Climate change exerts a significant human toll – its painful negative economic effects exacerbate already rising income and wealth inequality levels, and changes in the physical environment lead to population displacement within countries and across borders and contribute to deteriorating health outcomes.
Making more effective responses to climate change will require accelerated efforts across the entire world, at minimum, to meet commitments made for the Paris Agreement and related processes. In addition to making good on these pledges, governments and businesses ought to work together to partner with local communities and suppliers and create intentional space for diverse leadership. These changes will bring many benefits.
Positive changes are taking place, countries are bending the curve of global greenhouse gas emissions downward and, for the first time ever last year, the world spent as much on clean energy as it did on fossil fuels.Optimism, however, still needs to be grounded in reality and there is still lots of ground to cover.
In this article, I discuss how global corporations, institutional asset owners and managers can move beyond talk to take transformative action since this is the only currency that matters.
Mapping the terrain
Global finance for climate action reached $803 billion annually for 2019-2020—less than a fifth of the estimated $4 trillion in annual investment that is needed for public and private sector entities to meet net-zero objectives.
Global capital markets—with at least $100 trillion in assets under management—have the resources to contribute the financial capital needed for the transition away from high-emission polluting systems, limit global warming to 1.5°C and create a more sustainable global economy. Within this total, ESG-related assets under management are forecast to grow to $34 trillion by 2026—yet this financial capital is underperforming.