Businesses think they’re on top of carbon risk, but tourism destinations have barely a clue



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Tourism accounts for 8% of global emissions, much of it from planes.
Shutterstock

Susanne Becken, Griffith University

The directors of most Australian companies are well aware of the impact of carbon emissions, not only on the environment but also on their own firms as emissions-intensive industries get lumbered with taxes and regulations designed to change their behaviour.

Many are getting out of emissions-intensive activities ahead of time.

But, with honourable exceptions, Australia’s tourism industry (and the Australian authorities that support it) is rolling on as if it’s business as usual.

This could be because tourism isn’t a single industry – it is a composite, made up of many industries that together create an experience, none of which take responsibility for the whole thing.

But tourism is a huge contributor to emissions, accounting for 8% of emissions worldwide and climbing as tourism grows faster than the economies it contributes to.




Read more:
The carbon footprint of tourism revealed (it’s bigger than we thought)


Tourism operators are aiming for even faster growth, most of them apparently oblivious to clear evidence about what their industry is doing and the risks it is buying more heavily into.

If tourism destinations were companies…

If Australian tourist destinations were companies they would be likely to discuss the risks to their operating models from higher taxes, higher oil prices, extra regulation, and changes in consumer preferences.

Aviation is one of the biggest tourism-related emitters, with the regions that depend on air travel heavily exposed.

But at present the destination-specific carbon footprints from aviation are not recorded, making it difficult for destinations to assess the risks.

A recent paper published in Tourism Management has attempted to fill the gap, publishing nine indicators for every airport in the world.

The biggest emitter in terms of departing passengers is Los Angeles International Airport, producing 765 kilo-tonnes of CO₂ in just one month; January 2017.

When taking into account passenger volumes, one of the airports with the highest emissions per traveller is Buenos Aires. The average person departing that airport emits 391 kilograms of CO₂ and travels a distance of 5,651 km.

The analysis used Brisbane as one of four case studies.

Most of the journeys to Brisbane are long.

Brisbane’s share of itineraries under 400 km is very low at 0.7% (compared with destinations such as Copenhagen which has 9.1%). That indicates a relatively low potential to survive carbon risk by pivoting to public transport or electric planes, as Norway is planning to.

The average distance travelled from Brisbane is 2,852 km, a span exceeded by Auckland (4,561 km) but few other places.

As it happens, Brisbane Airport is working hard to minimise its on-the-ground environmental impact, but that’s not where its greatest threats come from.




Read more:
Airline emissions and the case for a carbon tax on flight tickets


The indicators suggest that the destinations at most risk are islands, and those “off the beaten track” – the kind of destinations that tourism operators are increasingly keen to develop.

Queensland’s Outback Tourism Infrastructure Fund was established to do exactly that. It would be well advised to shift its focus to products that will survive even under scenarios of extreme decarbonisation.

They could include low-carbon transport systems and infrastructure, and a switch to domestic rather than international tourists.

Experience-based travel, slow travel and staycations are likely to become the future of tourism as holidaymakers continue to enjoy the things that tourism has always delivered, but without travelling as much and without burning as much carbon to do it.

An industry concerned about its future would start transforming now.




Read more:
Sustainable shopping: is it possible to fly sustainably?


The Conversation


Susanne Becken, Professor of Sustainable Tourism and Director, Griffith Institute for Tourism, Griffith University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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From back office to boardroom: accountants step up in climate risk management



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To properly consider climate risks for their business, directors need the financial expertise of accountants.
StockLite/Shutterstock

Jayanthi Kumarasiri, RMIT University; Christine Jubb, Swinburne University of Technology, and Keith Houghton, Australian National University

The implications of climate change risks for corporate stakeholders are often poorly understood. Possibly least understood within this group is the role of those with financial expertise. We investigated and have produced a working paper on factors that influence accountants’ involvement in managing climate change risk in Australia.

Companies have been under greater pressure to disclose their exposure to risks of climate change since the 2014 G20 meeting in Australia. This created the Taskforce on Climate Change-Related Financial Risk Disclosure (TCFD. Its recommended disclosures were issued in June 2017.

