In 2021 we are at a liminal moment for climate change policy – a transformative period during which leaders, countries, economies, and communities will reset expectations and goals, and establish a new balance between humanity’s demands on the earth, and the earth’s ability to sustain and nurture our civilization. Confronted by the ongoing mega drought in the American mountain West, by California’s wildfires, by rising tides in Florida, and a dangerous hurricane season looming once again, many of us appear ready to finally address climate change as the challenge of our lifetimes. What evidence is there for such optimism?
The Public Wants Action
The largest poll ever conducted on climate change suggests the public now wants action and while climate denialism still exists, its influence looks to be waning. Worried workers, parents and grandparents want assurances actions are being taken to ensure a sustainable earth in the decades ahead. The UN poll took place between October and December 2021 (during the pandemic) and included responses from 1.2 million people from 50 countries across the globe.
Fully 64 percent of those surveyed saw climate change as an emergency; 65 percent of Americans and 81 percent of British people surveyed agreed. Overall 70 percent of young people polled agreed we faced an emergency. Those polled wanted governments to shift to green energy, to reforest the land, and take other active steps as possible solutions. My key takeaway from this massive poll is that voters want action now. This clear recognition of an emergency is also reflected in business shifts that are underway.
Business Leaders Want Direction
Hundreds of the world’s leading businesses, from Microsoft, to Amazon, to UBS, to CAlPERs, to Swiss RE, to the Business Roundtable and US Chamber of Commerce are committing to net zero strategies, and climate change action within their businesses. Asset owners, perhaps most prominently Larry Fink, CEO of BlackRock, are increasingly committed to the climate change transition. These firms are responsible for over $8.5 trillion in assets. This is not just greenwashing or virtue signaling. Rather, leading CEO’s understand the economy of tomorrow will be greener, and that winners must be part of the transition. That is where profit opportunities increasingly exist.
Firms that are leading a regreening of the world are winning the economic race. Decarbonizing and green technology firms’ equities have been rising faster than the general market (such as battery maker BDYU, Tesla, First Solar, Iberdrola and many others), even during the pandemic as least carbon intensive firms out-performing dirtier brown industries. This performance gap between dark green, green, and brown is set only to widen as cost premium and penalties for
Investors Want Greener Portfolios
A building investor driven demand for green assets will continue. The greening investors of today and tomorrow, are in for the long haul. They want and demand investments that fit with their goals and concerns on climate, on social, and governance criteria. The effect of this investor and client mindset shift is evident in firm and fund performance. For instance, 52 of Morningstar’s 69 ESG (short for Environmental-Social-Governance) screened funds out-performed broad market funds in 2020 during the pandemic. This is not a short-term blip. 57 of Morningstar’s 65 ESG indexes outperformed broad indexes even during down markets in the five years to the end of 2020. State Street, Blackrock and other asset managers see the same market shifts playing out. This illuminates that investors and markets are already undergoing an extended climate change liminal moment.
Governments Need Ambitious Credible Commitments
Governments must seize this liminal moment to accelerate climate change reforms as we approach the COP26 conference in Glasgow. All governments must commit to net zero by 2050. All governments must make measurable, monitorable plans to get from here to there. All governments need enforcement mechanisms for laggards, and support those that make the leap and lead. It is insufficient to only commit to net zero 2050.
The public should demand detailed leaders be clear on their yearly goals, sector requirements, and insist they establish credible predictable policy pathways. Such detailed planning processes can convert statements into action, and facts on the ground. This means for instance commitments to convert to renewables for the power sector by 2035 (as President Biden has done). It means setting phase outs for gasoline engines, as fourteen countries have done so far, with Norway leading with a phase out by 2025, with others aiming for 2030 and 3040. It ought to include legislating to make the climate change goals the law of the land, as the UK and France have done. It should include a rising price for carbon, so we pay the real price of pollution, and instead pick better options, as is the case in Sweden, in Canada, and across much of the European Union.
By putting in place carefully designed incentives, penalties, markets, new and adjusted mechanisms, governments can accelerate the rate of green transformation. Hundreds of millions, billions, of personal economic decisions can thus help shifting conduct and behaviour toward integrating climate change risks. This can galvanise the required net zero transformation.
Align All Our Green Goals
Nelson Mandela said that: “something is impossible until it is done.” Today at this liminal moment for climate change and our planet we should reject naysayers who claim change is impossible, too difficult, too complex. We should recognize increasing signs we are at a pivotal moment, where the public, private sector and governments can all align predictable credible net zero goals and begin the transformation in earnest. If we do so tomorrow need not be dystopian, it can be better than today, for humans and non-human species. Let us get on with it and herald a multi-decade Green Globalization 2.0, a new industrial revolution.
Economist and Climate Expert Dr. Stuart Mackintosh is the Executive Director of the Group of Thirty. His third book, Climate Crisis Economics: The Net Zero Transition will be published September, 2021. Climate Crisis Economics draws on economics, political economy, and science to show how our communities — political, economic, and business - are making the essential leap to create green globalization 2.0.