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Time is running out on climate action

On day two of the World Economic Forum's Annual Meeting, leaders discussed how time is running out to close the emissions gap and limit global warming to 1.5C.

On day two of the World Economic Forum's Annual Meeting, leaders discussed how time is running out to close the emissions gap and limit global warming to 1.5C.

The war in Ukraine has sparked a global energy crisis which has dramatically underlined the need for economies to future-proof their energy supply. At the same time, escalating climate change makes taking action ever more urgent.

Both problems require a radical overhaul of our energy systems, but global carbon emissions rebounded by 6% in 2021 as we emerged from the pandemic to reach their highest annual level.

The green transition

Policymakers are taking action: European Commission President Ursula von der Leyen, for example, on Tuesday outlined how the European Green Deal would help the European Union accelerate the bloc’s clean energy transition.

But speakers throughout the day laid out a stark message: Governments have a lot more work to do. John Kerry reminded us how, at the COP26 summit in Glasgow last year, countries representing 65% of global GDP made commitments that would see a global temperature rise of 1.8C, according to the International Energy Agency.

The focus must now be on persuading countries comprising the remaining 35% of global GDP to make similar commitments to bring that figure below 1.5C — and to make sure those commitments are properly implemented by all stakeholders.

Frans Timmermans, the European Commission Vice-President, reminded us that the world faces a biodiversity crisis as well as a climate crisis — something Mercer’s recent report "Biodiversity on the brink" explored.

The biodiversity crisis is not yet treated as urgently as the climate crisis, but it requires significant attention from policymakers and investors.

Global biodiversity loss is estimated to be between 100 and 1,000 times higher than the naturally occurring extinction rate, a loss which is already having a significant impact on everything from food security to health.

Measuring ESG

One of the day's discussions centred on how companies can best measure their environmental, social, and governance (ESG) factors to best promote transparency and comparability, which are increasingly important to investors and insurers alike.

“Accounting accounts, but it doesn’t count what counts,” said Emmanuel Faber, chair of the International Sustainability Standards Board, during the discussion.

The insurance sector can play a leading role in tackling this by taking a long-term perspective on risk and value.

A key theme was the need for businesses and policymakers to continue working towards a set of global standards on ESG reporting across different jurisdictions. Currently, complex standards for ESG disclosure are making reporting prohibitively expensive for many companies, especially small- to medium-sized enterprises.

We also heard from leaders working to accelerate "ecopreneur" projects in water resilience and tree conservation, and heard from panel speakers discussing what radical innovations could help major businesses. As Salesforce chief executive Mark Benioff put it, "We're ready for a new environmental capitalism."

With the increasing focus on nature, insurers are starting to look at the role nature-based solutions can play in protecting against some of the impacts of climate change. Businesses should take notice of these innovations to determine their own climate change risk profile.

This blog is part of our Davos climate series