Mainstreaming the low-carbon economy

With climate change firmly accepted as one the greatest challenge of our time, these developments should no longer surprise us: from the likes of BP and Total requesting an international carbon price, to Georgetown, a city in Texas, announcing a switch to renewable energy because it makes business sense, to Saudi Arabia’s oil minister acknowledging that we are reaching the end of the fossil fuel era.

These stories may have made the biggest headlines this year, but they are just a drop in the ocean of unprecedented commitments and actions companies, investors and governments are undertaking to address climate change. The message to policy-makers is clear. The business case is established. The transition to a new, low-carbon economy has begun.

The Peruvian and French Presidents of COP20 and COP21 are bringing these commitments and efforts together under an ‘Action Agenda’. This new, official recognition for non-state actors at the inter-governmental level will catalyse their increased involvement and be one of the most impactful outcomes of the 2015 Paris Climate Change Conference.

A shift in corporate attitudes

When CDP started 15 years ago, the idea that businesses, and not just governments, should account for and take action on anything beyond their financial performance was still alien to many. Now over 822 investors representing more than one-third of the world’s invested capital are requesting companies to disclose environmental risk and opportunities through CDP.

The insights gleaned from these disclosures are enabling decision-makers to see the true picture of corporate environmental impacts, and crucially, are driving action. Measuring, disclosing and managing non-financial data is now mainstream, creating a new bottom line in business.

Measuring, disclosing and managing non-financial data is now mainstream, creating a new bottom line in business

We can see these changes reflected in the increased engagement and dialogue between investors and companies. At the annual general meetings of BP, Shell and Statoil in 2015, a coalition of shareholders called ‘Aiming for A’ put forward resolutions calling on these companies to participate constructively in the transition to a low-carbon economy, and improve disclosure of their climate risk through platforms such as CDP. In a departure from history, these companies backed the shareholder calls and each was voted through with a huge majority.

So what is driving this unprecedented shift in corporate attitudes? A major factor is the growing body of evidence that connects the dots between sustainability, financial performance and competitive advantage. In 2014 companies using CDP identified savings of over US$53 billion from emissions reduction activities.

Businesses are also discrediting the notion that reducing emissions means falling profits. CDP’s Climate Performance Leadership Index – made up of companies leading the way in action to mitigate climate change – has outperformed the Bloomberg World Index of top companies by 9.6 per cent over the past four years.

The pace and ambition from non-state actors has accelerated since 2014. A vanguard of companies, cities and states and regions is emerging. These front-runners have strived to show policy-makers that not only are they keen to see a robust and ambitious deal secured in Paris, but that they are already taking and benefiting from action.

From setting emission reduction goals that align with limiting global warming to below 2 degrees Celsius, to utilising an internal price on carbon, to working towards procuring 100 per cent of their electricity from renewable sources, the likes of Honda Motor, Iberdrola, the city of Melbourne (pictured), Scotland and many others are embracing the low-carbon future.

As we look beyond Paris, it is clear that momentum and progress must be tracked

The understanding, ambition and potential to scale up non-state actor efforts to mitigate and adapt to climate change has steadily grown over the past fifteen years. As we stand on the cusp of 2016, the world is expecting negotiators in Paris to do one job: pull the policy trigger that will unleash and drive this action.

But as we look beyond Paris, it is clear that momentum and progress must be tracked. This is where we expect to see a new chapter on disclosure begin: it will be up to business, investors, cities and states to write that story.