2020 was a challenging and extraordinary year as the pandemic devastated lives and livelihoods across the globe. Despite the remarkable progress in developing a vaccine for COVID-19, we remain in a precarious situation. The economic, health and social impact of the pandemic will continue this year as a sobering reminder of the need to build more resilient and sustainable societies. 2020 was also the warmest year on record – an alarming statistic highlighting the gravity of the situation we find ourselves in.
While 2020 – the first year of the ‘decade of climate action’ - was marked with disruptions and delays, most notably the postponement of COP26 to November 2021, important progress was still made – proving that more countries and non-state actors are waking up to the urgency of the climate and ecological crisis. As we enter a new year, we reflect on what the international community has achieved despite the challenges, which areas are still lagging, and focus on what actions are needed to urgently speed up progress.
Signs of progress amidst a difficult year
In December, the five-year anniversary celebration of the Paris Agreement took place in the form of the virtual Climate Ambition Summit co-hosted by the UK, France and the UN, in partnership with Italy and Chile, bringing together leaders from government, business and civil society ready to make ambitious climate commitments.
Overall, the summit heard announcements from 75 leaders, including 45 nationally determined contributions (NDCs) and 24 net-zero emissions plans.
While it was developing countries leading the way, some announcements by major economies stood out, too: The UK’s 68% emissions reduction target by 2030 is the most ambitious pledge yet, while its announcement to end all export finance for fossil fuels was welcomed by environmental campaigners. The EU’s new 55% reduction target is also a step in the right direction. Other highlights included Denmark’s announcement to end all new oil and gas exploration and production in the North Sea, and Pakistan’s pledge to procure 60% of the country’s energy needs from renewable sources by 2030.
These announcements are important signs of progress in a challenging year, but while they are encouraging – they are not sufficient to put the world on track to limit global warming to 1.5 degrees.
Argentina’s net-zero announcement means that more than half of the G20 countries have now pledged to reach net zero by 2050. However, long-term ambition needs to be backed up by action in the short-term. Yet only around 70 countries – including the EU27 – submitted their plans to reduce emissions by 2030 before the December deadline set by the UNFCCC. Most notably absent were meaningful pledges from big polluters: Australia, Russia, and Mexico all re-submitted existing plans, while Brazil even weakened its already insufficient target. China promised a new NDC at the summit but, so far, remains among the 100+ countries that have not submitted any plans, together with other major economies such as Canada, India, and Indonesia.
In 2020 we saw that the rachet mechanism at the core of the Paris Agreement, centred around countries submitting progressively more ambitious climate targets every five years, is starting to work - but we need to hugely accelerate action in 2021 to ensure we limit warming to 1.5 degrees. With the Biden Administration announcing a series of climate-focused executive orders in the first days of his presidency, including the re-joining of the Paris Agreement, as well as several other ambitious announcements at the Climate Adaptation Summit, so far, 2021 has started on a very positive note.
Now other governments need to make sure they keep up this momentum and start acting on their commitments. And they should take confidence that leading businesses and investors will support them.
Action inspires action: ambition loops
CDP has been working with thousands of companies, investors, governments, and NGOs to drive sustainable economies for 20 years. In 2020, a year of unprecedented disruption, we saw evidence of non-state actors doubling down on their climate commitments instead of being deterred by the pandemic – ensuring that they are doing their part to meet the goals of the Paris Agreement.
In 2020, more than 9,600 companies, worth over 50% of global market capitalization disclosed their environmental data through CDP. In the five years since the Paris Agreement was signed, we’ve seen a 70% increase in disclosing companies and a 75% increase in companies reporting emissions reductions targets.
And companies are not just setting any targets: Over 1,000 companies, with a combined market capitalization of US$15.4 trillion, have committed to set Science-Based Targets – emissions reductions targets that bring them in line with the aims of the Paris Agreement. These companies are acting on their commitments, too, having reduced their emissions by 25% between 2015 and 2019, contrasting with an increase of 3.4% in global emissions from energy and industrial processes over the same period.
It’s clear that leading companies and investors are realizing the benefits of leaning into the green economy and are already blazing a path towards a Paris-aligned world. Our analysis has shown that UK-based companies that have set the most ambitious 1.5 degree aligned science-based targets are, together, committed to reducing their cumulative global emissions by 68% - matching the UK’s NDC commitment made in December. Many companies are going further – with more than half pledging emissions reductions of 70% or more. In the EU, just 200 companies with approved SBTs have committed to emissions reductions equalling 6% of the EU’s annual emissions. These companies are already contributing a substantial share of the cuts needed to get the EU on track to 1.5 degrees.
Around the globe, businesses, investors, and cities committed to achieving net-zero emissions by 2050 through the UNFCCC’s Race to Zero Campaign now collectively cover nearly 25% of global CO2 emissions, and over 50% of GDP. And a sister campaign, the Race to Resilience, aiming to catalyze action by non-state actors that builds the resilience of 4 billion people from vulnerable groups and communities to climate risks has just been launched at the Climate Adaptation Summit.
Government action can take us to the next level
As leading businesses and investors show that ambitious climate action is feasible, governments must now step up and put mechanisms in place to mainstream and accelerate action across the economy and unlock further ambition loops – where bold policies and private sector leadership reinforce each other.
As a first step, all countries need to submit updated NDCs as early as possible in 2021, sending strong signals to companies and investors about their countries’ direction of travel, encouraging them to ramp up their climate action. Countries that have submitted NDCs, but failed to significantly increase their ambition, need to urgently re-assess their plans.
Alongside ambitious emissions reductions, countries also need to make sure that Nature-based Solutions are incorporated into NDCs. Mainstreaming nature is not only a cost-effective measure to enhance NDC ambition, but also key to protecting biodiversity, improving climate and disaster resilience, and enhancing livelihoods.
Ambitious plans need to be followed by equally ambitious policies to deliver them. Mandating environmental disclosure for companies and financial institutions, in line with the recommendations provided by the Task Force on Climate-related Financial Disclosures (TCFD), needs to be a critical next step for all governments: By creating comparable, consistent, and quantifiable information on climate risk, disclosure is an important tool to measure and manage corporate environmental action. The UK government has recently published ‘A Roadmap towards mandatory climate-related disclosures’, outlining that high-quality disclosures will improve transparency and encourage better informed pricing and capital allocation.
Governments that are already well on their way to mandating disclosure could take further steps: ensuring that companies are managing their transition to net zero by requiring a vote on companies’ climate transition plans at annual shareholder meetings. Such votes will increase companies’ accountability towards their shareholders for their climate ambition, ensuring that solid plans are produced and delivered on.
The need to build a more resilient, equitable and sustainable society has never been clearer. Deep cuts to global emissions are urgently required. And while thousands of leading companies and investors are stepping up – we need bold government leadership to facilitate a whole economy transformation that allows us to reduce emissions at the pace and scale required to keep warming to below 1.5 degrees.
Read more about the steps governments need to take in our latest policy brief.