Blunting the impact of climate change is our time’s greatest challenge. The landmark 2015 Paris Agreement on climate pledged to keep the rise in global temperatures to less than 2 degrees Celsius above pre-industrial levels. The overall Paris pledge is the sum of individual country pledges, known as Nationally Determined Contributions (NDCs), to drive decarbonization. But, even if all the NDCs were implemented, we would not get to net zero by 2050. To get there, the world needs to see emissions decline by over 8 percent – roughly the amount they fell in 2020 – each year from now until 2050.
With 60 percent of the world’s greenhouse gas emitters updating their Paris pledges to align with net zero by mid-century, policy support should help boost the outlook for investing in sustainability, climate solutions, and the innovation needed to get the world there. Taxes on carbon emissions have been set far too low, averaging $3 per ton globally, far short of the estimated $70 per ton needed to get to net zero. These will undoubtedly rise over the decades to come.
Governments set policies, but business plays the most important role in translating policy into real-world action. We will see market forces start to reward climate resilient companies with higher valuations, and there will be negative consequences for those that fail to adjust quickly enough. Corporate environmental disclosures can help capital flow to the highest return and most sustainable investments. Strong climate reporting can help business benefit from incorporating climate into capital allocation decisions.
Asia’s vibrant economies are at the heart of dire climate consequences, and the ability to help the world decarbonize. Asia accounts for 45 percent of global greenhouse gas (GHG) emissions, often measured in carbon dioxide equivalent, but is home to roughly 60 percent of the world’s people; China alone is responsible for close to 30 percent of the global total. As Asia’s middle class grows, the region must ensure that growth is green, so that it enjoys the benefits of cleaner cities and improved overall welfare.
This briefing’s aim is to underscore the relevance of climate reporting to C-suite and board leadership. Engaged leadership is at the core of every company’s transition to low-carbon operations. Executives whose compensation is tied in part to emissions reduction and other environmental Key Performance Indicators (KPIs) are more likely to succeed in their corporate sustainability efforts. It is easy to see these challenges as a cost, but early adopters will be better able to choose their most efficient decarbonization remedies, leaving them better positioned in the long run.