How sustainable metrics can speed and scale climate progress

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Bill Thomas, Global Chairman and CEO, KPMG

• Two things are needed to expedite progress on climate action: speed and scale.
• With the rights choices, purchasing power and financing – all the things that businesses, the private sector and capital markets do very well – capital can be directed towards projects that drive change and build momentum.
• Investors need information that’s comparable, trusted and transparent to act on. These sustainable metrics can help drive market action and unleash capital markets on these pressing issues.

Many people are focused on how much work is needed to expedite progress on climate action. To simplify the approach, two things are needed most of all: speed and scale. Speed because science has determined that waiting is no longer an option; and scale because the issue is fundamentally global in nature, with all human action having a net result. We’re closer than ever to harnessing the power of the capital markets to help us achieve both.

Thankfully, we have many of the tools and much of the technology needed to transition from our carbon-intensive past. It’s also important to acknowledge how much has already been accomplished. Smart people – engineers, scientists and many others – have invented the tools and processes that we can use today to transition to a low-carbon future. Solar panels, windmills, batteries and other innovations already exist and the technology is only getting better. But while progress has been made, we still need to act quickly.

We need to scale and deploy things at the fastest speed possible, which in certain sectors and markets is already happening. For example, in only a few short years, the size of the solar industry has ballooned while pricing for this clean energy has dropped considerably. Renewables, including solar, wind and other generation methods, are now the cheapest source of new energy in many markets. It’s a remarkable change.

How did that happen? Simply put, more people focused on solving the problems, demand was created, policies were implemented to build momentum and market forces were unleashed. Speed and scale were delivered in an important sector and we now have a roadmap for even greater success in others.

Of course, nothing comes for free. Capital needs to be directed to the projects that drive change and build momentum. That’s where choice, purchasing power and financing come in – all the things that businesses, the private sector and capital markets do very well. From my perspective, stakeholder and citizen demand are strong, but there’s still an information gap that appears to be stalling market momentum.

Investors need better information to mitigate the risk and judge opportunities with a sustainable lens. That’s just as true for a new project in an emerging market as it is for investing in global stock markets. They need information that’s comparable, trusted and transparent that they can act on – easy to say, but complicated to bring to life. However, we’re closer than ever to getting it done.

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We saw the World Economic Forum’s International Business Council create sustainability metrics to jumpstart conversation across critical industrial sectors, standard setters and regulatory bodies. Then, standard setters agreed to merge and create the ISSB at COP26 – a huge step. Even more recently, the EU is closer to requiring comprehensive mandatory disclosures, another important push in the right direction.

The next step is to make sure that these standards and metrics work together and drive market action that unleashes the capital markets on these pressing issues. It’s critical that we don’t add unnecessary burdens to corporate balance sheets or focus decision-makers and boardrooms on things that deviate from the task at hand. Doing so would stall the great momentum we’ve already created, and it’s encouraging to see that this step is already underway.

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What’s the World Economic Forum doing about climate change?

Climate change poses an urgent threat demanding decisive action. Communities around the world are already experiencing increased climate impacts, from droughts to floods to rising seas. The World Economic Forum’s Global Risks Report continues to rank these environmental threats at the top of the list.

To limit global temperature rise to well below 2°C and as close as possible to 1.5°C above pre-industrial levels, it is essential that businesses, policy-makers, and civil society advance comprehensive near- and long-term climate actions in line with the goals of the Paris Agreement on climate change.

The World Economic Forum’s Climate Initiative supports the scaling and acceleration of global climate action through public and private-sector collaboration. The Initiative works across several workstreams to develop and implement inclusive and ambitious solutions.

This includes the Alliance of CEO Climate Leaders, a global network of business leaders from various industries developing cost-effective solutions to transitioning to a low-carbon, climate-resilient economy. CEOs use their position and influence with policy-makers and corporate partners to accelerate the transition and realize the economic benefits of delivering a safer climate.

Contact us to get involved.

Right now, as it relates to climate change, humanity and good sustainable business sense are still in the driver’s seat and our future will be what we make it. If we work together, project by project, to do what needs to be done, real progress can be achieved when we look back at the aggregate. That was true for solar panels, and that’s true for harnessing the power of the capital markets to drive a more sustainable future.

We just need to stay focused on the issue at hand and keep things moving forward together, for better.