Regular headlines reaffirm the rise of sustainability on the global stage. Political momentum behind climate action has not been derailed by COVID-19, sustainability is increasingly central to national political debates, and what once might have been confined to scientific pursuits and UN conferences has now percolated through to international financial affairs and the wider political summits.
Much is made of the scale of the challenge, from climate change, water stresses, and biodiversity loss to the looming spectre of environment-induced societal breakdown triggering unprecedented civilizational challenges on the back of decades of systemic neglect over the true cost of social and environmental imbalances and unencumbered consumption.
But the good news is that talk of sustainability solutions is picking up pace and growing in its reach into the mainstream. The Wall Street Journal recently charted the shift of sustainable finance from being a niche interest of socially conscious investors into a sustainable ‘gold rush’, further bolstering its financial credentials with trillions of dollars designated for the global energy transition.
Assets in investment funds with links to the environment came to almost $2 trillion globally in the first quarter of 2021, more than tripling in just three years, and investors are putting some $3 billion a day into these funds while bonds and loans worth $5 billion looking to bankroll green initiatives are issued every day.
Climate ambitions and power diplomacy
Should the number of zeros fail to persuade, other signs of a sustainability pivot abound. Climate ambition was the driving force in major power diplomacy as France, Germany, China, and the US jostled for leadership positions in a high octane theatre of ‘climate one upmanship’ in the run-up to the Climate Summit hosted by US president Joe Biden. The G7 has agreed to stop international financing of coal projects, and an International Energy Agency report says delivering net zero emissions by 2050 means no new coal, oil, or gas development from now on.
Governments are sending unmistakable policy signals which are redrawing multiple frontiers of the real economy, such as the banning of single use plastic in multiple jurisdictions from Europe, China, and more than 30 African states as well as New York and California. The sale of internal combustion engine vehicles is also set to end by 2035 or sooner in the EU, the UK, and California, and China is expected to follow suit with similar plans. France has proposed a ban on domestic flights when there are less carbon intensive alternatives on the ground.
But these signals did not spring out of a political vacuum. A global climate poll conducted by the United Nations (UN) in 50 countries showed two-thirds of the 1.2 million people polled thought there is a global climate emergency, and most indicated their support for stronger climate action even in countries with strong fossil energy interest.
Real economy responses to noticeable changes in risk calculus and political appetite will likely underpin further rapid shifts in market sentiment as investors begin to fully factor in the scale of the challenge and escalate their interrogation of company-level climate action plans.
Rapid pace of change still needed
But despite this ever-clearer direction of travel and growing availability of new technology and policy options, the need for speed remains. The rationale for moving fast in the next decade and a half to avoid the clear and present threats of environmental and breakdown is increasingly clear.
Getting up to scale is an ongoing and daunting challenge not least because exponential growth has brought growing pains. The recent spat over the definition and the usefulness of net zero targets for corporations and investors as seen in the shareholder votes over the climate plans put forward by Shell and other companies are all testimony to the challenge of mainstreaming.
While some have characterized these debates as political infighting, the reality is higher stakes simply mean it is more important than ever to safeguard the integrity of sustainability commitments as well as the quality of their delivery and implementation.
The move from ‘what’ to ‘how’ points to a clear demand for new, innovative collaborative efforts to help mitigate myriad political economy challenges associated with the upcoming great transition and ensure this sustainability pivot will deliver the promised outcomes. Launching the Chatham House Sustainability Accelerator in support of these once-in-a-generation efforts is a proud moment for the institute, and a clear sign that this pivot to sustainability is here to stay.
Bernice Lee, Research Director, Futures; Hoffmann Distinguished Fellow for Sustainability; Chair, Chatham House Sustainability Accelerator Advisory Board.