Increasingly, there are consequences for repeating mistakes.
With many of us still in the grip of a pandemic-induced lockdown, the advent of Groundhog Day on Tuesday may have raised a mirthless chuckle. The restrictions on our daily routines required by social distancing measures can make it feel as if we too are trapped in the seemingly endless day-in, day-out nightmare inhabited by Bill Murray in the 1993 film.
But this week felt very different. It felt like an almost orderly transition was grinding into gear. Words were beginning to turn into actions.
On Monday, Aviva Investors called on 30 “systematically important carbon emitters” to “demonstrate their commitment to immediate action on climate change”, as part of its Climate Engagement Escalation Programme. While reiterating its philosophical commitment to engagement, the firm issued a not-so-veiled threat: “Aviva Investors is committed to full divestment of targeted companies that fail to meet its climate expectations.”
Further evidence was provided by Norges Bank Investment Management (NBIM) – manager of Norway’s US$1 trillion-plus sovereign wealth fund, the world’s largest – which hit the headlines both for exiting investments in seven companies as a result of their tax policies, having also sold out of oil exploration and production, following losses of around 25% on oil and gas holdings in 2020.
Tuesday saw the publication of the Dasgupta review, which reignited interest in natural capital accounting in the UK press in the same way Brexit negotiations prompted a barrage of commentary on the mediation procedures of the World Trade Organisation.
Commissioned in 2019 by the UK’s HM Treasury, a team led by Professor Sir Partha Dasgupta, Emeritus Professor of Economics at the University of Cambridge, explored the cost to nature of human economic growth over 600-odd pages, concluding, unsurprisingly that the latter had come at the expense of former, bringing us to a series of tipping points which could have “catastrophic consequences for our economies and well-being”.
Humanity has failed as managers of natural assets, because we had failed to account for them, literally. Our methods of measuring economic growth do not account for the costs to nature, the review argued. To have a future, we need to recognise that “we – and our economies – are ‘embedded’ within Nature, not external to it”.
At a high level, the solution is to rebalance, the review said, reducing our demands on nature, and support its ability to supply. To bring this about at a practical level takes multi-faceted change. Technology can help us to decarbonise energy production and develop sustainable food production systems, but new policies are needed also, to change prices and behaviours that damage our natural resource.
As well as stronger, more coordinated efforts to protect, understand and appreciate natural resources, we need to change our measures of economic success, the report insisted. This means putting a price on the priceless, as one blog post put it.
The idea of complementing GDP with measures of wealth generation which include all assets, including natural ones, is not new. The review conceded that natural capital accounting is complex and at different stages of development in national jurisdictions. But it will gain mainstream consensus all the quicker if greater attention is focused on the challenge.
Dasgupta sees a critical role for finance in channelling investments “toward towards economic activities that enhance our stock of natural assets and encourage sustainable consumption and production activities”.
It’s perhaps encouraging that one of the key challenges the review sees for the finance sector is one on which there is already significant focus, ie greater precision in the measurement, disclosure and assessment of systemic risk.
“What is ultimately required,” the report said, “is a set of global standards underpinned by credible, decision-grade data, which businesses and financial institutions can use to fully integrate Nature-related considerations into their decision-making, and assess and disclose their use of, and impact on, Nature.”
Overall, the report gave food for thought to policy-makers than the finance sector or those working in other parts of the economy (btw, I’d recommend the ‘headline messages’ version as a taster of the full report).
Policy-makers, it seems, are in the market for fresh ideas. In November, at COP26, they are due to report on and update the National Determined Contributions to climate change targets to which they committed under the Paris Agreement. France, in particular, may be refining its approach, after a court ruled on Wednesday the state had failed to respect its commitments to combatting climate change.
On Thursday, the UK government, host of COP26, was reported to be conducting a review of the cost of emissions across all departments as part of carbon reduction blueprint. The expectation is for the UK to produce a framework for carbon pricing across all areas of the economy which will be presented in the run-up to COP 26, in the hope of encouraging buy-in from other states.
An orderly transition does not mean smooth or painless. Ask Shell. Or bp. It may also offer welcome transformations and false hopes. Time will tell to which category belongs ExxonMobil’s announcement of a Low Carbon Solutions business, aimed at investing in “20 new carbon capture and storage opportunities”.
In case you missed it, this year – as in the film – the groundhog did see his shadow, condemning us to six more weeks of winter (that said, his forecasts have only a 50-50 success rate). Groundhog Day might not be everyone’s idea of ideal lockdown viewing. But there is comfort in the message that you will achieve your goal eventually if you learn from your mistakes. Unlike Murray’s cynical weatherman, of course, we don’t have the luxury of endless attempts to get it right.