Climate Crisis: the private sector now vital to solving critical challenges

We are in a climate emergency. A different kind of economy is not only possible, it is crucial, and it is the private sector that is in the best position to lead the way in addressing society’s most critical challenges. 

This was the message given by HRH Prince Charles in his speech to 120 world leaders at the opening of COP26 in Glasgow on 31 October. He said it is not governments that have the trillions of dollars of investment needed to tackle the climate crisis, it is the private sector. It is business and investors.

“No government has those sorts of sums,” Charles said, “which is why I have spent so much time over the past 19 months trying to form a global alliance amongst the private sector, as I have long believed it holds the ultimate key to the solutions we seek… and, from what they tell me, the private sector is already there, eager to work with you and ready to play a hugely significant and game-changing role.”

The Investor Agenda

Here at Sustainable Network, we completely agree that the private sector is key to solving the climate crisis. Only the private sector has the resources, the innovation and the will, to grasp the opportunities offered in launching a green economic recovery. It is only the private sector that can deliver the trillions of dollars of investment needed every year to limit warming to the target maximum of 1.5C above pre-industrial levels.

This is why Sustainable Network recently put our name to a joint statement from the 2021 Global Investor Statement to Governments on the Climate Crisis. This is the strongest ever call by global investors for governments to raise their climate ambition and implement meaningful policies to support investment in solutions to the climate crisis.

More investors than ever before are embedding net zero goals and strategies into their portfolio decisions, engaging companies to cut their emissions and calling on policymakers to deliver robust climate action. Investors are urgently seeking to decrease their exposure to climate risk as a core fiduciary duty and benefit from the opportunities associated with the transition to a net-zero emissions economy.

Take the brakes off

So if the private sector is chomping at the bit to properly allocate the trillions of dollars needed to support the net-zero transition, what’s the hold up? The problem has been the ambition gap between government commitments (as set out in NDCs) and the emission reductions needed to limit global average temperature rise to 1.5-degrees Celsius.

In addition, investors need access to adequate information on how companies are assessing and managing the risks and opportunities presented by climate change. In other words, they need standardised and mandated sustainability reporting. Government policy has a critical role to play in increasing investor access to and affirmative disclosure of such information.

Climate Change - Transforming to Net Zero

Happily, governments are starting to step up. At COP26, UK Chancellor Rishi Sunak promised to transform the economy and make the UK the world’s first net zero-aligned financial centre, including:

• All UK financial institutions and listed companies must publish plans by 2023 on how they will transform to net zero. These plans must include targets to mitigate climate risk, interim goals between now and 2050, and measures to meet them,
• In 2022, the UK will publish proposals setting out how the financial sector should transition to net zero by 2050. A special new taskforce will be set up to examine these plans,
• A $100 billion climate finance target for the most vulnerable countries will be met by 2023.

As well, the Glasgow Financial Alliance for Net Zero, a global coalition of 160 leading financial institutions, announced that over $130 trillion of private capital, equivalent to 40 percent of the world's financial assets, would now be aligned to climate goals of limiting global warming to 1.5C.

In the same way that our current economic model was based on funnelling funds into the oil, coal and gas industries, the solution is to siphon funds away from these polluting industries and into clean energy projects on a massive scale.