- Global economy remains largely reliant on fossil fuels
- Climate change solutions are attracting a significant share of the US$100 trillion bond market
- There are limited incentives for households and enterprises to invest in net zero technology
- The Glasgow Financial Alliance for Net Zero (GFANZ) reported during COP26 that over US$130 trillion in private wealth has been committed to carbon neutrality—enough to reach net zero by 2050
- The International Financial Reporting Standards Board (IFRSB) is now combining a slew of climate risk disclosure frameworks and measurement standards into a new International Sustainability Standards Board (ISSB).
The most recent nationally determined contributions (NDCs) to decarbonization made at the United Nations Climate Change Conference of the Parties (COP26) in 2021 still fall short of the Paris Climate Agreement’s 1.5°C objective.
The 1.5°C objective is so important that societies must be willing to accept poor effects of government policies today in order to avert the worst outcomes later. This includes the employment losses, higher prices, and geopolitical insecurity that come with a chaotic transition. Only a socially equitable transition will make the implications acceptable for vast segments of society, with governments developing laws and social-protection mechanisms to assist mitigate the effects.
Concerns like as melting land ice, increasing sea levels, and longer periods of extreme heat and cold, as well as their ramifications for human and economic systems, are increasingly evident. While COVID-19 lockdowns resulted in a global drop in GHG emissions, upward trends quickly resumed. GHG emissions rates grew faster in 2020 than they had over the previous decade demonstrating how the global economy remains largely reliant on fossil fuels.
The rise of stakeholder capitalism, shareholder activism, and companies’ increased willingness to use environmental, social, and governance (ESG) targets and metrics, as well as ESG-based investments, is reshaping the financial and economic landscape and a growing number of companies are committing to decarbonize their operations. Financial systems are quickly emerging as essential enablers of the transformation as banks, insurers, and institutional investors push capital towards net zero.
The Global Risks Report 2022, by the World Economic Forum, highlights that Governments, corporations, investors, and communities are increasingly agreeing on the need for a faster transformation, with one group raising the bar for the other. Many countries, regions, and businesses have embraced green parties and policies, such as a carbon border adjustment tax, as well as multilateral initiatives like climate clubs. The International Financial Reporting Standards Board (IFRSB) is now combining a slew of climate risk disclosure frameworks and measurement standards into a new International Sustainability Standards Board (ISSB). This will help to explain what has to be done and by whom in order to expose and avoid greenwashing and climate action stalling.
With the government’s coffers under strain, regulatory bodies are not moving fast enough, and market forces are expected to save the day. There are limited incentives for households and enterprises to invest in net zero technology in many nations, and few consequences for failing to do so.
New inventions that need a lot of energy during production and use, like crypto-mining or crypto-trading, which are generally powered by fossil fuels, can counteract attempts to lower environmental footprints.
Climate change solutions are attracting a significant share of the US$100 trillion bond market, which is estimated to surpass $1 trillion in annual issuances by 2022. Furthermore, the Glasgow Financial Alliance for Net Zero (GFANZ) reported during COP26 that over US$130 trillion in private wealth has been committed to carbon neutrality—enough to reach net zero by 2050.
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