In a speech this month, Australian Securities and Investments Commissioner John Price reinforced these recommendations. He made clear climate risk is an ASIC priority. Directors who fail to properly consider and disclose climate risks could face lawsuits, he warned.




Read more:
Company directors can be held legally liable for ignoring the risks from climate change


So where do accountants come into this?

It can be argued that those with financial expertise, such as accountants, have the tools to provide crucial information to management on potential risks embedded in climate change.

Previous research found accountants had a limited role in assessing climate change risk. However, our comparative study reveals shifts in climate management towards those with financial expertise.

ASIC commissioner John Price’s warning that directors must consider climate risks is a pointer to accountants’ role in quantifying those risks.
Lisa Creffield/Youtube

A principal conclusion from our research is that, together with engineers and other technical experts on climate change, those with financial expertise are significantly more intertwined in assessing and mitigating the risk than before.

The study involved semi-structured interviews with managers directly involved in emissions management for some of the largest Australian companies. These took place before and after the 2014 repeal of the carbon tax. In 2013, we interviewed 39 managers across 18 companies. In 2016 it was 14 managers and 11 companies.




Read more:
Carbon tax repealed: experts respond


The key finding from the 2013 interviews was that engineers and environmental specialists dominated emissions management. Those with financial expertise had minimal involvement. Many interviewees claimed that, because of the complexity and technicalities, only professionals with engineering or environmental science backgrounds had the relevant expertise:

Because it’s quite a technical thing … it’s not just a number. You need to understand what’s behind the number, and why it’s there.

Importantly, in that period, one financial professional leading a team in the field asserted that accountants, as risk management experts, could bring significant value to their companies:

I think that accountants have a lot of credibility … because when it comes to emissions … I think I can put forward the business case of why it’s important … I think, that means … it’s better received within the company than if I was … an engineer or an environmental scientist.

Both financial and non-financial experts shared this view. One sustainability professional explained how a limited financial understanding leads to an inability to appropriately use techniques common in finance, such as target setting and performance evaluation.

Well, I think if you had the accounting knowledge … it [the target] would be far more accurate, and probably a lot higher than what we’ve set.

Australia’s carbon tax was gone from July 2014. Emissions have risen every year since. At December 2017, emissions were up 1.5% compared to 2016.

With our commitment to the Paris climate agreement, one might have expected companies to more urgently reduce emissions. In general, though, the second round of interviews reveals that companies’ emissions management (and momentum towards urgent action) has significantly diminished.




Read more:
Direct Action not as motivating as carbon tax say some of Australia’s biggest emitters


Financial expertise now coming to the fore

However, the involvement of those with financial expertise in climate change risk management has increased. Many viewed this as positive and potentially useful for boardrooms.

Whether it was the carbon tax that brought finance team attention, or organisational learning, more recent interviews found evidence of greater acceptance of climate change as a financial (and other) material risk. The ASIC commissioner’s speech advocating TCFD-type disclosures suggests the issue is not merely one of eco-efficiency, but one of commercial substance of relevance to company directors.

From the interview data, one possible explanation for increased collaboration between technical and financial expertise is greater acceptance of climate change issues as material risks to companies:

Management of carbon is fundamentally a risk-management exercise … It is a material risk … if we don’t think about the long-term risks … and what are the strategies that we need to mitigate…

The best way to present … climate-related information to … management … is in the risk-management process [including] … in terms of reputational risk, commercial risk, strategic risk … it’s all risk.

Barriers to collaboration between technical and financial experts still exist. These include geographic co-location and some accountants being unable to step outside traditional roles.

The ConversationWith regulators’ increased interest in measurement and disclosure of climate change risk, the landscape is changing again. We anticipate better integration of the assessment and mitigation of climate change risk with strengthened expertise being brought to bear. This includes greater involvement from the technical expert on the ground through to the boardroom.

Jayanthi Kumarasiri, Lecturer in Accounting, RMIT University; Christine Jubb, Professor of Accounting, Associate Director Centre for Transformative Innovation, Swinburne University of Technology, and Keith Houghton, Emeritus Professor, Australian National University

This article was originally published on The Conversation. Read the original article.

