4 hard truths about capitalism and climate | Steve Howard

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2:04Modupe Akinola: That includes 3 % daily cash when you buy the latest iPhone, AirPods, and Apple Watch at Apple. Through this special referral offer, when you get a new Apple Card, you can earn bonus daily cash. To qualify, you must apply at apple.co slash getdailycash. Apple Card issued by Goldman Sachs Bank USA, Salt Lake City Branch. Offer may not be available elsewhere. Terms and limitations apply. Many of us understand the steps we need to take to mitigate the long-term effects of the climate crisis. Yes, we've tried to implement more sustainable practices into our personal lives, but is that truly impactful?

2:40Modupe Akinola: Experts suggest that we need to combine individual action with systemic change to make the most impact. That means taking a hard look at our businesses and organizations and seeing what kind of impact we can make there too. But even some of the most well-intentioned businesses fail to transform their climate commitments into meaningful outcomes. And that's because capitalism and environmentalism are often pitted against each other. But does that always have to be the case? How do we break through and actually make a difference?

3:14Modupe Akinola: I'm Madhu Bakanola. This is TED Business, a podcast from TED. Our speaker today, sustainability investor Steve Howard, is here to deliver hard truths about the relationship between capitalism and climate. He wants to give us all a clear-eyed look at how to move beyond short-term answers and learn to make long-term solutions. Then after the talk, I'll hone in on one of his suggestions, but first, a quick break. Support for today's episode comes from Square, the easy way for business owners to take payments, book appointments, manage staff, and keep everything running in one place. Whether you're selling lattes, cutting hair, or running a design studio, Square helps you run your business without running yourself into the ground.

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6:12Modupe Akinola: And now Steve Howard takes the TED stage. How can capitalism help solve climate change?

6:23Steve Howard: I'm Steve Howard, I'm Vice Chair Sustainability at global investment firm Tamasek. I've been wrestling with this question for about three decades. I was formerly Chief Sustainability Officer at IKEA, I've helped set up several climate change organisations, We Me Business Coalition, The Climate Group, and recently Tilt Collective, and I've come to some conclusions that there are some real hard truths. The first hard truth, every business is a machine. They are hardwired and softwired to do what they do. That's why they're really good at it. Let me give you an example. About 15 years ago, I sat in the headquarters of a global car manufacturer with their chief technology officer.

7:08Steve Howard: I said to him, surely the future is electric vehicles. He slapped the table and said, never, while I am CTO, will we make an electric vehicle. Now, he's absolutely right, because he's no longer CTO.

7:30Steve Howard: Amazingly enough, I got a taxi the other day in one of that company's electric vehicles. But it's very easy to make that about him and his leadership. But I realized that day that in the buildings around us, there were hundreds of proud, skilled engineers who'd spent their careers making ever better internal combustion engines. The company had spent 100 years perfecting global supply chains for spark plugs and carburetors. This was an internal combustion engine vehicle company. And change for companies like these is incredibly hard. And many companies, from manufacturing to technology and even finance, are hardwired and softwired to do what they do.

8:12Steve Howard: Now, of course, there are exceptions, but they're exactly that. They're exceptions. And we're sorely mistaken if we think all companies will change themselves by themselves. My second truth is that financial markets are incredibly short-term. The leader of a private bank said to me recently, Steve, I've never met a long-term investor. A hedge fund leader said to me, Steve, you have to remember, we're profit-seeking creatures. I wake up in the morning and think, how much profit will I make today? I go to bed at night and think, how much profit did I make? so markets are baked in to pursue short-term profit over long-term value creation the other thing is the free market has had a free ride if you asked an economist in the room they would talk about externalities it's external to the market but it's not external to people in the planet.

9:16Steve Howard: These are the costs that are born of the impacts on nature, of pollution, the destruction of our habitats, the impact on human health, and of course, the dramatically escalating costs of climate change. They're not priced into the market. The companies don't pay the bill. Now, economists can debate the exact number, but we know they're in the trillions of dollars, the bill's mostly unpaid and it's rising by the day. So how do we go from short-term to long-term? It's a difficult thing to do, but if you're a long-term investor, a large asset owner, a pension fund, a sovereign wealth fund, an endowment, a family office, then you're exposed to the total economy.

10:01Steve Howard: The best guarantee of your long-term financial success is economic growth itself. And we know an inclusive, resilient economy where we tackle climate change is the one with the best economic growth. Again, the numbers have been run time and time again on the impacts of unabated climate change. Cambridge University did one recently. Their estimate was unabated climate change will wipe out a quarter of global GDP. That's five COVID pandemics, and it's a pandemic that doesn't go away. So if you're a long-term investor, if you're an asset allocator, a principal owner of capital, it's in your interest to invest in solving climate change, not just in the easy things to do, but in the hard things to do with conviction capital.

