Now the real work must begin
The consensus reached in December at the Paris 2015 Climate Summit (COP21) was an unambiguous success, but what’s next? Is there a new climate for doing business? It’s up to the business community to drive the change through innovation and find the finance, but the transformation needed to move the world into a green future needs the support of governments and consumers.
Christiana Figueres, Executive Secretary of the UN Framework Convention on Climate Change (UNFCCC), said that the signal from Paris to move towards a long-term transformation is urgent. “We have a ticking clock and we need clear progress,” she said. “We are at risk. Now the real work must begin.” She acknowledges that developing countries are being expected to enter into a growth cycle with a lower carbon footprint than anyone has done in the past. “It is the developing countries that represent our biggest opportunity to support their growth in a clean, predictable and safe way,” she said. “This is where the change is really going to happen.”
Time for an orderly transition
It is useless to demonize the oil and gas industry. The industry is sitting on access to capital, technology and a trained critical mass of engineers, all of which can be moved over to the new economy. Stuart T. Gulliver, Group Chief Executive of HSBC Holdings, emphasizes the need for an orderly transition. Because the industry makes substantial tax contributions, a disorderly transition to green economies will have huge implications for government budgets.
Wal-Mart is recognized as a leader in greening its business. Ten years ago, the company set three goals to propel the group into a more sustainable future. Doug McMillon, the company’s President and CEO, said the goals and the targets set within them have been met and exceeded. “We are trying to make a difference and lead by example,” he said. “We want to influence the companies we do business with. We can lower costs and we can be more efficient.”
But the question remains whether people are really in tune with climate change. McMillon replied that “doing the right thing is good for business” and is the path of least resistance for consumers. Feike Sijbesma, Chief Executive Officer and Chairman of the Managing Board of Royal DSM, said his goal is to turn consumers into users. “This way people will think about the whole circle of products. If that thinking is there, you can make progress,” he said.
Sijbesma said the technology is available to make the transition from fossil fuels to bio-renewables. “We are entering this age now. Business needs to reduce our own emissions, enable the whole supply chain and advocate for the new climate economy. The growth of the economy and profits can go together by addressing climate change,” he added.
A fledgling market set to grow
The market for green bonds is just emerging, but it is promising and set to grow. “It’s only a matter of time,” speculated Gulliver of HSBC, a company that underwrites green bonds. Gulliver commented on the “tremendous momentum” across the financial services industry.
“I am optimistic that the math works; we need $5.5 trillion per year to meet the commitments of COP21,” he said. “This needs to be financed through public-private partnerships. There is enough money in the private sector to do this.”
Figueres pointed to the need to de-risk the flow of capital. “De-risking finance is a major lever,” she said. “Perhaps the way forward is a collective effort such as a capital facility that every country can contribute to.
Experts tend to agreed that a price on carbon is critical. But Figueres pointed out that the COP21 Climate Agreement has to be unanimous: “This is why we could not get a price on carbon. It would have been a deal breaker.”
Wal-Mart and Royal DSM have already put a price on carbon for their internal operations and supply chains. The private sector and governments are starting to work together. “This challenge brings everyone under the tent,” Figueres said. “It is a win, win, win, win agenda.”