Why we can’t rely on corporations to save us from climate change



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Managers’ short term incentives mean they can’t follow through on grand climate change programs.
Shutterstock

Christopher Wright, University of Sydney and Daniel Nyberg, University of Newcastle

While businesses have been principal agents in increasing greenhouse gas emissions, they are also seen by many as crucial to tackling climate change.

However, our research shows how corporations’ ambitious pro-climate proposals are systematically degraded by criticism from shareholders, media, governments, other corporations and managers.

This “market critique” reveals the underlying tension between the demands of tackling climate change, and the more basic business imperatives of profit and shareholder value. Managers operate within increasingly short time frames and demanding performance metrics, due to quarterly and semi-annual reporting, and the shrinking tenure of executives.

Our research involved detailed analysis of five major Australian corporations over ten years, from 2005 to 2015. During this period, climate change became a central issue in political and economic debate, giving rise to a range of risks and opportunities for business.

Each of the companies we studied acted at the leading edge of this issue. However, despite operating in different industries (banking, media, insurance, manufacturing and energy) we found a common pattern in which initial statements of climate leadership degenerated over time into more mundane business concerns.

Our study revealed three phases to this transformation.

1. Climate change as a business opportunity

In this first phase, senior executives present tackling climate change as a strategic business decision.

This is epitomised by British entrepreneur Richard Branson, who has claimed that “our only hope to stop climate change is for industry to make money from it”.

The managers in our study associated climate change with words like “innovation”, “opportunity”, “leadership” and “win-win outcomes”. At the same time they ruled out more negative or threatening associations, such as “regulation” or “sacrifice”.

For example, in outlining why his company had embraced the climate issue, the global sustainability manager of one of the world’s largest industrial conglomerates told us:

We’re eliminating the false choice between great economics and the environment. We’re looking for products that will have a positive and powerful impact on the environment and on the economy.

2. Localising climate engagement

These statements of intent are open to criticism from customers, employees, the media and competitors, especially with respect to the substance and relevance of corporate climate action.

Thus, in the second phase, managers sought to make their proposals more concrete through eco-efficiency practices (such as reducing energy consumption, retrofitting lighting, and using renewable energy), “green” products and services, and promoting the need for climate action.

Notably, these are often supplemented with measures of corporate worth to demonstrate a “business case” for climate action (for instance, savings from reduced energy consumption, increased employee satisfaction and engagement, or improved sales figures from green products and services).

Importantly, companies also sought to communicate the benefits of these measures to employees through corporate culture change initiatives, as well as to customers, clients, NGOs and political parties.

As the environment manager at the global media company we studied outlined, these practices were central to creating a climate-conscious culture in his organization:

That inspires others and it gets things done. It’s a fantastic tool. It’s how behavioural change happens on sites.

3. Normalisation and business as usual

Over time, however, climate initiatives attracted renewed criticism from other business groups, shareholders, the media, and politicians.

For instance, the increasingly heated political debate over carbon pricing forced many companies to rethink their public stance on climate change.

As a senior manager at one of the country’s major banks explained:

How we deal with sensitivities within the organisation about taking what can be seen as a partisan position in a highly political environment … that’s the challenge at the moment.

And so, in the third phase we found that climate change initiatives were wound back and market concerns prioritised.

At this stage, the temporary compromise between market and social/environmental discourses was broken and corporate executives sought to realign climate initiatives with the goal of maximising shareholder value.

For example, new chief executives were promoted who advocated “back to basics” strategies. Meanwhile, climate change initiatives were diluted and relegated to broader and less specific “sustainability” and “resilience” programs.

One of our case study companies is a large insurance company. While initially very progressive on the need for climate change action, this changed after a reversal in its financial situation and a change of leadership.

As a senior manager explained:

Look, that was all a nice thing to have in good times but now we’re in hard times. We get back to core stuff.

Where next from here?

