For years, the climate change movement was led by the so-called ‘eco-warriors’, a myriad of non-profit organisations and dedicated small investors who shared a collective desire to drive change within big companies. They protested outside business headquarters, filed shareholder resolutions and spoke out at annual meetings in order to valiantly make their points.
Large investors, in contrast, largely remained silent — at least in public. However, in the wake of the Paris agreement, a rising number of large investors now seem highly alert to the investment risks of global warming. As of 2020, this group seems to recognise that drastically cutting greenhouse gas emissions represents good business sense. Delaying action on emissions, will only mean more radical intervention is needed in the future at greater financial cost, and with larger impacts on society. Plus, by taking action now, companies can plan to achieve long-term, sustainable economic growth from a low-carbon economy.
As a result, it’s no longer a question whether climate change will dominate our lives and economies in years to come. Recent announcements from the likes of the World Economic Forum, the Bank of England and leading blue chips like Microsoft, which demonstrate that climate risk has moved centre stage into the world’s most influential boardrooms only furthers the point.
To this end, the world’s largest companies now forecast nearly $1 trillion at risk from climate impacts. Conversely, the same companies have identified $2 trillion in opportunities from investments into sustainable business areas, such as low carbon technologies. Therefore, for the business community, climate change has become a thing of now and not a thing of the future. Across modern boardrooms, daily discussions focus on how companies can meet climate challenges, as well as making the best use of any potential opportunities.
However, making the most of these opportunities requires foresight and investment. To this end, financial institutions, banks, investors and insurers must understand the risks they face in order to move to the next stage and build for the future.
In spite of the global pandemic, 2020 has proved to be a landmark year for investor action on climate change, with significant resolutions being passed and investment pouring into sustainable funds. With both regulators and clients increasingly calling for change, asset managers are now broadening their remit beyond energy-intensive industries such as oil.
Rather than driving investor attention away from climate change, the pandemic has cemented interest, with many investors fearing the economic fallout seen during the pandemic could be replicated if the world fails to halt global warming. Up until the outbreak, there remained a significant portion of the investor base who believed tackling climate change could wait until tomorrow. Fortunately, this has now changed. Companies and investors are starting to look at the importance of acting immediately.
With major corporations now being held accountable for their climate change responsibilities, more and more blue-chip companies and investment houses are talking up their need to invest sustainably. For example, Microsoft, Unilever, Nike and six other multinational giants have teamed up to establish a new initiative aimed at helping businesses reach net-zero carbon emissions by 2050.
The project, entitled “Transform to Net Zero”, will provide companies with practical and science-based guidance to help build a carbon neutral global economy. This radical transformation will require significant changes at the board-level, starting with how companies approach investments. Similarly, the program will look to transform methods of production and delivery, as well as the real estate and buildings inhabited by all those in the supply chain.
In launching ‘Transform to Net Zero’, these multinational giants have gone some way in following in the footprints of Apple, which is now the world’s largest company. For some years, Apple has led the way in renewing its sustainability commitment. In fact, the company has announced plans to reach 100% zero carbon emissions across its entire supply chain and product line by 2030. Moving forward, there’s no reason to suspect this continued focus on decarbonisation will change.