Conventional wisdom has been turned on its head: The UN is leading the fight against climate change while the private sector is hiding, ducking and pretending. Worse, it does not appear that the capital markets, still dancing to the tune of oil prices and oil men, are paying any attention at all.
Earlier this week, CDP, an NGO, released a report analysing progress by businesses on climate. It makes grim reading.
From 1,839 large companies in the CDP sample, we learn that only 15 companies have science-based emission reduction targets that can withstand simple scrutiny.
What about businesses committed to replacing our fossil fuel-based infrastructure with a clean energy one? Just 11 per cent of the CDP sample companies have targets for renewable energy consumption, while more than two-thirds of electric power companies have no renewable energy generation targets whatsoever.
Businesses are fast asleep, despite alarm bells going off all around them. Amazingly, the much-maligned United Nations is not. Drowning in the US presidential election cacophony, you would be excused not to have noticed that we have had an unprecedented run of major positive developments in the planetary fight against climate change, all in the space of two weeks; and all led by UN bodies.
The UN to the rescue
First, we learned that the Paris climate agreement received enough worldwide backing to enter into force on 4 November, a record-speed for the ratification of any treaty.
A few days later, nearly 200 countries agreed another deal to reduce then eliminate hydrofluorocarbons (or HFCs), a potent greenhouse gas used as coolants in refrigerators and air-conditioners. HFC gases are thousands of times more destructive to the climate than carbon dioxide, and their growing use is a strong contributor to global warming.
At about the same time, yet another landmark UN accord was struck by 191 countries to begin to curb emissions from passenger and cargo flights. The airline and shipping industries have been stand-out laggards (though not the only ones) in the fight against global warming, so this is the UN trying to get them to move.
That is a lot of positive, momentous action in a short period of time.
But the UN isn’t done yet. In less than two weeks, the next global climate conference, Cop22, kicks off in Marrakech, Morocco. Delegates will work hard to build on the momentum created by the Paris climate accord, the HFCs breakthrough and the aviation industry deal; and to turn momentum into actionable, measurable and verifiable progress.
Carbon emissions and climate risks aren’t going to be ignored much longer and the sooner businesses realise that, the better.
UN climate action trickles down fast
Big business and the financial markets should stand and take notice, otherwise their continued climate slumber will lead to the destruction of massive shareholder value (and therefore the pensions of tens of millions) as well as many lives.
Fund managers, risk managers and corporates are missing the forest for the trees: UN climate action will trickle down, and fast. In power generation for example, we’ve pretty much said good bye to coal, with China alone cancelling more coal capacity this week than the entire UK power generation fleet. Yet in the fantasy world of the financial markets, the prices of both thermal and coking coal are in the midst of an insane price rally.
Similarly, oil prices are rising in the midst of a take-off of the electric car revolution, and with clear signs that either China, India, Norway, Germany or the Netherlands are likely to be the first country to ban the sale of oil-fuelled cars. (More than 50 per cent of demand for oil is from the transportation sector). Investors need to wake up to this new, clean reality.
How not to go the Kodak way
Businesses that don’t want to go the Kodak way should take a close look at how the chemical industry joined the fight against climate change. Some of the most profitable chemicals used in air conditioning and refrigeration have been HFCs.
But when governments started the work to ban HFCs, the industry couldn’t fight back, it was too late. Instead, chemical companies embraced the intensely competitive task of innovating to find the best new chemicals to use. It wasn’t an effort driven by idealism, but rather by forward-looking survival needs.
The fossil fuel extraction, power and transportation industries, as well as the global financial industry (pension funds, fund managers and banks) aren’t following the lead of the chemical industry. Companies and funds are neither credibly including climate risks in their project assessments, nor incorporating carbon risks in their business decisions.
If they were, the financial markets wouldn’t so irresponsibly price coal and oil forward. They know fossil fuels won’t be there much longer, but somehow choose to ignore incredibly material facts.
This wilful ignorance really matters. The private sector is more than two-thirds of global GDP, wealthier and more cash-rich than governments. Carbon emissions and climate risks aren’t going to be ignored much longer and the sooner businesses realise that, the better. So much is at stake for them and for the rest of us.
Assaad Razzouk is chief executive officer, Sindicatum Sustainable Resources. This post is republished from Huffington Post with the author’s permission.
Thanks for reading to the end of this story!
We would be grateful if you would consider joining as a member of The EB Circle. This helps to keep our stories and resources free for all, and it also supports independent journalism dedicated to sustainable development. It only costs as little as S$5 a month, and you would be helping to make a big difference.