Unlocking the Next Wave of Economic Growth
Major economies around the globe are sharing a common fear: a sense that economic stagnation and malaise may be a new default setting powered by persistent inflationary pressures. Take, for instance, a recent Pew Research Center survey of 34 countries where a median of 64% of adults rated their country’s economic situation as poor. This lack of optimism in the context of climate change and the ever-present Anthropocene raises an urgent question: Where is thriving in the face of these headwinds?
Despite policymakers’ efforts to control for these issues, we believe that climate change and the constellation of surrounding challenges will continue to act as a persistent disruptor, compounding the feared volatility. Among many studies dedicated to the economic impact of climate change, a recent one published in Nature noted that the world economy may experience an income reduction of 19% within the next 26 years regardless of future emissions reductions. The need for new solutions is critical. Businesses and policymakers must look beyond the business-as-usual scenario to embrace the opportunities presented by sustainability and climate-tech as a crucial area of opportunity to drive new economic growth.
The Context: Global Volatility
Severe natural disasters—wildfires, floods, hurricanes—have become alarmingly routine, inflicting unprecedented damage on infrastructure, homes, and industries, such as insurance. Consider the case of the recent and ongoing fires in Los Angeles County where over 65,000 businesses were affected. While it is only January 2025, the estimates of damage from this single set of disasters could come with a price tag exceeding $250 billion (with only 12% covered by insurance). This number exceeds the total average annual cost of $150 billion in disaster damages in the United States annually, a number which had already doubled in recent years—and again, this was only January.
Meanwhile, public perception of the future is at an all-time low, fostering challenges in policy-setting and decision-making at the highest level. People fear tomorrow will be worse than today. A recent survey found that 75% of adults in Canada and the U.S. think their children will be worse off financially than themselves. This year’s Edelman Trust Barometer report found that 61% of people globally believe that government and business make their lives harder and that institutional systems are unfair. Worriedly, 40% of respondents would approve a form of hostile behavior (physical and digital violence, spreading disinformation, damaging property) if they thought it would bring about change.
This is a pivotal moment. Addressing the myriad challenges we face requires not only targeted solutions but also the creation of new productive forces in the global economy. Sustainability and climate-tech have the potential to lead this transformation, generating wealth, resilience, and opportunity.
Why Sustainability is the Next Productive Force for Growth
Greater Upside: Unlocking Innovation in Emerging Technologies
Examining traditional energy sources, like coal and oil, we see a technological and economic plateau. Coal, a 250-year-old innovation, has been optimized to its limits. And more broadly, the marginal returns from further investment in fossil fuels are dwindling, evidenced by lackluster interest in new drilling opportunities, such as the second failed lease auctions in Alaska’s Arctic National Wildlife Refuge despite the more fossil fuel-friendly new U.S. administration. Not to mention the fact that these industries are not providing additional jobs. In fact, employment among workers working directly at drill sites is down 20% from pre-2020 levels.
In contrast, renewable energy and climate-tech offer huge upsides in potential for innovation and growth. Innovations in photovoltaic cells and wind turbine designs are increasing efficiency and continue to show success at lowering costs. For example, the efficiency of commercial silicon solar cells has increased from around 15% in the 1990s to over 22% in 2023, while costs have dropped by over 85% since 2010, making it one of the cheapest energy sources. New developments, such as bifacial panels and Perovskite-silicon tandem cells, which can achieve efficiencies exceeding 30%, are nearing commercial viability. And innovations like thin-film solar cells offer lightweight, flexible options for unconventional applications like on curved surfaces or clothing. In the job market, the renewable energy sector employs more people than the oil and gas industry (approximately 13 million people worldwide) and is projected to significantly increase to 38 million jobs by 2030.
Meanwhile, battery technologies, such as solid-state and flow batteries, have unlocked new possibilities for energy storage and grid stability, such as increasing the range of electric vehicles (EVs), energy arbitrage for peak energy use (particularly for urban areas), decentralized microgrids and emergency backup and resilience (ensuring reliable power for local communities). Further, emerging technologies like green hydrogen show promise for decarbonizing hard-to-abate sectors such as steelmaking and aviation, which have complex processes and high energy demands. And if we’re worried about all of that oil and gas expertise going to waste, one could leverage it to uncap the potential of superdeep geothermal by drilling not for hydrocarbons, but for heat, without the pollutive wastewater and emissions. These innovations, both current and future, are part of a list too long to capture fully here. They can deliver tangible economic and productivity gains—such as growth, efficiency, resiliency, and cost savings—that similar efforts in legacy industries have no runway or viable pathway to match.
The Cost of Inaction: Climate Change as an Unseen Tax
Pursuing the lucrative edge of sustainable innovation may involve risks, but the cost of inaction is far greater. As climate change erodes the gains from productivity, optimization, and technological advancements, ignoring its impacts proves increasingly expensive. From decreased agricultural yields due to heat stress to rising costs from supply chain disruptions and economic damage caused by unprecedented extreme weather, the financial burden is unavoidable. Companies are now forced to rebuild infrastructure, establish redundancy plans, or create self-funded insurance programs just to operate in regions that were once stable and affordable—activities that distract enterprises from their competitive advantages.
