Can entrepreneurs save us from climate change?

Illustration by Kathleen White

Illustration by Kathleen White

Serious Business

by Hannah Waters

Every moment of every day, even as you read this magazine, a dizzying array of scientific gadgets collect data on our planet’s environment. More than 3,000 ocean floats measure the temperature and saltiness of seawater to depths of 6,500 feet. Instruments at the top of the Hawaiian volcano Mauna Loa (over 11,000 feet high) track carbon dioxide, water vapor and light in the atmosphere. Hundreds of tide gauges record the ocean’s height. A fleet of orbiting satellites measure ice cover and photograph every inch of Earth. And that’s just the tip of the iceberg (so to speak).

All collected data point to the same conclusion: The climate is changing at the fastest rate in recent history. The last time our atmosphere held as much carbon dioxide as it does now was 650,000 years ago, and it’s now warming at the quickest rate in 1,300 years. Surface seawater is 30 percent more acidic than it was 200 years ago, the fastest change in ocean chemistry in 50 million years. Sea level has risen 6.7 inches in the last century after thousands of years of flat lining—and the rate of rise doubled in the last two decades. And then there’s the ice: Glaciers are retreating throughout the world, Greenland’s massive ice sheets are melting, and Arctic sea ice is declining at a rate of 13 percent each decade.

These are the facts, relayed to us by those scientific gadgets through decades of data—data that largely sits on government computers collecting metaphorical dust.

So far, climate data is mainly used as mud for slinging, as politicians, public intellectuals and family members debate whether humans are responsible for these patterns in the data or not. At some point, however, it doesn’t matter who’s to blame. The climate is clearly changing—and our human world and its global infrastructure will have to change with it. 

This is why the U.S. government chose to make its dusty climate data better available to the public. The White House Climate Data Initiative, launched in March 2014, gathered climate data sets from across its agencies—National Oceanic and Atmospheric Administration (NOAA), NASA, U.S. Geological Survey (USGS), the Department of Defense, and others—and later added data on how species and natural resources are distributed across the country. The biggest U.S. technology companies participated in the fun, too, offering server space, funding and database tools.

“We need to take steps to make our communities more resilient to the climate-change impacts we can’t avoid—some of which are already well underway,” states the official program description. “This effort will help give communities across America the information and tools they need to plan for current and future climate impacts.”

Tucked into that list of outside contributors—including giants like Microsoft, Google, HP, Coca-Cola, Walmart, PepsiCo and others—sits GoodCompany Ventures, a Philadelphia-based outfit that trains novice entrepreneurs who care about social issues how to run a business. Their contribution to the Climate Data Initiative is a project called Climate Ventures 2.0, which offers their business boot camp to entrepreneurs eager to respond to the threats of climate change.

On that long list of philanthropic donations and funding offers, Climate Ventures 2.0 stands out. Most of the contributing projects make climate data more accessible, but they don’t promise that anyone will actually use it; climate data can just as readily collect dust on an Amazon server as on a NOAA computer. GoodCompany Ventures, on the other hand, invites people to do something with the data to prepare for a future under climate change.

But they’re not inviting just any people—they are inviting people who want to start businesses, which means ultimately making money from climate change. More than 97 percent of climate scientists say that humans caused climate change, and many of those humans used carbon-emitting fossils to fuel their business ideas. 

If business got us into this mess, can it also get us out?

Finding ways to use business to change the world for the better is Garrett Melby’s day job. After working in venture capital during the late 1990s tech bubble, he noticed a growing interest in combining philanthropy with business. He met investors who were interested in making money, sure, but also in doing good. Just as companies report their earnings to investors to be held accountable, these new investors—called “impact investors”—wanted to know that their investments were making a real impact and helping people. 

At the same time, a new class of entrepreneurs wanted to create businesses that meet social needs, such as reducing poverty or helping released inmates build new lives. They didn’t want to rely on philanthropy or grant funding, however; they aspired to find a way to make enough money to keep their do-gooding in business. 

“The great thing about them was that they were coming out of fields of social services, or scientific research, or public policy, and they really understood the problems,” says Melby. “But because they didn’t come from a business background, they needed help designing models to take their innovation out into the world, scale it up, and get it funded by investors.”

And so in 2009, he founded GoodCompany Ventures. It’s not unlike a venture capital effort, but instead of investing money into new companies, it invests training and mentorship. Melby solicited early stage entrepreneurs to submit their business ideas, and each summer invited the top 10 to 12 to Philadelphia for a 12-week crash course on how to run a business. In its first four years, 45 companies went through GoodCompany Ventures and went on to raise $60 million in private capital, he says. 

The nonprofit spread its wings in 2012, when it teamed up with Mayor Nutter’s office to submit to Bloomberg Philanthropies’ Mayors Challenge, which funds projects that find new solutions to a city’s old problems. Their idea, called FastFWD, built upon GoodCompany’s 12-week curriculum with a few added features designed to sell social issues to investors and entrepreneurs.