These case studies, on top of our previous research, show why corporations are particularly unsuited to tackling a challenge like climate change.

Businesses operate on short-term objectives of profit maximisation and shareholder return. But avoiding dangerous climate change requires the radical decarbonisation of energy, transportation and manufacturing on a scale that is historically unprecedented and probably incompatible with economic growth.

This means going beyond the comfortable assumptions of corporate self-regulation and “market solutions”, and instead accepting regulatory restrictions on carbon emissions and fossil fuel extraction.

It also requires a reconsideration of corporate purpose and the dominance of short-term shareholder value as the pre-eminent criteria in assessing business performance. Alternative models of corporate governance, such as B corporations, offer pathways that better acknowledge environmental and social concerns.

The ConversationIn an era in which neoliberalism still dominates political imaginations around the world, our research shows the folly of depending on corporations and markets to address climate change.

Christopher Wright, Professor of Organisational Studies, University of Sydney and Daniel Nyberg, Professor of Management, Newcastle Business School, University of Newcastle

This article was originally published on The Conversation. Read the original article.

What ethical business can do to help make ecocities a reality



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Soft Landing recycles the materials of mattresses that otherwise get dumped in landfill.
Alan Stanton/flickr, CC BY-SA

Katherine Gibson, Western Sydney University

This is one of a series of articles to coincide with the 2017 Ecocity World Summit in Melbourne.


Cities have always been eco(nomic)cities but rarely eco(logical)cities. Today, growing inequality and environmental degradation undermine the very conditions of life as we have known it. Continuing business and urbanisation as usual will make this problem worse.

Economic growth must become synonymous with ecological and social sustainability. If we forget this we are doomed. Cities, where more than half of the world’s people live, must lead the way.

Many city dwellers are heeding the call to change ways of being and reshape livelihoods. They are modifying their behaviours as much as they can to reduce, reuse and recycle.

They are becoming renewable energy producers in the face of a political system that as yet, in Australia at least, refuses to help very much. They are reducing car use and are interested in sourcing food more locally.

But citizens can only so do much. One hope for our cities, identified in my research, is that more and more businesses put ecological and social sustainability at the core of their performance model.

Companies that lead the way

Companies like commercial carpet tile manufacturer Interface Carpets did this a generation ago when it abandoned the linear “take-make-waste” model of production. Instead, it embraced a commitment to eliminating any negative impact on the environment.

With the input of an “eco dream team” made up of pragmatic philosophers and biomimicry experts, the company adopted a visionary plan, “Mission Zero”.

Carpet takes over 50 years to break down in landfill.
WasteZero

The Interface business was redesigned along circular economy lines to eliminate oil from the production of synthetic carpet tiles. This achievement will be largely completed by Interface’s target year 2020. At the same time, the business has eliminated waste, is powered by 100% renewable energy and uses efficient transportation.

But environmental wellbeing is not all Interface is committed to. Social equity is also a company goal.

Interface’s Netherlands plant is pioneering collaboration with a social enterprise that employs people at a distance from the labour market. This enterprise is organising the cleaning and reuse of carpet tiles, large proportions of which are replaced before their product expiry date.

Interface’s Minto plant, on the outskirts of Sydney, has taken the corporate lead internationally to refashion the “factory as a forest” as part of the new Climate Take Back strategy.

The goal is not only to reduce the negative impact on the environment but to have a positive impact through restorative action. How this will be done is still to be determined, but it is objectives like Mission Zero that have driven innovation in the past.

The Australian social enterprise Soft Landing first established just north of Wollongong provides jobs for people experiencing disadvantage. They disassemble and recycle the materials of mattresses that otherwise get dumped in landfill.

Just like Interface, Soft Landing is exploring new interdependencies between for-profit firms with a commitment to environmental sustainability and for-purpose social enterprise.

Having worked with key industry partners over many years, Soft Landing is co-ordinating a product stewardship scheme that enrols firms in voluntarily adopting sustainability protocols for mattress making and unmaking.

Mattresses are a problem waste stream, and this initiative will help roll out Soft Landing’s innovative “waste to wages” model, significantly reducing landfill while also creating jobs.

