Editor’s Note: Harvard Business School Senior Lecturer Vikram S. Gandhi teaches about sustainable investing and climate-related opportunities and risks in a growth economy. We sat down with him to discuss advice for business leaders in today’s complicated context, when the U.S. is a leading producer of emissions, the administration is dialing back clean energy support, renewables are cheaper than fossil fuels and—for the first time ever—solar and wind surpassed coal in electricity generation in the U.S. The interview has been edited for length, clarity, and style.

What is your advice to U.S.-based business leaders around renewable energy in today’s context, when the environmental and energy realities and current U.S. policy seem to be at odds?

The world is warming and that has negative consequences and it’s not an overnight thing, it’s a transition. So as a C-suite person or someone sitting on the board who has a fiduciary obligation for long-term value creation and preservation, focusing on climate issues is very important, regardless of what’s going on politically.

Companies and investors … may not talk about it, or they may not say what they would have two years ago. But factoring in both climate risk and opportunities is something that is front and center. Most people can talk about climate as a risk, and it clearly is, but it’s also a huge opportunity from an investment perspective and a growth perspective.

One question is, how global is your business? If a large part of your business is in growth markets like China and India, you are going to have an aggregate emission increase. Try to do it on what I would call a low emission trajectory.

Could you give me an example of what you mean by a low emission trajectory?

Some energy companies are saying that, 20 years from now, their big source of income while they’re drilling for oil and gas will be carbon capture and storage. But that hasn’t happened yet. The technologies have not reached a scale where you can do it at an economic price that makes sense. … If you assume that climate is a real problem, which you should because that’s what the data suggests, then investing in manufacturing, processes, and new technologies that drive down the cost of alternative sources of fuel, alternative energy, is really an important factor.

The Union of Concerned Scientists said the U.S. is poised to see an increase of 60–80% in electricity demand through 2050, with AI data centers making up more than half of the increase. What is your advice to business leaders?

The energy consumption in the U.S., while the trend has been going down in absolute terms, may start reversing if nothing happens about these data centers.

For a data center, you can’t have variations in energy. You need it 24–7 and you need it consistent. The problem with renewables right now is that, while they are on parity or even cheaper than fossil fuels, the ability for them to provide 24–7, reliable energy still does not exist because we need storage for when the sun is not shining and the wind is not blowing.

Data centers may have some renewable energy, but they still have gas and other fossil fuels that are more reliable based on current technology and price. I think the ultimate is 24–7 renewable energy and investing in that and thinking about that from a strategic perspective.

While the current administration in the U.S. has backed off subsidies to EVs and a few other things, they haven’t backed off on a lot of things that are technology-driven. Investments in battery R&D. Investments in alternative fuels. A lot of the beneficiaries of the so-called Inflation Reduction Act, which is what was driving the climate subsidies in the U.S., are red states. If Texas were an independent country, it would be the fifth largest installed capacity of renewables in the world.

What is your advice on renewable energy to members of corporate boards?

You have to be thinking in the 10- to 20-year time horizon. Regardless of what industry you’re in and where you’re focused or where you are, not factoring that into your capital allocation decisions and human resource decisions would be seriously short-sighted. The problem with climate is that it’s a slow burn. And therefore, while you do see more wildfires and you do see more hurricanes, it’s not in your face all the time. You can’t put a mask on or suddenly have a vaccine that’s going to deal with the climate problem. It’s an irreversible problem. And so getting in front of the curve in terms of technology and processes is important.