More than 300 U.S. cities submitted proposals to the Mayors Challenge—and FastFWD was one of five winners, receiving $1 million in funding. GoodCompany Ventures used that money to fund two cohorts of 10 entrepreneurs each through its program.

One of those entrepreneurs was Jimmy Chen, who had left a swanky job at Facebook to work on a difficult government problem: SNAP benefits, previously known as food stamps. In 2014, he founded Propel and created a mobile website that streamlines the benefit application process. It takes three to four hours on average to fill out Pennsylvania’s 27-page application for SNAP benefits; the same application takes only 15-20 minutes with the website (easyfoodstamps.com), he says.

But before the website could go live, Chen had to figure out how to make enough money with Propel to cover its day-to-day expenses. Convincing city government to pay for an untested idea that would ultimately increase their budget makes for a hard sell, and charging his low-income users even a buck or two felt exploitative.

He knew that Propel would help people feed themselves—and spend more money. So, who could he convince to pay for it? 

Chen and Melby followed the money to the main financial beneficiaries of SNAP benefits: grocery stores. They calculated that registering every qualified Philadelphian for food stamps would bring an additional $12 million into local grocery stores—at no direct cost to the customers. 

Propel is currently running a pilot with La Salle Fresh Grocer on Chew Avenue, and will soon hear whether the mayor’s office will fund another. If it works, it won’t just prove Propel’s business model, but also that there is money to be made in serving often-overlooked poor customers. 

This ability to follow the money and find who can and will pay for a product is the secret sauce in GoodCompany Ventures’ curriculum, and they’ve done it over and over again. One Degree Solar, which went through the curriculum in its early days, has African cell phone companies purchasing solar-powered lights for villagers so that they can charge their phones. Edovo, a FastFWD company, is bringing Wi-Fi and tablet-based education to prison inmates; prisons fund the tech to reduce violence inside and keep released citizens from coming back.

“GoodCompany Ventures is better than anyone else I’ve seen in the industry at identifying what it is about your business that is unique and powerfully motivating, and then defining not just who should pay, but who can pay,” says John Moore, a managing partner at Philadelphia’s Robin Hood Ventures and board member of GoodCompany. “This is what makes them unique.”

Now, with Climate Ventures 2.0, Melby will bring his savvy to answer the question: Who should pay for climate change?

This question of “who pays for it” is among the reasons that capitalism is not a great system for addressing social problems. All businesses provide some social good, broadly defined, or else no one would give them money. But entrenched social problems (such as poverty, illness, discrimination and educational access) disproportionately affect poorer people—and if your core customers don’t have money to spend, it’s hard to convince investors to take a gamble on your company to get it off the ground.

It doesn’t have to be that way, says Moore. As president of the Philadelphia chapter of social impact investing group Investors’ Circle, he is working to understand how to use the power of capitalism to address social problems. 

“There are a couple of things that capitalism does really well—namely, allocating resources and encouraging productivity,” he says. “At the same time, there are some downsides to capitalism. There are a lot of incentives for companies to externalize their costs.”

A prime example is the tobacco industry. A pack of cigarettes at the corner store typically costs $5-10 in Pennsylvania. But if you include the social costs of smoking, each pack should cost around $40, according to the 2004 study The Price of Smoking. That figure includes the private costs to the smoker (mainly through shortened lifespan), the costs to his or her family through hospital bills and lost wages, and the societal cost paid by taxpayers into Medicare and Social Security to treat lung cancer, emphysema and other tobacco-related illnesses.

“In a true capitalistic model, tobacco companies would pay that cost, and cigarettes would be significantly more expensive,” says Moore. “Taxpayers would not have to pay for the negative health effects of cigarettes.”

Climate change presents a similar problem. For the last few centuries, extracting and selling cheap, high-energy fuel—coal, then natural gas, then oil—has made a small percentage of the world’s population an enormous amount of money, and transformed how people live.

Extracting, refining and selling dead plants that had cooked in the Earth’s crust for millions of years must have felt like a free lunch to those early oil prospectors. But as we’re now realizing, there’s no such thing. The entirety of the world’s population—and especially the poor—will endure the societal costs of climate change, although the specific costs will vary widely by location. 

One example of how much climate change could cost is ongoing on the other side of the country: Central California is in its fourth year of severe drought. Without the water for irrigation, farmers leave fields unplanted; more than 10,000 seasonal laborers are out of work, as are another 11,000 people whose work depends on the farms. Altogether, the drought will cost the state $1.84 billion this year, according to a study out of the University of California, Davis.

$1.84 billion—and that’s just the cost of one severe drought, on one agricultural sector, in one state, in one country, in one year. 