Further, climate change acts as a drag on revenues everywhere. Up to 7.1% of US federal revenues could be jeopardized over time, equivalent to $2 trillion annually. The recent Los Angeles wildfires leave $115 billion in projected business revenue at risk and globally, climate change may be costing businesses $16.3 million per hour. A recent study in Nature found that that higher temperatures alone are projected to add 1–2% per year to global food inflation by 2035 on top of regular inflationary numbers. These impacts continue to be identified, expanded and new areas of concern are regularly found. Adjacent issues like biodiversity loss, environmental contamination, and resource scarcity compound the challenges, further escalating costs and risks.
While optimization and efficiency yield short-term benefits, the "climate change tax" creates a persistent drag on long-term productivity and profitability. To counter this, companies must not only adopt resilience-focused strategies but also look for opportunities in their portfolio to capitalize on sustainable innovation for products and services they are specialized to provide. For example, what better sector to develop resource-conserving Industrial Internet of Things (IIoT) solutions than mining? Or climate-risk analysis solutions than insurance? Or emergency distribution logistics than Amazon, or even Coca-Cola?
The costs of climate inaction are no longer hypothetical—they are real, measurable, and growing rapidly. Businesses that fail to integrate sustainability into their strategies risk tighter profit margins, greater operational disruptions, and rising costs. On the other hand, companies that invest in adaptive, climate-ready practices not only reduce risk but also position themselves for long-term profitability and resilience.
Creating Real Value: A New Era of Purpose-Driven Innovation
When we think about the role of business, it is to create “something of value,” meaning goods or services that people want or need, and generating revenue through the exchange of these things of value. Companies in emerging industries, such as AI, frequently achieve sky-high valuations based on potential rather than performance. For instance, OpenAI and other large AI players have been valued in the tens of billions of dollars, despite limited revenue streams or direct consumer impact. Valuations are increasingly based on intangible factors like intellectual property, brand perception, or user data, which are harder to quantify in terms of true impact. For example, Meta’s (formerly Facebook) valuation has been built on user data exploitation, yet its role in amplifying misinformation and polarization raises questions about the societal cost of its "value creation.” In contrast, sectors like climate-tech, manufacturing, and healthcare deliver a more tangible and direct value to society—cleaner air, reliable infrastructure, better health outcomes—but often face lower valuations compared to speculative tech.
While AI has been pushed to be the next driver of economic growth, recent events—such as the release of DeepSeek’s hyper-efficient, open-source model, which wiped out almost $1 trillion of tech company valuations in a single day—underscore the fragility of AI sector valuations and their weak ties to actual economic value. Much of the wealth generated by AI innovation has concentrated in large tech companies, with limited direct benefits reaching consumers and smaller businesses globally. Furthermore, the dominant brute-force approach to AI improvement—scaling computational power to train larger models—poses vast environmental and social challenges. Training state-of-the-art AI models like GPT-4 has been estimated to emit as much carbon dioxide as five average cars over their lifetimes. This demand disrupts existing electric grids, hikes drinking water prices, and delays the transition to clean energy as coal plants remain operational to meet surging electricity needs. DeepSeek’s innovation, which significantly reduces energy demands for AI training, exposes weaknesses in this approach and underscores the urgent need for technological progress that creates tangible value.
On the other hand, the climate-tech revolution offers a transformative opportunity to address clear and fundamental needs: clean energy, resilient infrastructure, and healthier food systems. Further, sustainable-tech innovations often reduce the externalities of traditional industries. For example:
Air Pollution: Renewable energy and electric vehicles are reducing air pollution, which costs the global economy an estimated $8 trillion annually in healthcare and lost productivity.
Water Contamination: Technologies like wastewater recycling and environmentally-friendly manufacturing can prevent water contamination and mitigate the immense health and financial burdens of PFAS exposure (”forever chemicals”), which costs Europe €52–84 billion and the U.S. $37–59 billion annually, largely borne by patients, taxpayers, and healthcare providers.
Healthier Food Systems: Innovations in regenerative agriculture, plant-based proteins, and precision fermentation enhance food security while reducing emissions and health risks linked to ultra-processed foods. Poor diets contribute to trillions in economic losses from chronic diseases like obesity and diabetes, costing $50 billion in yearly health care costs in the U.S. alone.
By emphasizing practical, scalable, and sustainable solutions, the climate-tech sector provides a pathway to genuine value creation. Unlike speculative bubbles that inflate and burst, these innovations offer much more durable benefits for society, the environment, and the economy, ensuring that progress today translates into prosperity tomorrow.
Addressing the myriad challenges we face requires not only targeted solutions but also the creation of new productive forces in the global economy. Sustainability and climate-tech have the potential to lead this transformation, generating wealth, resilience, and opportunity.The Inflection Point: Why Now?
The case for sustainability-driven growth has never been stronger. Climate-tech is undervalued, presenting a major investment opportunity. Regulatory frameworks are aligning to incentivize sustainable innovation, and venture capital and private market interest in climate solutions remains steady.
Investing in sustainable technologies is not an ethical question—it’s an economic necessity. It stabilizes economies, reduces social unrest, and opens pathways to the next wave of global economic growth. As history shows, every major era of growth is driven by transformative innovation. Sustainability and climate-tech are poised to be key drivers in this era.
If you’re still feeling skepticism faced with this information, return to the original question at the beginning of this article: where is thriving in today’s world of inflationary pressures, climate volatility, and stagnation? The answer lies in places and institutions embracing sustainable innovation, unlocking not only profitability but also the resilience and stability that global economies desperately need.
Ready for Now, Ready for the Future
Tackling the challenges of today and creating the opportunities for tomorrow requires an end-to-end approach that embraces your unique value proposition. Partner with us to see how a sustainability-driven approach might help.
