Keeping Tabs on the World’s Climate Action Plan
When the Paris Agreement came into force in 2016, it was considered by many to be a step forward in the world’s climate action plan. In the five years that have followed, more and more countries have established carbon neutrality targets.
Has it been enough to keep us on track? This graphic from MSCI shows where we are in relation to the Paris Agreement goal, and what may happen if we fail to reach it.
What is the Paris Agreement?
The Paris Agreement is a legally binding international treaty that lays out a climate action plan. Its goal is to limit global warming to well below 2 degrees Celsius (3.6 degrees Fahrenheit), and preferably to 1.5 degrees Celsius (2.7 degrees Fahrenheit), compared to pre-industrial levels.
A total of 191 countries have solidified their support with formal approval.
Tracking Our Progress
To date, signing nations are not close to hitting the goal set five years ago.
|Scenario||Global Mean Temperature Increase by 2100|
|Pre-industrial baseline||0℃ (0℉)|
|Paris Agreement goal range||1.5-2.0℃ (2.7-3.6℉)|
|Government pledges||3.0-3.2℃ (5.4-5.8℉)|
|Current policies||3.5℃ (6.3℉)|
Source: UN Environment Programme
Based on policies currently in effect, we are on track for 3.5 degrees Celsius global warming by 2100—far beyond the maximum warming goal of 2 degrees. Even if we take government pledges into account, which is the amount by which countries intend to reduce their emissions, we are still far from achieving the Paris Agreement goal.
What about the impact of reduced emissions due to COVID-19 lockdowns? The temporary dip is expected to translate into an insignificant 0.01 degree Celsius reduction of global warming by 2050. Without significant policy action that pursues a more sustainable recovery, the UN Environment Programme projects that we will continue on a dangerous trajectory.
“The pandemic is a warning that we must urgently shift from our destructive development path, which is driving the three planetary crises of climate change, nature loss and pollution.”
—Inger Andersen, Executive Director, United Nations Environment Programme
The World Economic Forum agrees with this viewpoint, and identified climate action failure as one of the most likely and impactful risks of 2021.
The Potential Consequences
If we fall short of the climate action plan, our planet may see numerous negative effects.
- Reduced livable land area: Due to rising sea levels and increased heat stress, low-lying areas and equatorial regions could become uninhabitable.
- Scarce food and water: Global warming may increase water and food scarcity. In particular, fisheries and aquafarming face increasing risks from ocean warming and acidification.
- Loss of life: The World Health Organization projects that climate change will cause 250,000 additional deaths per year between 2030 and 2050.
- Less biodiversity: About 30% of plant and animal species could be extinct by 2070, primarily due to increases in maximum annual temperature.
- Economic losses: At 4 degree celsius warming by 2080-2099, the U.S. could suffer annual losses amounting to 2% of GDP (about $400B). If global warming is limited to 2 degrees, losses would likely drop to 0.5% of GDP.
What steps can we take to reduce these risks?
Advancing Our Climate Action Plan
Everyone, including investors, can support green initiatives to help avoid these consequences. For example, investors may consider company ESG ratings when building a portfolio, and invest in businesses that are contributing to a more sustainable future.
In Part 2 of our Paris Agreement series, we’ll explain how investors can align their portfolio with the Paris Agreement goals.
Race to Net Zero: Carbon Neutral Goals by Country
Which countries have made a net zero pledge, and how strong is it? This map breaks down carbon neutral pledges.
Race to Net Zero: Carbon Neutral Goals by Country
The time to talk about net zero goals is running out, and the time to put them into action is well underway.
At the U.S. Climate Summit in April 2021, U.S. President Biden pressured countries to either speed up carbon neutral pledges, or commit to them in the first place.
It’s a follow-up to the Paris Agreement, which keeps signatories committed to reaching carbon neutrality in emissions in the second half of the 21st century. But 2050–2100 is a wide timeframe, and climate change is becoming both increasingly present and more dire.
So when are countries committed to reaching net zero carbon emissions, and how serious is their pledge? This infographic from the National Public Utility Council highlights the world’s carbon neutral pledges.
