I've continued to ponder over a question that arose in my last blog: What is it about climate action that is drawing the attention of major financial institutions?
According to new research, Oxfam released an article that stated the world's richest 1% cause about double the amount of CO2 emissions in compared to less fortunate 50% from 1990 to 2015. The study showed, the richest 10% of the global population - about 630 million people - were responsible for about 52% of global emissions over the 25-year period. Naturally, I was curious to understand, who is considered rich? I found that from a global standpoint, the richest 10% are those with incomes above $35,000 a year, and the richest 1% are people earning more than about $100,000. Safe to say, the major contributors of CO2 emissions, include myself, and almost every single person I know. People who live in homes with access to electricity, often travel via plane, own and/or drive in cars daily. We are living a “disposable” lifestyle, and quite frankly, this is the only life we know. So this begs the question, how can we be or do better? Carbon Market: Voluntary vs Compliance Carbon markets exist under both mandatory (compliance) schemes and voluntary programs. The recent United Nations Climate Change Conference (Cop26) focused on the adoption of the Glasgow Climate Pact, and set a stage for nations to propose their strategies on how they plan to turn the 2020s into a decade of climate action and support. The plans created by each country, will be regulated by international entities constituting the (mandatory) Compliance Market. On the other side, the private sector has taken a stance through a variety of corporate promises, creating the function of Voluntary markets outside of public, Compliance markets. The voluntary side of the Carbon Market enables companies to pursue developing and transitioning towards green business strategies. This market also enables individuals to invest in businesses with practices that intend to offset carbon on a voluntary basis. Financial institutions are the middle man of all these dealings and transactions, which helps to bring light to their growing interest of going green. Industries & Impact The top 100 producers of greenhouse gas emissions from 1988-2015 are all in the energy or natural resources industry. And according to this Carbon Tracker study, a fifth of global industrial greenhouse gas emissions are backed by public investment. This puts a significant responsibility on investors to engage with and urge corporations to disclose climate risk and develop green strategies. Without investors backing operations, these corporations risk losing a fair share of resources. And without financial resources, the effects could be damaging, trickling down to impact the private sector who use their products and services to produce and provide the majority of the goods and services the richest of the world utilize and have access to on a daily basis. Global financial institutions have become champions of the transition to clean energy. Yet, they are still largely enabling investments into the fossil fuels and natural resources industry. Though their websites showcase promises to invest in removing as much carbon dioxide from the environment as they emit. When looking at their websites, we can see their sustainability promises and some even have released impact reports. But unfortunately, when we look at what is behind it all, it’s a challenge to see if there is a lot of substance behind the commitments. In an effort to make commitments from the private sector more comprehensive, the United Nations Environment Programme convened mutile Net-Zero Alliances bringing together financial institutions worldwide. And during Cop26, Mark Carney, Former Governor of the Bank of England, introduced the Glasgow Financial Alliance for Net Zero, which also brings together a global coalition of financial institutions to accelerate decarbonization of the economy. It is honestly great to see global powers taking steps towards action. But I, along with many others, are skeptical if it's enough, if this is enough to produce results and hit the 1.5°C target limit set out in the Paris Agreement. I’ll keep my ear to the ground and keep you all up to date.. stay tuned
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