10:50Now, at Tamasek, we are a longer-term investor.

10:54Steve Howard: We've just had our 50th anniversary. Our purpose is so that every generation prospers. We have stakes in some of the companies today that were the companies that we had when we started 50 years ago. But in order to align ourselves with climate change, we had to rewire ourselves. We had to measure carbon portfolio emissions, set carbon budgets, put an internal carbon price in, align our staff incentives with success, set those targets, engage all our portfolio companies. And then we had to realign our strategies, reskill our investment teams, invest in new partnerships and new platform companies so that we had the capabilities to invest in the sustainable businesses of today and tomorrow.

11:43Steve Howard: Now our portfolio of sustainability-aligned investments is$40 billion Singapore dollars. It's up a lot from a few billion just a few years ago. It's growing and it's a start. This is a journey we're on, but we're well on the way. The third truth, policy is a master switch. If we want to level the playing field for climate technologies, we need long, loud, legal policies. This can unlock the investment and get innovators innovating. Long, if you have a technology that takes 10 years to develop, there's no use having a policy that's just one year long. You need it to last a full investment cycle.

12:27Steve Howard: The policy must be loud. The signal must be unmissable. Legal means it must have teeth. Compliance can't be optional. Now, most businesses don't embrace policies, but they want clarity. They want a level playing field. And we know if we want a free market to be a fair market, policy is a master switch. And in this environment, we could say, actually, we need all the countries. We need large countries to have policy and not to roll them back. But actually, whether you're a city, a state, a smaller country, policy can be hugely powerful. Let's take the Singapore CO2 tax, the carbon tax in Singapore.

13:07Steve Howard: That's provided a price signal. It's priced an externality by putting a price on carbon. It's allowed the businesses in Singapore, including many of our portfolio companies, to turn long-term targets into concrete actions and plans to decarbonize their business. they can create the business case because of that carbon price. It's also had a link to global carbon markets, and global carbon markets are going to be increasingly important over the next decade because you can meet some of your obligation for the tax with international carbon credits. So it's allowed our own platform company, Gen Zero, to invest with greater confidence in projects that are removing and reducing emissions elsewhere, nature-based solutions, forest restoration projects.

13:54Steve Howard: Policy can be a carrot as well as a stick. In Singapore, they went for super-fast regulatory approval for plant-based proteins and cell-cultivated meats. If you're a startup, you measure time in days and weeks, not years. So being able to get to market quickly and meet your customers, test your products, and get revenue in is invaluable. Singapore's become a hub for these companies now. But it's not just for startups that fast regulatory approval and good planning is a big boom. It's for big infrastructure projects as well. Why be tied up for years? If you can have effective, fast planning, then it gets green shovels in the ground and green investment flowing.

14:41Steve Howard: My fourth truth is just a word. It's only one word, and it's a really important one. Better. I learned this when I was in IKEA, and I'm going to give you an example. When I started in IKEA, we had some LED lights. They were expensive, sales were limited, and the light was still harsh and stark. But we knew, because it was so much more energy efficient and the technology was developing, we knew they were the future. So we set a target for ourselves to go for 100 % LEDs across the business. We aligned all our investments with ever better LEDs. We communicated across the supply chains. We used our own purchasing power to secure finance for new factories and production lines.

15:27Steve Howard: When we got to the LED that was not just energy efficient, but was affordable with a great quality of light, the next best thing to daylight, they flew off the shelves. And we hit our target of being able to only sell LEDs from 2015. When you get to better, you get scale really fast. So if you look at the total global lighting sector, in 2010, it was less than 1 % LEDs, more than 99 % all the other types of light bulbs. By 2020, it was more than 60%. We flipped the entire global lighting sector that had been around for more than 100 years in a decade. When you get to better, you get to scale really fast.

16:12Steve Howard: And we know that there are many other technologies that have got to better. They've moved from the green premium to the green discount. Solar, wind, batteries, storage. It's very exciting. And when you get to better, these technologies create platforms for business model innovation. Our impact investing partner, Leapfrog, has invested in a startup in India. It's a young startup. They're doing battery swapping stations for two-wheeler drivers and auto rickshaw drivers. So rather than have a long queue to refuel, you can drive in. In two minutes, your battery's swapped out. It's a fixed price. You can have a cup of chai.