The Timeline of Carbon Neutral Targets by Country
The first question is how quickly countries are trying to get to net zero.
137 countries have committed to carbon neutrality, as tracked by the Energy and Climate Intelligence Unit and confirmed by pledges to the Carbon Neutrality Coalition and recent policy statements by governments.
But the earlier the pledge, the better, and most of the commitments are centered around 2050.
|Antigua and Barbuda||2050|
|Central African Republic||2050|
|Democratic Republic of Congo||2050|
|Papua New Guinea||2050|
|Saint Kitts and Nevis||2050|
|Saint Vincent and the Grenadines||2050|
|Sao Tome and Principe||2050|
|Trinidad and Tobago||2050|
|Australia||2050 – 2100|
|Singapore||2050 – 2100|
As far as early achievers go, Bhutan and Suriname are the only two countries that have achieved carbon neutrality and are actually carbon negative (removing more carbon than they emit). Uruguay’s 2030 target is the earliest to try and match that feat, followed by Europe’s Finland, Austria, Iceland, Germany, and Sweden, who are all targeting 2045 or earlier.
Over 90%, or 124 of the 137 countries tracked above, set a target of 2050 for reaching carbon neutrality. This is largely due to membership in the Carbon Neutrality Coalition, which asks member states to target 2050 for their goal but leaves commitment up to them.
Only five countries have net zero pledges set for after 2050, including Australia and Singapore, which haven’t set a firm target yet. Targeting 2060, in addition to Ukraine and Kazakhstan, is the world’s largest emitter, China. The country’s recent pledge is significant, since China accounts for an estimated 25% of global emissions.
In fact, according to the Climate Action Tracker, 73% of global emissions are currently covered by net zero targets.
How Seriously Are Countries Committing to Carbon Neutrality?
Setting a goal is perhaps the easiest step towards carbon neutrality. But the real challenge is in solidifying that goal and starting to make progress towards it. That’s why it’s important to consider how deeply committed each country’s carbon neutral pledge truly is.
The most rigid commitments are enshrined in law, followed by official government policy, though the latter can change alongside governments. Likewise, proposed legislation shows forward momentum in making pledges a reality, but proposals can take a long time to become enacted (or get derailed).
As it turns out, the vast majority of carbon neutral targets are only under discussion, with no formal action being taken to act on them.
|Costa Rica||Policy Document|
|Marshall Islands||Policy Document|
|South Africa||Policy Document|
|Vatican City||Policy Document|
|European Union||Proposed Legislation|
|South Korea||Proposed Legislation|
|Antigua and Barbuda||Under Discussion|
|Burkina Faso||Under Discussion|
|Cabo Verde||Under Discussion|
|Central African Republic||Under Discussion|
|Cook Islands||Under Discussion|
|Democratic Republic of Congo||Under Discussion|
|Dominican Republic||Under Discussion|
|Papua New Guinea||Under Discussion|
|Saint Kitts and Nevis||Under Discussion|
|Saint Lucia||Under Discussion|
|Saint Vincent and the Grenadines||Under Discussion|
|Sao Tome and Principe||Under Discussion|
|Sierra Leone||Under Discussion|
|Solomon Islands||Under Discussion|
|South Sudan||Under Discussion|
|Trinidad and Tobago||Under Discussion|
Uruguay’s 2030 target might be the earliest, but it is not yet set in stone. The earliest commitment actually enshrined in law is Sweden’s 2045 target.
Including Sweden, only six countries have passed their carbon neutral targets into law. They include Denmark, France, Hungary, New Zealand, and the UK.
An additional five countries have proposed legislation in the works, including Canada and South Korea, as well as the entirety of the EU.
Meanwhile, 24 countries have their climate targets set as official policy. They include Brazil, China, Germany and the U.S., some of the world’s largest emitters.
99 of the 137 pledges are only under discussion at this time, or more than 72%. That means that they have no official standing as of yet, and are harder to act on. But as time starts to pass, pressure on countries to act on their carbon neutral pledges is beginning to grow.
The National Public Utilities Council is the go-to resource for all things decarbonization in the utilities industry. Learn more.
