香港地球之友綠色金融顧問 / Green Finance Advisor of Friends of the Earth (HK)
Earlier this week the United Nations Environment Programme issued its tenth Emissions Gap Report, emphasizing the failure of the 2015 Paris Agreement to cut global greenhouse gas emissions and halt global warming. Sadly, the average temperature will increase to 3.2 degree Celsius above pre-industrial levels even if countries hold themselves to their emissions pledges from four years ago. Such an increase in temperature will well past the 2 degree limit set by the Paris Agreement and will be hostile to our lives.
To reach the original 2 degree limit, governments and corporations have to cut their carbon emission but rather, they have done the opposite. While the situation is more challenging now than ever, we still have solutions to reach the target of controlling the temperature rise to just 1.5 degree by 2030. To bring climate change under control, we have to act promptly. The world leading countries – members of the G20 – which generate 78% of all emissions have to take the lead. While some countries among them have taken positive moves, only five have committed to a long-term zero emissions target.
Not surprisingly the burning of fossil fuels is the major contributor of gas emissions, producing 68% of carbon dioxide released into the atmosphere in 2018. The latest Emission Gap report calls for radical transformations of global energy system. Replacing coal-fired power plants with renewable energy power generation is a major action that needs to be taken. Switching from conventional cars to electric vehicles is another development that helps cutting down emissions. Overall, the world’s energy system has to transform from carbon-heavy to carbon-light to ultimately carbon-free.
Climate risks are very real, but so do opportunities emerge from climate change. In my view, a critical mission of green finance professionals is to assist the fair and proper allocation of capital to private and public entities based on their contribution to sustainability and performance in ESG. Among all ESG issues for the moment, climate change is so critical as it affects every stakeholder in the society.
Valuation of equities and bonds have clearly not factored in sufficient climate risks and this has to be and will be corrected. Companies and governments that are helping directly or indirectly in reducing the world’s emissions should have access to more capital at lower costs than those which ignore climate issues and generate more emissions. Investors who fail to assess the climate risks and opportunities are going to lag behind those who can with the difference revealing in their portfolio performance.
View the latest emissions gap report issued by the United Nations Environment Programme: