1.

Mark Carney may be new to elected office, but he seems to have anticipated the current moment. In his 2021 book “Value(s),” the Canadian prime minister and former central banker asserts that an overreliance on market fundamentalism for decades left too many citizens exposed to the worst extremes of globalization, producing disillusionment and populism together with a collapse of public trust in elites and technology. While much has happened in the five years since then, Carney’s diagnosis holds. In 12 years as a central bank governor and later as special envoy on climate action and finance at the United Nations, Carney navigated the global financial crisis, the Covid-19 pandemic and the threat of climate change. The experience of the three crises, Carney posits, suggests that dynamism, resilience, sustainability, fairness, responsibility, solidarity, and humility represent the values and beliefs that underpin a successful economy and society. “These beliefs and values are not fixed,” he cautions. “They need to be nurtured.”

Read an excerpt here.

2.

A pair of new studies by two of Asia’s biggest asset owners highlight the unavoidable opportunity in financing companies that offer solutions to help governments, businesses and households adapt to growing climate physical risks. “The inevitable need for climate adaptation will fuel growth across both established and emerging solutions,” write Wong De Rui and Kim Kee Bum of Singapore’s GIC , who estimate in “Sizing the Inevitable Investment Opportunity: Climate Adaptation” that the value of the investment opportunity for a select set of climate adaptation solutions could reach USD 9 trillion by 2050 (up from USD 2 trillion currently) across public and private debt and equity, with one-third of the demand driven by rising temperatures. (Our Institute recently highlighted case studies of 10 resilience-solutions providers domiciled in Asia.) For their part, Boston Consulting Group and Temasek, the Singaporean government-backed investment fund, zero in on the investable opportunity in private markets. Their study, “The Private Equity Opportunity in Climate Adaptation and Resilience,” examines prospects for investment in six subsectors. Private equity investors, the study notes, bring to climate adaptation and resilience experience in scaling businesses and guiding companies toward maturity — know-how that could advance the market for resilience solutions.

Read GIC’s study here and the study by BCG and Temasek here.

3.

Even if you’ve never owned a car, you may have heard of BYD, the Chinese electric-vehicle maker that last year overtook Tesla in revenue. (Tesla was more profitable.) Both companies sold roughly the same number of EVs but BYD also sells hybrids. Though the rivalry between the two has generated an internet’s worth of analysis and commentary, “BYD Hit $100 Billion. Next: An EV Factory Bigger Than San Francisco,” a story in the U.S.-based trade publication @InsideEVs, captured our attention (h/t Institute fellow Sylvain Vanston). It spotlights BYD’s megafactory in Zhengzhou, the capital of China’s Henan province, that when fully built would have a footprint spanning about 50 square miles, roughly the size of the city of San Francisco. The story features a recent episode of the video podcast Future AzA that’s worth a look for aerial footage of the factory and commentary from host Brian White and his guest Herbert Ong, who follow Tesla with Talmudic intensity. Regardless whether you track miles per watt, this simple video presents a report’s worth of analysis on the jockeying underway for the future of the auto industry.

Read here and watch here.

4.

Artificial intelligence demands a lot of power, but it also insists on a lot of water, exacerbating scarcity and compounding a material risk that threatens global growth. That’s according to Whitney Nguyen, Tenzig Tashishar and Madison Krieger at Northstar Asset Management, who in “Drinking From An Empty Cup,” provide a toolkit to help investors address AI’s growing demands on fresh water. AI demands powerful data centers, which themselves require vast amounts of water for cooling, explain the authors, citing projections that two years from now, AI-driven water withdrawals could reach 4.2-6.6 billion cubic meters annually, an amount equivalent to California’s total water use. Or consider, as one study they cite finds, that ChatGPT needs to drink a water bottle’s worth of fresh water for every 20 to 50 questions you ask. It couldn’t come at a worse time for an already scarce resource, with demand for fresh water expected to exceed supply by 40% by 2030, note the authors, adding that nearly one-third (32%) of U.S. data centers are located in areas of high to extremely high water stress. Rather than bookmark this report for the next time you need these stats, read it now, especially pages 16 and 17, which offer a guide to how investors can assess the risk of extractive water exposure within their portfolios. The authors detail what data to look for in corporate sustainability reports, and what data to ask for if companies don’t disclose it.

Read here.

5.

Speaking of water, how might climate-related physical risk influence decision-making by companies confronted by successive U.S. presidential administrations with incentives to bring their manufacturing ashore? My colleagues Michael Disabato and Katie Towey delve into the question on the latest episode of MSCI’s Sustainability Now podcast, which examines possible impacts of water scarcity, heat waves, and other climate-amplified weather extremes on reshoring in the semiconductor, household goods and textiles industries. Both Intel and Taiwan Semiconductor Manufacturing Company (TSMC), for example, are building new advanced manufacturing facilities in the U.S.; Intel, in Chandler, Arizona, with funds awarded by the Biden administration, and TSMC, in Phoenix, with support from the Trump administration. While both cities are in water-stressed Arizona, manufacturers in Chandler face higher risk of water scarcity than those in Phoenix, notes Towey, citing hazard exposure based on location-specific data. Such hyperlocal risk assessments are anything but theoretical. As Towey notes, a Baxter International factory in North Carolina that supplies 60% of the IV solutions used in the U.S. closed for several months last year after being flooded by Hurricane Helene.

Listen here.