A carpet manufacturer and mattress recycler are showing the way toward repairing and restoring the social and environmental fabric, and pushing policy along as they do so. This is jobs and growth in a new register. If they can do it, so can others.

Now for the construction sector…

Now we need the urban building sector to take notice and attend to the context in which carpet and mattresses are housed.

Rather than catering to demand for the cheapest housing that conforms to the most basic of BASIX, we need to see some leadership with housing that truly contributes to environmental and social restoration and repair.

Housing developers could race to the top by experimenting with:

Interface and Soft Landing are successful businesses that show what can happen when commitments to building a better world become central to their brand. If we can’t rely on our politicians to listen to the warnings of the Anthropocene, we can at least turn to ethically attuned business to help make ecological cities a reality.

Working with a reparative ecological approach and a commitment to socio-economic inclusion, everyone can be part of a solution. Overcoming inequality and environmental degradation is key to ensuring that ecocities are not another excuse for business as usual in a new guise.


The ConversationYou can read other articles in the series here. The Ecocity World Summit is being hosted by the University of Melbourne, Western Sydney University, the Victorian government and the City of Melbourne in Melbourne from July 12-14.

Katherine Gibson, Professor of Economic Geography, Institute for Culture and Society, Western Sydney University

This article was originally published on The Conversation. Read the original article.

As big business goes green, green bonds ready for takeoff


Usman W. Chohan, UNSW Australia

The climate summit in Paris has shown that global big business is now also on board with the transition to a low-carbon economy.

However, the most promising instruments in finance for promoting green investing, particularly green bonds, have been around for almost a decade now, starting with the European Investment Bank (EIB) Climate Awareness Bond in 2007.

Why haven’t green bonds entered the mainstream of finance, and what is holding them back?

To be clear, the rise of green bonds has been dramatic: whereas issuances amounted to only US$4 billion in 2010, they were nearly ten times that amount by 2014, representing US$37 billion in new issuance volume. However, green bonds haven’t yet achieved a critical mass because their growth stems from a small base, given that global fixed income constitutes US$80 trillion in outstanding value.

An important factor constraining the wider proliferation of green bonds is the fact that their issuance is still relegated to a few large players. The largest emitters of green bonds remain the large multilateral development institutions which collectively accounted for almost half (44%) of new issuances in 2014, while the corporate sector accounted for another one-third of the total.

The World Bank alone has conducted 100 green bond transactions in 18 different currencies that cumulatively represent more than US$8.5 billion.

Having such a concentrated base of issuers is insufficient for a wider introduction of green financial instruments, and new institutional players, particularly private sector entrants, are required to enlarge the green bond market.

Looking back, an overarching reason for limited private sector participation in green bonds was that “green credentials” were less important in past corporate cultures. However, with the cultural shift taking place as seen at COP21, more entities are expected to “green-up” their business models.

It is important to note that, because green bonds are properly certified as climate-friendly financial instruments, they only represent a portion of a larger, more loosely defined “climate-aligned” bond market.

While not officially labelled as “green” bonds according to environmental rubrics this market accounts for more than US$600 billion.

The green bond market also suffers from a lack of project diversity. For the broader “climate-aligned bond market” that includes green bonds, the two largest segments are transport (nearly 70%) and energy (another 20%), but transport is almost entirely rail networks backed by state entities. Only 10% of the “climate-aligned” market covers the remaining construction, agriculture, waste management, and water categories.

It is heartening to see that developing countries have taken the lead in issuing “climate-aligned” securities (not necessarily certified as green bonds), with China alone accounting for 33% (US$164 billion) of the climate-aligned issuances. India (US$15 billion), Brazil (US$3 billion), and South Africa (US$1 billion) are also among the emerging markets engaging in the climate-aligned capital raising process.

In Australia, the scope for green bond issuances is extremely promising, but in the context of the overall Australian A$1.5 trillion bond market, green bonds still reflect a minute portion of the issuances, and the country has generally lagged behind in its adoption. This is partly due to regulatory uncertainty and political hostility. However, there’s actually a strong interest in green bonds in Australia, as the 2015 green bond issuance of A$600 million by ANZ bank and this South Australian A$200 million wind farm project evidently show.

