02 Feb The climate crisis risk
“The viability of our societies depends on leaders from government, business and civil society uniting behind policies, actions and investments that will limit temperature rise to 1.5°C.”
That call to action was one of the milder comments made by UN Secretary-General António Guterres as he launched the recent Intergovernmental Panel on Climate Change (IPCC) report. Calling the report a ‘code red for humanity’ the Secretary-General called for governments, businesses and others to act decisively and immediately in order to reduce climate impact.
Where do businesses start? In commenting that “the climate crisis poses enormous financial risk to investment managers, asset owners and businesses,” the Secretary-General added that “These risks should be measured, disclosed and mitigated.” These actions form part of a classic business transformation matrix, something which all leaders should be familiar with. As a result, businesses should not feel that they are ‘flying blind’ when facing up to climate challenges. Although change may require innovative solutions, the pathway to change is already understood.
Within his remarks it was good to see that António Guterres highlighted disclosure as one of the key action points. Businesses need to help their investors, clients and suppliers to understand the reasoning behind any change of outlook, processes, or practices as a result of climate impacts. They also need to help investors and others to appreciate how both internal and external actions could affect the future prosperity of the company. The more that a company discloses, subject to certain confidentialities, the better their investors will be able to make accurate judgements about the direction in which the company is moving.
Without that disclosure and discussion investors may just vote with their feet. A ‘9 things you can do about climate change’ guide issued by Imperial College London comments that “the discussion around responsible investment – weighing up environmental, social and governance (ESG) factors and taking them into consideration when investing money – is growing.” Imperial put investing money responsibly as number seven on their list of action points. But if more and more individuals start to factor ESG into their investment decisions then institutional investors will be forced to follow suit, if they haven’t already taken action.
The climate change challenge may be stark but it isn’t all gloomy, particularly for those who respond swiftly. As the Attorney-General comments “Inclusive and green economies, prosperity, cleaner air and better health are possible for all if we respond to this crisis with solidarity and courage.”