The changes needed according to the last COP
At the last COP held in Bonn just one year ago, we attended numerous events to reflect on advances, topics discussed, and future strategies.
It was an event committed to encouraging cities, governments, businesses, and society to take action. One subject discussed was the part that various actors play, particularly that of businesses, in the shift towards a low-coal economy: the internal changes needed in their business strategies, as well as the power to mobilize their supply chain.
What will the role of governments be?
Nonetheless, we must not forget about governments, with their authority to legislate, to incentivize or disincentivize, to reward or punish, to disconnect growth emissions, and to direct society as a whole toward an economy free from coal. They all have the responsibility of establishing a legal framework with ambitious objectives and set rules, while at the same time they provide investors with confidence and stability.
The financial sector’s responsibilities
No less important in this change is the financial sector. The Financial Stability Board, created at the G-20 summit in London, is an international body that seeks efficacy and stability in the international financial system. It considers Climate Change to be a key variable to keep in mind in financing decisions. It is difficult for them to know that the companies that are better prepared and taking measures are subject to more risks. They ask transparency of companies in the identification and quantification of the financial impacts of their risks and opportunities, as well as in managing and monitoring these factors.
Who will the dangers of global warming affect?
And the fact is, the planet’s global warming is creating threats to the global economy and impacts on many economic sectors. The world of risks that we face is very large. In addition to the physical damage that our infrastructure and assets will suffer, there are other transitional risks associated with regulatory, technological, market, and reputational changes that will also affect us.
Despite all of the negative things, new opportunities will arise
However, not everything is negative, because if we look at this situation from another perspective, along with the risks we get a glimpse of many opportunities to do things in a different way and to answer new needs. The reality is that investment is turning toward new business models that help reach objectives of the Paris Agreement through mitigation and adaptation of infrastructure to climate effects. Activities related to water, which presents a serious problem of quality and quantity; to energy, where there is a clear commitment to demand for electrification, energy efficiency, and renewable energy; to adapting infrastructure to climate effects; and of course, to cities, which will be a big challenge for management since they are home to a high percentage of the population.
Throughout this analysis, the variables of time and climate settings are key. The financial impact of risk or opportunity in a stagnant situation, where there are no legislative changes or norms, is different from one where there is sustainable development aligned with achieving the objectives of the Paris Agreement, linked with an “emissions-neutral” economy from the mid-century on and with radical change in the ways of producing and consuming energy.
An initiative has been launched so that companies will go one step further
In addition to the various scenarios and the goal of not surpassing 2ºC at the end of the century, there is the certainty that, with current agreements and actions, we will not reach this goal. For this reason, there is a call for businesses to take action. The Science Based Targets initiative, driven by CDP, UN Global Compact, WRI, and WWF, has emerged. Until now, businesses with aspirations for growth have discussed reducing emissions in terms of intensity. This initiative goes one step further. It is necessary to reduce emissions in absolute terms annually, independent of growth. In this way, they invite businesses to not only think about energy efficiency measures or buying renewably-sourced electricity that will help to reduce their emissions, but also to think about the nature of business and their continuity over time.
There will need to be a new strategy among businesses, one that coincides with and is in harmony with the climate strategy
And thus, businesses come to be a motor of change. We businesses have to prepare ourselves for these changes, integrate Climate Change throughout companies, and consider it in decision making, primarily in new business investments. It must be integrated in governance, strategy, risk management, metrics, and objectives. We will have to adapt our businesses and activities to comply with emerging policies and regulations, gain access to financing, answer to shareholders and investors, comply with our agreements, and take on our part of responsibility in the fight against climate change. In short, we must integrate climate strategy in business strategy.