One of the biggest takeaways from the Paris climate conference has been the astonishing shift in the world’s investors over the past 12 months to renewable energy
There is now unprecedented momentum towards participating in the transition to a low-carbon renewable energy economy. The view at the “big end” of town is that the Paris agreement will provide an even stronger boost. It’s not that investors and chief executives have had an ethical epiphany about climate change; it’s just that they can see where the world is headed, and it makes sense to be part of it rather than being stuck in the economy of the 20th century.
As US Secretary of State John Kerry said at the climate conference “While we’ve been debating, … the clean energy sector has been growing at an incredible rate.”
Australia’s business community by contrast has always been “we don’t want to be at the forefront of global action”. The old fossil fuel companies still have the dominant voice in the public debate and in the policy process. It may take another year for what’s happening across the world to sink in, but the complaint will increasingly become “we don’t want to be left behind”.
So what are the dimensions of this shift in business and investor sentiment? Investors are now running ahead of governments, as shown for example by the quiet revolution in the growth of green bonds, and by the Montreal Carbon Pledge under which large investors have committed to measuring and reporting on the carbon footprint of their portfolios. In a little over a year, this pledge has been signed by investors controlling more than US$10 trillion in assets.
More immediate abatement action is to be found in the so-called Science Based Targets initiative, under which 114 large corporations have pledged to reduce their emissions in a way consistent with the 2℃ objective. Big corporations including Ikea, Coca-Cola, Dell, General Mills, Kellogg, NRG Energy, Procter & Gamble, Sony and Wal-Mart have already signed up and are implementing plans.
Dell, for example, has pledged to reduce emissions from its facilities and logistics operations by 50% by 2020 (relative to 2011 levels), and to reduce the energy intensity of its product portfolio by 80% by 2020.
These corporations have not decided that principles should outweigh profits; they have decided that, looking over the next several years, sustaining profitability requires that they shift to low-emission renewable energy.
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