In the runup to the COP26 climate negotiations in Glasgow, even the most ardent advocates of aggressive action have been dampening expectations. In all likelihood, the 26th Conference of the Parties to the Paris Climate Accords will end on 12 November roughly where it began on 31 October. There will be broad agreement on the scale and severity of the climate crisis but no unified commitment among the treaty’s 197 signatories on how they will address it.
Indeed, the New York Times reported on 28 October that China, one of the 197 signatories and the world’s largest emitter of greenhouse gases, is “opening up new coal production exceeding what all of Western Europe mines in a year, at a tremendous cost to the global effort to fight climate change.”
As much as we might wish for concerted action in Glasgow, it must be counted as progress that the voices of climate denial are more muted today than even a few years ago. The evidence of destructive storms and accumulation of damning studies overwhelms the protestations of climate skeptics such as US Senator James Inhofe, who arrived in the Senate chamber in 2015 carrying a snowball. His purpose wasn’t clear, though he succeeded in demonstrating both ignorance and obstinacy about the defining issue of our time.
Climate change is real
Today there is near-universal agreement that climate change is not only real but that it threatens global destabilization. And we see growing evidence that public pressure is producing tangible results.
In June, activist investor Engine No. 1 delivered a stunning defeat to climate foot-dragger ExxonMobil by winning shareholder approval to install three directors on Exxon’s board to push it to reduce its carbon footprint. The tiny firm wouldn’t have stood a chance but for the support of some of Exxon’s biggest institutional investors – BlackRock, Vanguard, and State Street – who voted against Exxon’s leadership and in favor of Engine No. 1’s candidates.
With its more climate-friendly board, Exxon is now debating whether to continue with several major oil and gas projects. It is considering both the projects’ costs and whether their expected carbon emissions would affect its ability to meet emissions pledges. Exxon has also begun calling for transparent carbon pricing and cross-border pricing adjustment systems to promote the development of carbon capture and storage technologies. To be sure, Exxon is still fundamentally a carbon emitter. But it’s also no longer the Exxon of old.
Meanwhile, another activist investor, Third Point, has taken a significant position (well over $500 million) in Royal Dutch Shell and is urging the oil giant to separate into two stand-alone companies. One would hold its legacy businesses, such as refining, providing steady cash flow, and the other would house renewables and other units that require significant investment. As the Wall Street Journal reported, doing so “would clarify the company’s strategy and appeal to different sets of investors who have been making competing demands” of the company.
While oil giants face mounting investor pressure to decarbonize, many of the world’s largest companies are committing to do so voluntarily.
More than 2,000 companies have committed to the Science-Based Targets initiative (SBTi), agreeing to set carbon-reduction targets aligned with the science behind the Paris Treaty (which calls for a net-zero global economy by 2050) and then to publicly disclose their progress each year.
Meanwhile, more than 200 have signed The Climate Pledge, an initiative formed by Amazon and NGO Global Optimism. Participants agree to reach net-zero by 2040, 10 years ahead of the Paris timetable. (There is overlap; many companies have committed to both.).
Pressure still needs to be applied
Skeptics rightly ask why one should believe climate promises from any business after so much greenwashing and futility. Skepticism is healthy, and the offenses have been real. But consider that commitments to SBTi and TCP include public disclosure requirements through which we can all hold participants to account – and that the pace of these corporate commitments is accelerating.
It is beyond doubt or dispute that Earth’s climate will worsen for decades, probably centuries, even if we reach net-zero by 2050 because of the carbon already in the atmosphere. Every new weather disaster, every new study, is a fresh reminder that we’re passing an unconscionable mess to our children, our grandchildren, our great- and great-great-grandchildren.
The COP delegates should remind themselves daily – hourly – of this stark fact. The rest of us must remember it too. As customers, investors, employees, lenders, voters, we must apply pressure in whatever ways we can.