Over the last eight years, the Paris Agreement and the spirit of it have galvinised businesses, investors, regulators and policymakers to focus their efforts across the globe and facilitate the transition to net zero carbon dioxide emissions. For the private sector, the $125 trillion financing needed for the transition to a 1.5°C economy represents an attractive source of return opportunities. Left unattended, climate risk will also increasingly also constitutes a growing danger in investment portfolios. Tackling net zero, however, can easily turn it into a seemingly daunting and unsurmountable obstacle.
To understand how the hurdles that remain can trip us on the way to achieving this net zero emissions by 2050, we assembled a panel of sustainable investing experts in Stockholm to understand the factors affecting how managers are managing their own transition to net-zero.
First, we revisited the obstacles created by inconsistent and incomplete data. Once again, the finger was pointed at politicians and regulators for their lack of initiative and inability to present a more cohesive and inspiring approach to achieving the transition to net-zero, be it through better definitions or carbon taxes. Short-termism was not spared either, with too many market participants resisting the tide of change, while managers that have embraced the transition often appear to fail to tailor their communication to the relevant audience.
But all is not grim. The panel acknowledged the progress in data collection that has occurred in the last eight years. While incomplete, the EU taxonomy and border tax adjustments and the incorporation of generous green incentives in the recent USA fiscal stimulus would have been unthinkable before the Paris Agreement.
The global adjustment and the sacrifices made to tackle COVID-19 would have also struck our past selves. Challenges remain, but if this roundtable discussion is anything to go by, we can move forward optimistically.
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