2019 may be remembered as the year when climate change activism went mainstream. At the end of September, in a series of rallies timed to coincide with the United Nations climate summit, an estimated six million people in more than 180 countries took to the streets to demand far more action to cut greenhouse emissions.
This was probably the biggest climate protest in history.1 Protests in the form of school walkouts had taken place throughout the world for a whole year. The ‘Extinction Rebellion’ initiative has added a further edge by seeking to demonstrate the potentially catastrophic consequences of inaction.
The build-up to this high level of awareness and activism has been slow. Government action began more than 30 years ago when the Intergovernmental Panel on Climate Change (IPCC) was established, in 1988.
The first global climate treaty was reached at the Rio Earth Summit in 1992. The Kyoto Protocol was adopted in 1997. The 2015 Paris Agreement to limit temperature increase and thereby substantially reduce the risks and impacts of climate change is a more recent effort to curb carbon emissions and has been ratified by 187 countries to date.
Over the last two years, mounting public awareness, fanned by the widespread perception that extreme weather events are becoming more frequent, and by the growing weight of scientific evidence on changing weather patterns,3 has added further urgency to the debate. The result is that a wide range of actors is now evaluating the implications of climate change.
Most of the world’s big banks, its major investors and insurers, and its financial regulators have for the first time signing up to a coordinated pledge that will incorporate carbon emissions into their most fundamental decisions.
The lenders and investors say they will help fund a shift that will reduce carbon emissions by businesses and spur the growth of industries that can help limit climate change. Regulators are putting in place new rules to oversee the shift.
The United Nations’ Glasgow Financial Alliance for Net Zero says financial groups with assets of $130 trillion have committed to its program to cut emissions.
That is enough scale to generate $100 trillion through 2050 to fund investments needed for new technologies, and enough reach to impose pathways for corporations and financial institutions to restructure themselves, the group said.
Why does the financial sector matter for climate change?
The world’s banks and investors can deliver the financing needed to get the world on the pathway to reducing carbon emissions. They could provide cheap and plentiful financing for green energy producers and make it more costly for fossil-fuel producers to raise cash.
Investors have been at the forefront of pushing change in corporate thinking. Banks are catching up, pledging to align their financing portfolios and lending power to persuade clients to get aboard too.
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