In fact, most of the major Australian banks, including NAB, Westpac, and ANZ are dipping their toes in the space. To facilitate stronger growth in Australia, however, non-bank financial institutions will also need to be part of the equation, which is why it is encouraging that sectors such as the property market are turning to green bond vehicles for raising capital.

The outlook on market volume growth for green bonds is overwhelmingly positive. Some forecasts are suggesting the green bond market will treble again this year as it did in 2014, touching US$100 billion. Given the growth and engagement on the “greening” of finance, green finance could soon become mainstream.

The Conversation

Usman W. Chohan, Consultant, World Bank Institute (previous); Doctoral Candidate, Economics, Fiscal Policy Reform, UNSW Australia

This article was originally published on The Conversation. Read the original article.

Why is the business world suddenly clamouring for a global carbon tax?


Peter Burdon

Among the various interests at the Paris climate talks, it is arguably the voice of business that has emerged most clearly. Many business leaders are now saying that if the world is intent on reducing greenhouse gas emissions, there must be a worldwide price on carbon and a framework for linking the 55 schemes that exist in areas such as China, the European Union, and California.

Momentum has been building since May, when six of Europe’s largest oil and gas companies, including Royal Dutch Shell and BP, issued a letter calling for global carbon pricing system. That month, leaders from 59 international companies also signed a statement calling for carbon pricing to feature in the Paris agreement.

Advocacy has continued during the Paris negotiations. For example, Patrick Pouyanné, chief executive of French oil and gas giant Total, argued that the shift from coal to gas “will not happen without a carbon price”. He suggested that a price of US$20-$50 in Europe was required (well above the current price).

Oleg Deripaska, president of the world’s largest aluminium producer Rusal, put the issue in stronger terms, describing the idea of voluntary national emissions commitments (upon which the Paris agreement largely hinges) as “balderdash”.

Asked what success would look like from the Paris negotiations, Deripaska replied:

A success [for most people] would be lunch at a nice French banquette with foie gras and oysters. But no, seriously, it is carbon tax or die.

Carbon tax on the menu?

It is not clear whether a carbon price will figure in the Paris agreement. But it is important to consider what is motivating some of the world’s highest-emitting companies to advocate for a carbon price. And what other, perhaps more intrusive plans for tackling climate change would be taken off the table?

Businesses have a stronger presence at COP21 than at any previous climate negotiation. They know which way the wind is blowing and realise that governments might require painful and complex interventions to reduce emissions. Moves are afoot to decarbonise the world economy some time after 2050 (see Article 3 of the latest draft text, and there has been strong advocacy for a moratorium on new coal mines.

Helge Lund, chief executive of British oil multinational BG Group, argues that a carbon price reduces government intervention and attempts at “pick[ing] winners in terms of energy technologies.” Instead, he argues: “the market will dictate the most efficient solution”.

Forecasts from the International Energy Agency suggest that fossil fuels (including coal) will provide the bulk of energy demand for developing countries going into the future. Companies intend to meet that demand. Thus, Shell can simultaneously advocate putting a price on carbon and make plans to drill in the Arctic where production will not begin until 2030.

While that might sound perverse, there is actually nothing inconsistent about those two positions.

One way for energy companies to maintain economic growth in a carbon-priced economy is to shift investments gradually away from coal and oil, and towards gas. That is why Shell has paid US$70 billion for the BG Group.

Of course gas might come under similar pressure in time, but as the Financial Times has reported:

…oil companies’ skills and assets mean that finding and extracting gas is a short and natural step. Moving into renewable energy is a much bigger leap.

This can be seen in the many examples where energy companies have struggled to develop other forms of energy, such as BP’s ill-starred attempt to brand itself as “beyond petroleum” and invest US$8 billion over ten years in renewable energy. The company has since backtracked on that goal, has left the solar market, and has no plans to expand its onshore wind investments.

