15 Jan 21 | Opinion
While it’s not perfect, the Paris accord marks a real change of pace, and signs that business strategy will increasingly be set by climate risk
Nothing new there then.
The second is that deep-pocketed vested interests and their political representatives are not going to go away. Their mantras of “it’s not a problem”, “it’s not our fault”, and “it won’t work” will continue and cleverly diversify. In some places – such as the US – this voice will become shriller.
The third is that short-term social and economic issues, such as growth, jobs, migration, public health and housing, will continue to command voter, media and political attention.
In terms of trends, I expect we will see the following important, and permanent, developments.
- The pressure on fossil fuels will increase. This will deepen the divide between “carbon light” fuels (such as gas) and coal, but will also hasten the consumer-facing business shift to renewables as the energy of choice.
- In large part this will be driven by growing investor activism, driven by concerns about carbon due diligence (eg risks posed by stranded assets) and transparency pressures around climate response strategies.
- The renewable energy community will be bolstered by the fact that electricity prices will increasingly make investment in other forms of energy uneconomic in many places, including the US.
- Budgets for research and innovation will increasingly focus on clean energy production and storage. Bill Gates’s interest is a sign of the times. Carbon capture will continue to make a play here, but ultimately lose out.
- Legal action, brought by activists, investors or public prosecutors are set to intensify. The investigation by the New York attorney general into Exxon Mobil have captured the attention of clever litigious types.
- Increased public recognition that green technology can have positive implications for economic growth. This will be amplified by a new generation of innovating engineers, entrepreneurs and investors.
- Extreme weather events will continue to cause ever greater damage, including to insurance premiums and government budgets. Storms, floods, droughts and fires will turn political attention to the causes.
- As the impacts of climate change mount, climate change will become a national security issue. (States of emergency have already been declared with droughts and floods. Expect more funding and political attention.)
- Climate activist groups, mobilised by Paris, will intensify their demands, sharpen their campaigns and continue to break new ground with their research, exposés and social media.
- Paris is the beginning of a new phase of commitments, not the end. Climate science, on balance, seems likely in coming years to underline that deeper and earlier cuts are necessary to hold warming below 2C, let alone 1.5C. Paris could seem very conservative by 2020 or 2030.
Business model scrutiny
- What are we doing (or could we be doing) to capture a part of the growing markets for reducing global emissions and helping with climate adaptation?
- What are we doing (or could we be doing) to help build – or support – coalitions of change for smarter and more consistent legislation in support of the Paris goals?’
- What are we doing, internally, to play our part? Do we have the right people? Who else should we be working with?
Asking these questions will strengthen the capacity of any business to handle the intensifying challenges of climate change.