Global elite discuss net zero economy at Davos but there’s a long way to go

Greta Thunberg, Climate Activist, Kringlaskolan Södertälje, Sweden, and John J. Haley, Chief Executive Officer, Willis Towers Watson, USA, speaking at the Session "Preparing for Climate Disruption" at the Annual Meeting 2019 of the World Economic Forum in Davos, January 25, 2019. Congress Centre - Jakobshorn. Copyright by World Economic Forum / Mattias Nutt

Climate change dominated discussions at this year’s traditionally conservative World Economic Forum but it remains to be seen how far business will go cutting carbon.

When the head of the largest money manager in the world shows up to the world’s biggest meeting of business elites wearing a climate data-themed scarf, it’s clear something is afoot.

The Fifth Estate wrote recently about a sea change in attitudes in finance circles regarding the business risks related to climate change.

That has only gathered pace this week in the wake of the latest World Economic Forum – commonly known as Davos after the Swiss ski resort in which it is held – where climate change was a key theme.

One of the many climate-change related sessions was how to finance a net-zero economy.

So, it is no surprise that head of giant funds manager BlackRock, Larry Fink, who has pledged to change his investment strategy to minimise climate change risk, was sporting his global warming scarf.

Many businesses are reeling from a range of extreme weather events that hit late last year and in the new year, and which have led to loss of life and damaged vital infrastructure, among other things.

In California, last year’s bushfires are estimated to have caused $US25.4 billion in damage. Fires the previous year helped push Pacific Gas & Electric, the state’s largest energy producer, into bankruptcy, from which it is still struggling to exit.

Chief executive of Ikea, Jesper Brodin, says the company’s sales have been affected by severe flooding in the US, temporarily closing many of its stores, according to the New York Times. In its home country, Sweden, the retailer has been hit with soaring energy prices thanks to a heat wave there.

In Brazil, flooding and landslides have killed scores of people and forced thousands more from their homes. In Spain, a massive storm last week killed 13 people. Exceptionally wet weather in eastern Africa has led to the worst outbreak of locusts in Kenya in 70 years. And the list goes on.

The global impact of Australia’s bushfires has been so severe thanks to their contribution to  emissions, it warranted an entire session at Davos.

All the companies that attended the forum were asked to commit to net zero carbon emissions by 2050 or earlier. Many said they would, and a coalition of major financial institutions, representing $US4.3 trillion in assets, said it would take steps to minimise carbon-heavy investments in portfolios. It is also lobbying other investors to join it.

The young climate change activist from Sweden, Greta Thunberg, was invited to address the forum. You can read what she said here.

Perhaps, most significantly, many forum attendees agreed 2050 is far too late to achieve a net-zero economy.

“We cannot get to 2030 and still have this conversation,” said board member of oil and gas producer, Saudi Aramco, Andrew Liveris.

But not everyone is convinced the business world’s talk will turn to action.

Greenpeace International executive director Jennifer Morgan told Davos that the very banks signing up to net zero goals, such as Bank of America, were “pumping” billions of dollars into the fossil fuel sector.

“So I don’t know if the problem is fully understood because I don’t think you can actually say with a straight face [they] are Paris-compliant,” Morgan told the forum.

According to the NGO’s new report, It’s the Finance, Stupid, since the Paris summit on climate change in 2015, 24 global banks have invested US$1.4 trillion (A$2.1 trillion) in the fossil fuel industry, a figure that could buy more than the current global capacity of solar power.

Bank of England governor Mark Carney warned companies they faced extinction if they didn’t transition to a green economy, saying there was a “fundamental reshaping of the system” under way.

Carney agreed with Thunberg’s comments that, on the current emissions trajectory, the world will likely breach the limit required to restrict global warming to 1.5C in about eight years’ time.

Government’s are at risk, too.

Last year, Moody’s, one of the main agencies that rates the creditworthiness of large borrowers, including cities and corporations, bought a major stake in Four Twenty Seven, a company that analyses the risks to corporations and governments from climate change.

In September Global index company MSCI also bought Carbon Delta, a boutique focusing on climate risk analysis and S&P closed the year making a move for sustainable index player RobecoSAM.

It’s a signal that governments can expect to see more warnings like the one Moody’s issued this week to the NSW government, about the risks to its budget from drought and bushfires.

One area that urgently needs attention, says sustainability analyst Rachel Alembakis, is natural capital, that is, the world’s stock of geology, soil, air, water and all living things.

According to the World Forum on Natural Capital, poorly managed natural capital is not only an ecological liability, but a social and economic liability. It says over-exploiting natural capital “can be catastrophic not just in terms of biodiversity loss, but also catastrophic for humans as ecosystem productivity and resilience decline over time and some regions become more prone to extreme events such as floods and droughts”.

Alembakis told the Business Council of Sustainable Development Australia’s quarterly webinar, this week, that she expects a big focus this year on the development of tools to measure the construction and destruction of natural capital.

But for all the talk of business leaders grabbing the reins of the climate change movement, politics will continue to exert a powerful influence on the world’s efforts to curb our carbon emissions.

Former UK Prime Minister David Cameron – an early believer in climate change – told the ABC’s 7.30 Report on Wednesday that world leaders must listen to what the scientists are saying about climate change, and look at their own promises to see if they can do more to address it.

He also warned conservatives not to leave the solutions to the “left”.

“These are natural conservative issues, don’t leave this to the left or you’ll get an anti-business, anti-enterprise, anti-technology response.”

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