3 reasons to be hopeful about tackling climate change in 2018

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We all worked hard during the past year to continue to shift the dial on combatting dangerous climate change.

Yes, there was bad news during 2017 – rising emissions, higher temperatures, devastating hurricanes, droughts, and wildfires. And while we should not be dismissive of the huge impacts such extreme weather events have, I’d like to take the opportunity to look forward to 2018 and the reasons to be hopeful as governments, individuals, organisations and companies look to take steps forward in tackling dangerous climate change.

1. Financial institutions + climate-related risks= investment decisions game changer

Financial institutions are uniquely exposed to a number of climate-related risks due to direct physical impacts (such as extreme weather events damaging assets and increased insurance claims) and the high expectations surrounding their role in the transition to a low-carbon economy (the International Energy Agency estimates that US$1 trillion is needed each year up to 2050 to finance the transition to a low-carbon economy).

For these reasons, corporate disclosure and transparency on climate change for investors is more important than ever.  From investor led demands for company reporting through frameworks such as CDP and DJSI to the publication of stock market guidance on ESG reporting by indices such as that issued by LSEG, there are clear signals for public companies that information on climate disclosures is relevant and necessary for institutional investors to make informed decisions.

The trend towards sharing information about non-financial performance is also apparent through the Task Force on Climate-related Financial Disclosures (TCFD), chaired by Michael Bloomberg and with support from Mark Carney. The TCFD framework encourages organisations to disclose the impact climate change is likely to have on their business. This includes physical and transition risks, opportunities from the transition to a low-carbon economy and financial impacts.

Reporting is increasingly critical as investors seek to differentiate between companies that assess climate risk and identify opportunities, and those that don’t. This will become more relevant in 2018 as CDP aligns with the TCFD framework and governments.

2. The onward march of renewable power

2017 saw the first day since the industrial revolution that Britain didn’t burn any coal for power generation. This is an incredible milestone in the renewables revolution.

According to the IEA, 2017 has seen a global increase in electricity generation from renewables of 165 gigawatts (GW) due mainly to cost reductions and government policy changes. Importantly there has been a 50% growth in solar PV capacity across the globe – it is the world’s fastest growing source of power. This is mainly due to improvements in technology as well as reductions in price of production and purchase.

Several companies have bid to build a subsidy-free wind farm in the Dutch part of the North Sea. This is the world’s first ever zero subsidy tender for wind power and the response by companies is testament to the commercial viability of wind power for electricity generation.

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While there have been numerous improvements in increasing the capacity, availability and affordability of renewable energy, there are still challenges. And these challenges pave the way for innovations: balancing supply and demand, battery storage and smart grids among the notable activities in 2017.

3. Benefits of embedding environmental sustainability are obvious

Business leaders are increasingly recognising that an environmentally sustainable approach makes good business sense in the short, medium and long term to change the way business is run.

Our research into the sustainability reporting performance of the UK’s largest public companies found a couple of interesting examples of how companies are embedding sustainability to the benefit of their operations.

The Royal Bank of Scotland has introduced a sustainability engagement programme called JUMP. Employees log sustainable actions they have performed in the workplace on an app, where they are then awarded points and are then eligible to win vouchers. This kind of engagement programme makes behaviour change straightforward and accessible while helping to encourage employee satisfaction by contributing to a purpose beyond their job role.

Marks and Spencer are working with their food factories to improve social and environmental standards. In turn, they reward the best-performing factories by purchasing more from them, incentivising their supply chain to become more sustainable. This makes business sense for both Marks and Spencer as the buyer and for suppliers as they benefit from a more resilient supply chain and business models.  

So there are reasons to be hopeful, although we acknowledge there is much more work to be done. We shall be advising and guiding companies throughout 2018 on how to manage climate risks and identify opportunities as well as embedding sustainability into their business models. We look forward to seeing you on the journey.


About EcoAct

At EcoAct we are driven by a shared purpose to make a difference. To help businesses to implement positive change in response to climate and carbon challenges, whilst also driving commercial performance.
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