How Workplace Culture Enables Investment Firms to Do Better
The importance of a positive workplace culture is becoming clearer than ever, but what does this mean for the investment industry?
Workplace Culture Enables Investment Firms to Do Better
In today’s highly competitive business environment, workplace culture is becoming increasingly recognized as a source of competitive advantage.
What does this mean for the investment industry, and how can asset managers use it to improve performance?
To find out, this infographic from Wells Fargo Asset Management explores the elements of a healthy culture, then shares four insights regarding the workplace of tomorrow.
The Top Cultural Edges to Develop
Workplace culture was gaining traction for several years prior to COVID-19, but after the disruptions experienced in 2020, its perceived importance has quickly escalated.
In light of this situation, the Thinking Ahead Institute, a non-profit dedicated to improving the efficacy of the investment industry, surveyed 27 asset managers on what they believe are the most important cultural edges to develop.
#1: Diversity, Equity & Inclusion (DE&I)
92% of respondents
DE&I was the top cultural priority by a wide margin, and it’s easy to see why given the industry’s well-documented lack of diversity. Boosting DE&I isn’t just about optics, however.
In a 2018 study, the Boston Consulting Group (BCG) surveyed 1,700 companies globally to learn how diversity affected their performance. They found that firms with above-average diversity on their management teams reported average innovation revenue of 45%, while those with below-average diversity reported it to be about 26%.
62% of respondents
Asset managers frequently apply innovative techniques within their portfolios. When it comes to business and operating models, however, innovation is much harder to come by.
The Thinking Ahead Institute identifies a number of characteristics that an innovative culture should possess:
|Incentives||The degree to which innovation is rewarded|
|Time scales||Whether the long time horizon associated with innovation is recognized and honored|
|Judgement capacity||Leadership is willing to challenge the status quo and make uncomfortable changes|
|Structure||Whether roles and organizational design allow innovation to flourish|
42% of respondents
In a recent survey of 300 asset owners, trust was identified as the most important factor for choosing an asset manager, even coming ahead of performance and fees.
|Factor||% of Respondents*|
|Good investment track record||42%|
|Low or no fees||21%|
*Question: Why did you originally select your financial advisor?
By fostering a culture of transparency, asset managers will find themselves better positioned to build deeper, more meaningful relationships with clients and prospects.
Four Insights Regarding the Workplace Culture of the Future
Lessons learned during the COVID-19 pandemic are likely to have a lasting impact on the way businesses operate. To get an idea of what this may look like, here are four insights regarding the workplace culture of the future.
#1: Health and wellness determine business success
Disruptions to normal life were a drain on U.S. workers, with 46% reporting mental health issues during the pandemic—an 18% increase over the prior year.
Moving forward, businesses that focus on wellness may find themselves with a more effective and resilient workforce. In one 2017 study, participation in employee wellness programs was found to increase productivity by 5% to 11%.
#2: Remote work continues to play a role
Over the course of the pandemic, businesses have learned that many of their normal operations can be conducted remotely.
To understand this operating model better, McKinsey & Company analyzed each industry’s potential for remote work. This was defined as the % of time spent on activities that can be done remotely, without any losses in productivity.
|Industry||Effective Potential (no productivity loss)||Theoretical Maximum|
|Finance & Insurance||76%||86%|
|IT and Telecommunications||58%||69%|
|Arts, Entertainment, and Recreation||19%||32%|
The Finance & Insurance industry has the highest potential for remote work, which is understandable given the industry’s large reliance on office jobs. Sectors such as Retail, which rely heavily on in-store workers, were among the least likely to benefit.
#3: Accelerated adoption of digital strategy
Lockdowns during the pandemic appear to have fundamentally changed the way businesses and consumers interact, resulting in a greater reliance on technology.
To compensate, executives from a variety of industries have reported making larger investments in digitization, particularly in terms of automation and employee communications.
#4: ESG investors pay greater attention to culture
As the benefits of culture become more well-known, investors are likely to give it a more significant weighting when analyzing the environmental, social, and governance (ESG) aspects of a business.
In a 2020 survey on responsible investment, 53% of respondents agreed that after the events of COVID-19, companies should disclose more details about their workplace culture and other social factors.
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