The estimates for the total cost of climate change are harder to grasp. Citigroup estimates that not acting on climate change could cost the world $44 trillion by 2060. To avoid the worst impacts of climate change, investment in clean energy will have to ramp up to $1 trillion per year, says the International Energy Agency; that’s quite the bump from the global investment of $250 billion in 2013. The United Nations estimates that, by 2050, it will cost $250 billion to $500 billion per year to prepare developing countries for the effects of climate change. 

Such estimates shouldn’t be taken at face value, says Jessica Hellmann, director of the Institute on the Environment at the University of Minnesota, but they do tell us one thing: Climate change is going to cost a lot. But who is going to pay for it?

The most official mechanism by which the world will pay for climate change is the Green Climate Fund, which was set up by the UN to help poor countries cope with climate change. Developing countries can submit adaptation plans to the fund, and a governing board doles out the money accordingly.

“Whatever is in the Green Climate Fund is the amount the international community can spend on adaptation,” says Hellmann. “But it doesn’t have much money in it right now.” 

No matter how much the fund raises, it will never approach how much we need to spend, says Hellmann. Philanthropy alone won’t provide the resources to prepare for flooding from sea level rise, droughts, the loss of major agricultural areas, mass human migration and transforming our energy system—among other things. 

However, we do know of one system that is very good at moving resources and creating productivity: capitalism and business.

“Business is an exceptionally critical part of the solutions for climate mitigation and adaptation,” says Alicia Seiger, deputy director of Stanford University's Steyer-Taylor Center for Energy Policy and Finance. “One of the biggest challenges around climate change is that the scope of the problem is so large; you’re talking about mobilizing a trillion dollars, which is hard to do in the nonprofit world. You have to be moving mainstream capital and mainstream business.”

In the last few years, big business has taken notice. Investing firms are publishing reports about how climate change will affect their investments. Some offer “green” investment funds for those who want to divest from the fossil fuel industry. In a symbolic gesture, the governor of the Bank of England warned a room full of insurers that climate change could cause a collapse of the financial system if they didn’t wake up. 

“The far-sighted amongst you are anticipating broader global impacts on property, migration and political stability, as well as food and water security,” he said in September. “So, why isn’t more being done to address it?”

Because climate change has largely been framed as a “save the planet” advocacy issue, the entry of big business to help the cause—and make money while doing it—makes many people uneasy, and not without good reason. Much of the heightened frenzy is self-interested, as investors realize that climate change will affect their investments.

“Everyone should be skeptical of capitalism run amok,” says Hellmann. “The interests of private individuals do not necessarily align with the interests of the public. They’re not looking out for the public interest, and no one is making them. But at the same time, I think that market forces are powerful. And if we’re smart, we’ll find ways of harnessing them to build the world we want.”

It’s hard to imagine the challenges we will face, and harder still to imagine how we could surmount those challenges. As a result, people have largely taken no action at all. It’s a classic anxious-avoidant response: The data tell us change is coming, and people are afraid, so we waste time talking around the problem instead of doing something about it.

“Emergent threats are coming—caused by what, we don’t have to agree on that,” says Melby. “What sorts of adaptations can we begin to develop so these changes do less harm?”

Climate Ventures 2.0 will focus on food and water systems, which is a “smart choice” for a few reasons, says Moore. It’s one of the first areas that will be affected by climate change, whether through drought or sea level rise.

Additionally, what is more critical to human survival than food and water? People can handle temperature change, but without food and water, we’re toast. If major farming areas go into decline, if saltwater invades freshwater aquifers, or if storms flood ports and roads that deliver food around the world, people will be in real trouble.

The entrepreneurs that go through Climate Ventures 2.0—the program is accepting applications through January 2016—will bring new ideas for how to overcome these challenges, and with any luck, the program’s boot camp will work its magic to turn those ideas into sustainable businesses.

Melby has no idea what these ideas will be or what projects he’ll be working on in the coming years. Maybe a budding entrepreneur found a way to use government data to identify climate risk to rural farmers. Maybe someone has developed a sensor to help farmers manage their water use, or a mapping tool to help insurers plan for sea level rise, or solar-powered drones to monitor crops.

It all depends on the applicants—and he has full faith that they’ll pull through.

“One of the things that’s really a delight and a curse about what we do is that we can’t tell you what we’re going to get,” Melby says. “I guarantee that some of the things that are going to come through here will be super cool and you wouldn’t have thought of them yourself. That’s the point: If you could think of them yourself, you wouldn’t need this platform to stimulate and collect and develop them.”

To have ideas, these entrepreneurs need to envision a future world under climate change—with data to guide them. These worlds won’t be governed by the drama of dystopian science fiction. They will be worlds with people living their normal lives and doing what they do best: adapting. 

Most people are ready to think this way, says Hellmann. “We have to give people something they can contribute to. If there are forces acting that you can’t do anything about, why should you care?” she asks. “The problems are real. But it’s important to give people opportunity and a vision of hope so that we can imagine overcoming them.”