- World leaders are gathering next year to ensure countries are meeting the Paris climate accord’s goals.
- The U.N.’s special envoy on climate change is making transparency and “private finance” central to climate solutions.
- To limit global temperatures to below 2 degrees Celsius, $3.5 trillion in energy-sector investments would be needed each year until 2050.
If the world is going to solve the climate crisis, then every financial decision — whether it’s made by large companies or private investors — needs to take cutting carbon emissions into account.
That’s according to the U.N.’s special envoy for climate change, who spoke to financial leaders in London Monday about how they can back climate solutions and hold companies accountable.
Mark Carney, the former governor of the Bank of England, says that while 126 countries have committed to achieving net-zero emissions, it’s essential that companies get on board too. In the United States alone, for instance, industry and commercial sectors combined produced more pollution than transportation in 2018, releasing 34.3 percent of the greenhouse gases into the atmosphere, according to the Environmental Protection Agency.
Carney’s speech comes ahead of next year’s U.N. climate summit, known as COP26, in Glasgow. Leaders are gathering to ensure that the world is on track to meet the Paris climate accord’s goal of limiting global temperatures to no more than 1.5 degrees Celsius.
The plan also comes as the U.S., which withdrew from the Paris Agreement under President Trump, is expected to rejoin the accord once President-elect Joe Biden takes office.
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“When the world’s governments set the goal of net zero and over $100 trillion of capital are demanding action, at a minimum, major companies need to disclose whether the assumptions in their financial accounts are aligned with Paris,” Carney said. “In other words, are they joining us on the Road to Glasgow or not?”
But, the business of solving climate change is not a small undertaking, to put it lightly. To meet the Paris climate accord’s standards, $3.5 trillion in energy-sector investments would be needed each year until 2050 — that’s twice as much as is currently being invested. And as Carney says, both companies and countries, especially those that are not as wealthy, need financial support to become more sustainable.
That is why Carney laid out a strategy for how the world’s largest companies, more than 500 of which have already set science-based targets, can create more sustainable practices and how private investors can help.
At the heart of his strategy is the idea that “private finance” will fund businesses’ plans to cut their carbon emissions, as long as they feel as though their investments are sound. That means companies need to become more transparent about their efforts and the risks climate change poses on their operations.
By doing so, the investors, who are overseeing more than $140 trillion, are also holding companies accountable — a notion that Carney has long championed as the first step in reducing greenhouse gas emissions, according to The Associated Press (AP). Additionally, Carney says investors could have their own “advisory vote on transition plans.”
“Rather than have authorities be overly prescriptive on plans, it may be desirable for investors to have a ‘say on transition,’” Carney says. “This would establish a critical link between responsibility, sustainability and accountability.”
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Carney noted that banks, insurance companies and investment funds should also disclose how their investment choices are aligned with climate goals, AP adds.
“Over time, investors won’t just judge company transition plans, they too shall be judged,” Carney said.
The plan also calls for the creation of carbon offsets, a cost-effective market that could particularly focus on emerging countries. It’s one climate solution that Carney says “barely exists” now.
Carbon offsets, according to AP, is when a polluter pays someone else to reduce their emissions but receives credit for such reductions. The polluters can then use these credits to offset their own emissions.
“Climate change is a global challenge. Much of the critical investment will take place in emerging and developing economies,” Carney said. “For this to happen, we need to turn billions of public capital into trillions of private capital.”
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