Business and industry must rise to the challenge of climate change

For nearly three decades the United Nations has been bringing together almost every country on Earth for global climate summits known as the

In the run-up to COP26, the UK has been working behind the scenes with every nation to reach agreement on how to tackle climate change. My hope is that when world leaders arrive in Scotland, alongside tens of thousands of negotiators, government representatives, businesses and citizens, we will see concrete steps being taken to deal with the problem. In fact, as a hard-nosed businessperson, I know that tackling the climate crisis is not just a worthy, altruistic goal. There are plenty of commercial opportunities too – provided that companies look up from their day-to-day concerns and realize the changes that are needed.

According to the latest part of the sixth assessment report from the Intergovernmental Panel on Climate Change (IPCC), released in August, temperatures are likely to rise by more than 1.5 °C above pre-industrial levels within the next two decades. That increase will breach the targets agreed by the 2015 Paris climate agreement set at COP21 and bring widespread devastation and more instances of extreme weather. Only rapid and drastic reductions in greenhouse gases over the coming decade can prevent such climate breakdown, the IPCC says, with every fraction of a degree of further heating likely to compound the accelerating effects.

As a hard-nosed businessperson, I know that tackling the climate crisis is not just a worthy, altruistic goal.

James McKenzie

“A code red for humanity” is how António Guterres, the UN secretary general, described our perilous situation as the IPCC’s nearly 4000-page report was launched. “The alarm bells are deafening,” he warned, “and the evidence is irrefutable: greenhouse-gas emissions from fossil-fuel burning and deforestation are choking our planet and putting billions of people at immediate risk.”

Closer to home, Institute of Physics chief executive Paul Hardaker has said that without urgent, collective action “the impacts on all of us will significantly worsen”. Importantly, as he reminded us, physicists have a crucial role to play in developing our understanding of the climate system and finding sustainable solutions to global warming. “There has never been stronger evidence that we need to act now and together,” Hardaker added. “Let’s hope our political leaders in Glasgow can make that a reality.”

Global goals

COP26 has four main aims, the first of which is to reach global net-zero carbon emissions by mid-century and to try to limit warming to 1.5 °C above pre-industrial levels, for example by phasing out coal, stopping deforestation, switching to electric vehicles and investing in renewables. The second goal is to protect communities and natural habitats to avoid people losing their homes, livelihoods and even lives. Third, developed nations have to “make good on their promise to mobilize at least $100bn in climate finance per year by 2020”, with international financial institutions unleashing cash from the private and public sector to secure global net zero. Finally, we all need to help – there’s no point in only a minority of people taking action.

We have to accelerate and smooth the transition both by funding private-sector initiatives and by amplifying the effectiveness of government climate policies.

James McKenzie

To me, it’s the third goal that’s most critical. We have to accelerate and smooth the transition both by funding private-sector initiatives and by amplifying the effectiveness of government climate policies. One good example of this in action was last year’s announcement by BlackRock – the world’s largest investment manager – that it would no longer invest in thermal coal. Since then a group of 617 institutional investors, who together control more than $55 trillion of assets, have joined forces as Climate Action 100+ to demand that the world’s 161 biggest polluters (representing 80% of industrial emissions) publish strategies to cut their output of greenhouse gases by 45% by 2030 and to reach net zero by 2050.

Not to be outdone, six of the largest investor alliances, representing assets worth over $103 trillion, last year wrote an open letter, calling on companies and auditors to fully reflect the effects of climate change in their declared results. The group also said that any assumptions made when preparing financial statements must be compatible with the Paris agreement.

As the former governor of the Bank of England Mark Carney – now a finance adviser to COP26 – neatly put it: “Markets require information to operate effectively – what gets measured gets managed. Investors need to understand how extreme weather events and climate policies to achieve net zero affect business models and what could be the associated financial impact.” He went on to warn that “climate change will prompt reassessments of the values of virtually every financial asset”.

I think we’re pushing on an open door. A recent UK government survey found that 68% of UK savers want their investments to consider impact on people and planet alongside financial performance. The UK government has already published its Ten Point Plan for a Green Industrial Revolution policy paper, which lays out an inspiring vision to create a quarter of a million jobs with £12bn of government investment over the next 10 years.

I hope that COP26 succeeds because green technology and growth can go hand in hand to tackle the climate crisis – our planet’s most enduring threat. I am a great believer in using science to solve problems and physicists have a big part to play in all this. But because it’s always easier just to carry on as before, nothing will happen without changes to global government policies and financial markets. In fact, when it comes to climate change, the real challenge is making the change – and doing so fast enough.