energy and transportation sectors are very interested in the possibilities of low-carbon futures. But I would suggest that in the agricultural and financial communities there is very deep interest in data related to changing variability and climate patterns. Food and agro-processing and financial services communities, particularly in the insurance and reinsurance sectors, need this information.
Q. Are business leaders in these sectors getting the climate information they need?
Dominic Waughray: The shortest answer is yes. But how much information should we get for such a complex and multi-varied challenge? The challenge for decision-makers lies in the type of information they receive. Through the International Panel on Climate Change and other fora, there is an ability to process information into scenarios and arenas of probability.
A step forward could be a more interactive channel between those who make business and investment decisions, on the one hand, and those in the scientific community on the modelling side, on the other.
Don’t forget that in businesses, the financial analyst community and the scientific community, there are mathematicians who have been to the same schools. They use the same kinds of probability models. That connectivity can take us forward.
Q. The WMO Congress in 2011 is reviewing proposals for a Global Framework on Climate Services which would provide climate information for decision-makers. We think this can yield considerable socio-economic benefits in health, food security, transportation, energy and other sectors. Will this initiative help fill a vacuum in providing services and making them accessible to a wider audience?
Dominic Waughray: Any initiative in this domain is to be welcomed, especially at the current time when there is so much conversation around data, modelling and the impact of climate change. The interesting thing is how one designs, organizes and implements such an initiative.
The ability for direct contact among those at the cutting edge of scientific modelling is important. Extreme weather events and the impact on commodity prices, for example, is of great interest. There is a link between scientists and those in the financial community who interpret that information.
To work together closely without economists or government policy-makers as intermediaries could be a new way of having a public-private interface. Put those directly involved in modelling from the scientific and the financial community together.
Q. You’ve done a lot of work on water. Water is clearly important as a sector in its own right, and as key ingredient for many business sectors. What kind of climate information related to water do you use in your own work with business leaders? What kind of climate information do they need related to water supplies?
Dominic Waughray: When one talks about the impacts of climate change, and decisions that have to be made for the future, it’s useful to put decisions through the optic of something as tangible as water supply.
In business value chains, whether a company is involved in agro-processing, growing food or mining, one needs an awful lot of water for those operations. These businesses will be looking 20 to 30 years into the future for the availability of water. Or one may be in government, looking at economic growth trajectories of five, six or seven percent per annum, and what that means in terms of increase in food or energy demand and supply.
Many times the choke point is water – the trade-offs for water between these competing needs. Good-quality yearly or seasonal weather information (such as changing monsoon patterns) as well as long-term climate trends have become very important to some companies, investors and economic policy makers.
Investors find climate disclosure initiatives of particular interest. You may have heard about the Carbon Disclosure Project, where companies provide information to investors on carbon liabilities. There is now a Water Disclosure Project along the same lines. It’s a very interesting development. As scientific information becomes available on water, it is shared with ƒ investors.
We derive our information from what the WMO and others develop about climate scenarios and impacts on water resources. I think people might not realize the extent to which companies use the very same information that comes from IPCC scenarios and run it through their own investment models.
So data produced by WMO and others are extremely important. This is particularly true about water. It is one of the most important interaction points between business and the scientific community in the climate change debate.
Q. The scientific community should translate data into information into material that investors and analysts can use. Your World Meteorological Day presentation mentions the need to create policy spaces on a regular basis for dialogue. Could you elaborate?
Dominic Waughray: I was invited to speak on the latest developments in public-private arena of climate change, and the science that requires. The latest developments, in a nutshell, encourage private investment in national plans for low-carbon development. So this has moved from a macro-level conversation among policy-makers and academics to tangible discussions with the private sector about generating investment. The search is on for good-quality case studies.
The scientific community will have to look at levels of risk and probability within a particular region or sector over a given time frame. Then let the market decide – the market is a good judge when given information about risk and probability. The government does not have to be the only consumer. Providing data to investors and companies to make those decisions at a national level is as important as providing climate data purely to government.
This is the interesting new area where scientists and the private sector could come together.
The debate has turned to one of investment. This is the interface where scientists and investors can collaborate.
From my experience in public-private dialogues, I’d say focus on developing the technical discussion. Take it down a level from top decision-makers. For instance, for particular commodities, have business analysts meet regularly with the experts in regional departments of international organizations. That exchange will bring greater understanding of where the debate stands, and show where uncertainties still lie.
Q. At that level, they speak the same language.
Dominic Waughray: It’s interesting, because they come from similar graduate schools, and they move from financial services to the scientific community and vice versa. They use the same techniques in different settings.
Q. Is this happening already?
Dominic Waughray: I would imagine it is still ad-hoc. Perhaps a far-sighted financial services firm has struck a deal with a National Meteorological and Hydrological Service. No doubt it happens.
The advantage of having a global platform through an organization like WMO is the greater reach for transfer of knowledge, South-South or North-South or vice-versa. I’m thinking, for example, of the fast rise of the financial services community in China or India and bringing those people to interact with scientific modellers in the USA. It makes for an interesting global mix of ideas and experiences that can only benefit the agenda, in my view.
Q. To sum up, are there specific actions that National Meteorological and Hydrological Services should take to foster public-private initiatives?
Dominic Waughray: I cut my teeth in my first job in the UK Institute of Hydrology (now the Centre for Ecology and Hydrology). We were assigned specific research topics. It would have been difficult for scientist A or B to suddenly reach out and have a public-private partnership.
Rather, it is up to the leaders of these institutions to look at what role the institutions should play in society. There is a change in the agenda and the need for consumption of climate information across the economy. Those who make political and bureaucratic decisions about funding, direction and organizational strategy need to take these trends into account, and find new ways to engage with private sector for the services they provide to society.
* Dominic Waughray is Senior Director and Head of Environmental Initiatives at the World Economic Forum. He has worked as Managing Partner, Environmental Resources Management, UK, focused on environment and developing country issues, with clients from the public sector (such as aid agencies and governments) and the private sector (mostly oil, gas and mining). He also worked for the Institute of Hydrology, now the Centre for Ecology and Hydrology, a public sector research organization that is part of the UK Natural Environmental Research Council. He studied geography and economics at the University of Cambridge and has a Master’s in Economics from University College, London. To watch the interview, please visit https://www.youtube.com/watch?v=npuwbW5dTQU&feature=youtu.be