By Andrew Adie
Achieving NetZero by 2050 is a benchmark that the UK has set itself. We were the first G7 nation to commit to the target and the UK Government has taken pride in its leadership on this point.
It will be a key focus for the COP26 meeting due later this year in Glasgow. Organisations hoping to be at the meeting will have to commit to this NetZero target.
That is of course assuming that COP26 still goes ahead, with much debate about whether the COVID pandemic could force further delays.
Yet in reality the UK still has a mountain to climb in achieving its NetZero target and many other countries aren’t yet at base camp.
This week the Government sought to ramp up pressure on business, highlighting that while the FTSE 100 has proportionately more companies that have committed to NetZero than those listed on rival exchanges in the US, Germany and France, it wants to see greater action elsewhere in the economy, from mid and smaller cap companies.
This is aligned to the Government’s announcement that it wants all UK companies to be reporting to the TCFD (Taskforce for Climate Related Financial Disclosure) standards by 2025.
Yet, the news that 30 of the FTSE 100 companies have signed up to be NetZero by 2050 should be something we all find profoundly depressing. It’s less than one in three of our largest, most globally focused companies.
This becomes even more depressing when we consider that data released recently by Climate Action 100+ showed that less than 1 per cent of companies analysed had set targets to cut carbon emissions by 2025, despite the fact that more than half of them had pledged to be NetZero by 2050.
The broad message emerging is that not enough businesses have committed to NetZero targets, of those that have very few have a credible plan in place to move the dial by 2025 and the rest of the economy hasn’t really started to do anything meaningful yet.
This may seem like a harsh judgement but it’s one that’s gathering pace with investors, activists and the media scrutinising company results, not just for core environmental commitments but also for wider ESG performance, including in equality, inclusion, social purpose and for the way that companies vet, pay and treat their supply chain.
Yet it’s easy to be cynical. In reality we have to do something and getting the economy to report to TCFD standards will provide a benchmark for investors to assess the impact of climate change on the valuation, performance and prospects of business. That will focus minds in boardrooms.
But it all seems achingly slow. The news that COP26 could be postponed or cancelled again is worrying and leaves a yearning void in international efforts to focus action and pledge to cut carbon emissions.
It also puts a lot of pressure on Joe Biden’s climate summit on Earth Day (22 April), will that become the proxy COP where leadership on NetZero is pledged and filters down?
The other rather miserable truth is that NetZero by 2050 isn’t a great result. It still means that we are accepting global warming of 1.5 degrees compared to 1990 levels. That’s getting close to the point of no return. And that assumes we actually achieve that, which on current progress seems optimistic.
So as we face the possibility of yet more delay on international diplomacy and climate action at COP26 the question is what fills the void?
It looks likely that the UK and other international economies will feel the need to act with greater urgency, to show leadership and to protect their economies and the planet.
That inevitably means that corporate action will come into sharper focus and companies will face greater pressure to act. NetZero is just the start.