Banking

Current industry climate commitments are like speed limits with no speed cameras

From a business perspective, these consequences of uncontrolled global warming have emphasised the need for better transparency and control over industry’s climate impact.

Let us not forget that the world’s 100 biggest companies generate 70% of global greenhouse gases.

Understanding the real-world impact of corporate emissions will be crucial in the next few years as climate action begins to overtake commitments.

Unfortunately, current efforts to measure the corporate world’s environmental footprint are failing. This means that more than five years after the introduction of the Paris Goals, many businesses are still just talking a big game on enacting meaningful change.

In 2015, the G20 formally acknowledged that climate change represents a genuine financial risk to companies. However, the framework for disclosing emissions that it introduced a few years later was voluntary. The result: businesses have not reported consistently, or with anywhere near enough participation and transparency, over the last four years.

This makes it impossible for investors to manage risk and know whether they are truly allocating capital in a sustainable way.

Last week’s meeting of G20 environment ministers in Italy barely mentioned corporate climate data disclosure, ignoring the momentum of the EU’s recently announced ‘Fit for 55′ package. 

How investors can manage the risks of climate change

In fact, ‘Fit for 55′ is a good example of how businesses are often happy to promote the importance of ESG and transition in their business models. Yet as soon as policymakers act, the majority of industry can only focus on the ‘risks of climate policies’, as we saw when representatives from the transport industry suggested the package was too much too soon. 

It is hard not to feel that many companies are missing the point.

This wide-reaching package of legally binding emissions rules for companies in the bloc brings climate action forward from 2050 to this decade, and can make the EU a true leader in tackling climate change.

It may ruffle feathers, but if it leads to long-lasting positive change through a clear and understandable climate stance, it will be worth it. Especially given the IEA’s announcement on Tuesday that the goals of the Paris climate agreement may be out of reach by 2023.

But without equivalent action on climate disclosures, we will not truly understand the effectiveness of new climate policy or our progress towards milestones like Net Zero or the Paris Goals. 

Don’t just rely on data: Net zero remains an aspiration unless companies act beyond numbers and pledges

Companies should be compelled to reveal at least what is known as ‘Scope 1 and Scope 2′ emissions (that is, all the emissions from sources that a company owns or purchases). Not on a voluntary basis, but in a legally binding fashion.

At the same time, we must build the infrastructure and landscape upon which consistent and comparable data are available.

Admittedly, Scope 3 emissions – those arising from businesses’ trading partners and broader supply chain – are also important, but we must accept that this will be a transitional process. Many organisations are simply not equipped to properly meet their obligations, or are even aware of what they are.

Policymakers would be wise to mix carrot with stick to make sure everyone is invested in the sustainability transition.  

To create action out of commitments on climate change, businesses, investors, and governments need to have an accurate picture of how industry’s climate impact is changing over time. Our approach must be grounded in science, based on consistent, transparent, and compulsory data that until now has been absent.

Until then, policymakers risk harming the greater good through a failure to take a firm stance on companies disclosing their climate impact.

Daniel Klier is president of Arabesque.

Most Related Links :
todayuknews Governmental News Finance News

Source link

Back to top button