Watch/listen here (dubbed into Spanish):
Good morning from Chicago!
Humans are worse than we may think at addressing impactful, obvious, probable dangers: think of a two-ton, gray rhino charging our way. One of these, climate change, threatens to destroy us if we fail to act quickly enough. But we are not condemned to fail. We not only can get out of the way, but can use the power of this gray rhino to make the world better.
Investors who consider environmental, social, and governance factors in their decisions recognize this challenge – the “E” part of ESG. You see the financial risks of failing to do so and the benefits that can come from the needed energy transition.
Your early action has helped others to see that too. Over the last 18 months, money has poured into ESG funds. More and more companies are disclosing their climate risks and impact. And finance ministers of G7 countries recently agreed to require disclosure of climate risks.
Despite these advances, the climate crisis is accelerating even faster than scientists feared, with new record temperatures and increasingly extreme weather.
The Intergovernmental Panel on Climate Change now estimates that limiting global average temperature increases to 1.5C requires reducing greenhouse gas emissions by 45 percent this decade. Yet a new UN report warns that without dramatic changes, these emissions will rise 16% by 2030. We are on a road to catastrophe.
At the same time, the ESG world faces its own gray rhinos. Greenwashing cynics use ESG marketing as a cover up for business as usual. There are concerns about how effective ESG is and can be. And the size of the challenge can be daunting as governments and banks continue to spend more on fossil fuel investments and subsidies than on the clean energy transition.
These issues make it urgent to become even more ambitious in confronting the climate crisis.
What does that mean? Here are a few ideas.
- Setting aside vague net-zero statements in favor of specific targets, being transparent about the steps needed will take to achieve those goals, and being accountable for meeting them.
- Advocating for interventions that only governments can do, like setting and enforcing standards, putting a realistic price on carbon emissions, and ending subsidies to fossil fuels.
- Pushing companies to integrate ESG best practices across their operations to reduce their climate impact.
The ESG community has been quick to embrace the central goal of gray rhino theory: rejecting denial and moving toward action. It’s now time to re-evaluate which actions are working or not to avert the climate gray rhino