Beyond markets

Of the 185 countries that have submitted climate targets ahead of the Paris talks, more than 80 have referenced market mechanisms.

Clearly, a price on carbon is going to play a role in attempts to tackle climate change. This is a good thing but it is not sufficient and must not become a distraction from other serious interventions.

Recent research confirms that we do not have time to wait for energy companies to transition at their own pace from fossil fuels to renewable energy. For example, last week Kevin Anderson from the Tyndall Centre for Climate Change Research published a paper in Nature Geoscience which argued:

The carbon budgets associated with a 2℃ threshold demand profound changes to the consumption and production of energy … the IPCC’s 1,000 gigatonne budget requires an end to all carbon emissions from energy systems by 2050.

A carbon budget consistent with 2℃ (let alone 1.5℃) requires a dramatic reversal in energy consumption and emissions growth. Governments should treat overtures from business with caution, even if businesses are making the right moves. They need to ensure that these moves are made at a speed that suits the climate, rather than just business.

The Conversation

Peter Burdon, Senior lecturer, Adelaide Law School

This article was originally published on The Conversation. Read the original article.

The earth has moved: big business’s radical climate shift is now unstoppable


Clive Hamilton

The most surprising revelation here at the Paris climate conference has been the astonishing shift in the world of investors over the past 12 months. There is now unprecedented momentum towards participating in the transition to a low-carbon economy, and the view at the “big end” of the conference is that a strong agreement will provide an extra shove. It’s unstoppable now.

It’s not that investors and chief executives have had an ethical epiphany about climate change; it’s just that they can see where the world is headed, and it makes sense to be part of it rather than being stuck in the economy of the 20th century. As US Secretary of State John Kerry said yesterday: “While we’ve been debating, … the clean energy sector has been growing at an incredible rate.”

Contrast that with Australia, for instance, where the attitude of the business community has always been “we don’t want to be at the forefront of global action”. The old fossil fuel companies still have the dominant voice in the public debate and in the policy process. It may take another year for what’s happening across the world to sink in, but the complaint will increasingly become “we don’t want to be left behind”.

So what are the dimensions of this shift in business and investor sentiment? I wrote last week about how investors are running ahead of governments, as shown for example by the quiet revolution in the growth of green bonds, and by the Montreal Carbon Pledge under which large investors have committed to measuring and reporting on the carbon footprint of their portfolios. In a little over a year, this pledge has been signed by investors controlling more than US$10 trillion in assets.

More immediate abatement action is to be found in the so-called Science Based Targets initiative, under which 114 large corporations have pledged to reduce their emissions in a way consistent with the 2℃ objective. Big corporations including Ikea, Coca-Cola, Dell, General Mills, Kellogg, NRG Energy, Procter & Gamble, Sony and Wal-Mart have already signed up and are implementing plans.

Dell, for example, has pledged to reduce emissions from its facilities and logistics operations by 50% by 2020 (relative to 2011 levels), and to reduce the energy intensity of its product portfolio by 80% by 2020.

These corporations have not decided that principles should outweigh profits; they have decided that, looking over the next several years, sustaining profitability requires that they shift to low-emission energy. One factor weighing on corporate minds is exposure to risk in energy markets, which are likely to be more volatile and uncertain partly because of the growing challenge posed to fossil energy.

Central bankers are now anxious that a rapid, structural shift in energy markets and the destruction of asset-value in some of the world’s biggest companies may disrupt the global financial system. As I reported, the governor of the Bank of England Mark Carney speaks of the need for an “orderly transition” to a zero-carbon economy.

This unprecedented business commitment feeds into, and is partially stimulated by, the Lima-Paris Action Agenda, which wound up yesterday and must be considered one of the standout successes of COP21. The number of mayors, governors, chief executives and investment managers who have arrived here to declare publicly their commitment has been unparalleled.

Yes, the message of this conference is that something big has shifted in the world.

The Conversation

Clive Hamilton, Professor of Public Ethics, Centre For Applied Philosophy & Public Ethics (CAPPE)

This article was originally published on The Conversation. Read the original article.