When we gathered in Paris in 2015 to hammer out the historic climate deal,
few of us dared hope that by 2021 more than 60 countries—representing over half of global emissions—would have committed to net zero emissions by mid-century. In addition, 4,500 non-state actors, such as
companies, cities, regions, and other institutions, have embraced a net
zero target. Asset owners and managers are also now stepping up, with over
$40 trillion of assets under management committed to net zero portfolios by
2050.
What has brought us to this inflection point of hope edging out despair?
Innovation—in institutions, understanding, technology, and leadership. The
Paris deal itself was hugely innovative. Politics ruled out a legally
binding treaty, so a new approach had to be forged. Fiercely criticized by
some for its voluntary nature and non-binding targets, it was predicated on
the belief that despite a modest first round of commitments, growing
scientific evidence, falling technology costs, and rising citizen demands
for action would lead to more ambitious targets over time. Recent evidence
appears to support this hypothesis, although it will be essential to
continue to ramp up ambition in the years ahead if the Paris Agreement’s
targets are to be met.
There has also been innovation in the economic understanding of climate
change. Not long ago economists, politicians, and business leaders
overwhelmingly believed in a trade-off between climate action and economic
growth. The cost of action today had to be weighed against the benefits of
avoided costs in the distant future, with the discount rate a major focus
of debate. This view has been largely replaced by an understanding that
smart action against climate change doesn’t only stop bad things happening,
it leads to increased efficiency, drives new technology, and lowers risk.
These benefits in turn stimulate investment, generating jobs, creating
healthier economies, and boosting the livelihoods and well-being of
citizens, even in the near term.
We’ve also seen important innovations in leadership. When in 2019 the
Intergovernmental Panel on Climate Change (IPCC) concluded that the risks
of 2°C average warming were simply too great, and recommended a maximum
warming of 1.5°C, it implied a considerably more difficult task ahead. Many
expected climate leadership to evaporate in the face of a much steeper hill
to climb. However, once the magnitude of the necessary revolution became
apparent, enlightened leaders recognized that they had to be all-in to
manage risks and seize opportunities. Investors, staff, and customers
wanted visionary leaders on the right side of history. To be sure, there
are business and political leaders, as well as critical segments of the
population, who have vested interests in maintaining the status quo and are
resisting change, but the discourse is quite different today than it was
only a few years back.
Most dramatically, of course, innovation has driven down costs and
introduced new technologies, and this must pick up speed throughout the
current decade.
