This is a year when the ambitious commitments made in Paris need to be put into practice. That is why today’s landmark joint statement from the B20, C20 and T20 – a set of leading businesses, think tanks and civil society groups from the G20 countries which act as the official stakeholder groups to this group of governments – is to be celebrated. It sends an important and powerful message to G20 leaders that such a diverse set of stakeholders across all these countries believe that climate change remains one of the largest risks to sustainable development and economic growth.
Action must be fast, fundamental and global
The joint statement reminds us that to curtail climate change will require fast, fundamental and global action – including changing how we produce and consume energy in all parts of society. The G20 nations are key to this as they are responsible for approximately 80% of global energy use and CO2 emissions.
The statement calls for three main provisions to seize the opportunities and manage the risks of climate change, and it is particularly encouraging for CDP that one of these is the call to help mobilize private sector capital by, “Promoting international disclosure and reporting standards for environmental and climate-related financial risk and [building] on the recommendations of the Taskforce on Climate-related Financial Disclosure.”
What gets measured gets managed
In the face of unparalleled global challenges - climate change, water scarcity and deforestation - disclosure is a vital first step for companies in managing and reducing environmental impact. For example, research from CDP’s supply chain program showed that that only 38% of first time disclosers had emissions-reduction initiatives in place, compared to 69% of those disclosing for three years or more.
Normalizing climate disclosure in corporate reporting has the potential to be game-changing. It brings climate risk directly into the boardroom, and sends the strongest signal yet to global markets that climate risks are indeed financial risks. That is why CDP is fully supportive of the TCFD’s recommendations and has committed to adopt them in their entirety in our disclosure platform for 2018.
Ultimately, disclosure can enable the finance sector to make better decisions, which will lead to improved financial stability at the economy level.
We need government too
To really move the needle however, and to mobilize private-sector capital at the scale and rate required to keep the world below a two-degree temperature rise, capital markets require corporate climate disclosure that is universal, comparable and consistent. To achieve this an element of intervention from the national governments of the G20 is likely to be needed, for example through setting expectations at national level, and by creating or enforcing rules that will stimulate action even by those companies that may resist voluntary norms. That is why CDP believes that mandatory climate disclosure is the next step for G20 governments to consider.
Putting a price on carbon
The joint statement also calls on the G20 to, “Collectively drive towards effective and globally converging carbon pricing mechanisms”.
This is a crucial part of a roadmap towards a low carbon economy. Incorporating carbon pricing in corporate scenario analyses will help companies to develop an actionable pathway on the basis of the risks the company is running, and set a clear path to reaching the target of a well below 2-degree temperature rise. In support of this goal CDP, on behalf of We Mean Business, is facilitating the Investment-grade Carbon Pricing Corridors Initiative – bringing together CEOs from across the corporate and finance sector to create an informed view of the carbon-related price signals which deliver on the Paris Agreement.
An important message to G20 governments
We hope that G20 leaders will carefully consider this powerful statement from such a wide cross section of stakeholders. Global business has the potential to help spur the transition towards a more sustainable economic system. But it needs G20 leaders to act too, and ensure a comprehensive approach to climate policy.