16:51Steve Howard: You drive away. It's cleaner. It's cheaper. It's quieter. It's mechanically more efficient. The customers love it. They've got 75 ,000 drivers on their platform and growing. They're doing more than 3 million swaps a month. Now, we know that there are many other areas where, in emerging markets, this business model innovation with these better technologies, pay-as-you-go solar is a great example there, but capital is scarce. We need capital allocators to allocate capital for emerging markets. The other area where it's really hard to find finance is for those technologies that haven't achieved full commercial parity yet.

17:33Steve Howard: The big industrial plants that are going for their first, second, or third-of-a-kind plant. Sustainable aviation fuel, green hydrogen, green cement, green steel, those cell-cultivated meats and plant-based proteins. Now, these industries, let's be clear, are the industries of the future. If you're an investor or a policymaker, you have to know they're the future and lean in behind them. And it will be cleaner, cheaper, better, faster, tastier future. Let's take one example. We have invested at Tamasek for a long time in large real estate businesses. They're big users of steel, cement, and concrete.

18:12Steve Howard: If you take cement in the form of concrete, it's the second most abundant material we use after water. 30 billion tons a year, 8 % of CO2. It's hyper-commoditized, very slim margins, lots of sunk capital in cement factories around the world. It's hard to innovate, hard to transform. We've invested in a company that's got an end-of-pipe solution. Basically, it's a bolt-on technology that captures the CO2 that would otherwise cause climate change and pollute the atmosphere. It remineralizes it and incorporates it back in the cement, so you get zero pollution and more cement. But you need patient capital behind these sort of companies.

18:56Steve Howard: That company alone has taken 100 ,000 hours of R &D on the technology, and it's going to need a lot of capital to roll that out across the cement industry. I have an ask. If you're a policymaker, let's go for long, loud legal policy regimes. Let's make the free market a fair market. Let's price externalities. But this is going to unlock a green industrial revolution in your economy. It's going to create the green jobs of the future. It's going to future-proof your economies. If you're an asset allocator, or you influence one, if you're in a pension fund, if you're in an endowment, a family office, a sovereign wealth fund, elsewhere where you're allocating capital, Take a pot of patient long-term capital and put it behind climate change.

19:53Steve Howard: Not just for the easy things to do, but for the hard things to do. It's in your interest to do it, and you'll be backing the industries of the future. I know many of the people in that sector, and I am talking to you. Remember the ask. If you're an individual, then actually maybe you have a pension or some savings. Look at your provider. Ask them what their climate allocation is. If they don't have a great answer, move it somewhere else. If you're a business leader or an entrepreneur, embrace change, unlock opportunity, and go for better. Now, this won't be easy, but we've used this playbook before.

20:37Steve Howard: Good government policy and incentives, business innovation and investment. We've ended acid rain. We've closed the ozone hole. We've harnessed the power of the sun and the wind to create the cheapest form of energy on the planet. And we have five billion years of sun reserves. We've also lit a billion homes with LEDs. And we have to remember, humanity wrote the rulebook. We've created all the markets. We've allowed externalities. We write all the policies. We've built all the machines. But if we rewire capitalism, we can help solve the climate change. Thank you.

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23:01Modupe Akinola: Pick up these man fly.

23:08Modupe Akinola: That was Steve Howard at the TED Countdown Summit 2025. I love the mix of concrete pragmatism and large-scale thinking in this talk. Big picture, Steve reminds us that another world is possible, and we have the power to shape it. We created these markets. We created the policies. We created the machines. So can't we create new ones to reflect our changing world? As we say again and again on this podcast, we literally can't afford to ignore the cost of climate change. We're not all policymakers or the heads of family foundations, but that doesn't mean the rest of us can't invest in long-term options.

23:48Modupe Akinola: This is one of the first talks that made me think, if you have a pension or a Roth IRA or some kind of investment vehicle, can you ask your provider if there's a climate allocation? As this talk sinks in, I'm wondering what comes up for you. What more long-term climate-oriented possibilities can you explore in your own work or your finances? The hard truths are hard to hear, but they shouldn't leave us hopeless. There are more and more tools at our disposal. We just have to act on them. That's it for today. TED Business is part of the TED Audio Collective. This episode was produced by Hannah Kingsley-Ma, edited by Alejandra Salazar, and fact-checked by Julia Dickerson.

24:32Modupe Akinola: Special thanks to Maria Ladias, Farah DeGrange, Daniela Ballarezzo, Tansika Sangmanibang, and Roxanne Heilash. I'm Madupa Akinola. Thanks for listening.

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