The global economic impact of Covid-19 demonstrates the interconnectedness of human and economic health, strengthening the case for action on climate change. It is time to accelerate efforts to bolster environmental and social resilience. But what are the main drivers that can raise investor stewardship to the next level?
The urgency of the climate crisis
In October 2018, the United Nations Intergovernmental Panel on Climate Change (IPCC) published a report on the dangers of global temperatures exceeding pre-industrial levels by more than 1.5° C. The report concluded that to strengthen the global response to climate threats, and promote sustainable development and efforts to eradicate poverty, the global economy must nearly halve its carbon emissions over the next decade and reach net-zero emissions by 2050 to have just a 50% chance of limiting warming to 1.5° C. Failure to do so could potentially create great risks for investor portfolios worldwide. Recent extreme weather events such as forest fires, hurricanes, severe droughts and floods have demonstrated yet again the urgency of the crisis we as a society are facing[1].
Corporations and investors have a role to play in this complex crisis as they need to reduce their emissions and cope with the impacts of global warming. Investors, as owners and lenders to companies, need to play an even stronger role through active ownership, fulfilling their fiduciary duty so as to encourage capital reallocation by companies towards net zero carbon.
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