For the first time in the history of the World Economic Forum's Global Risks Report, severe threats to the climate account for all five of the top spots for most likely long-term risks.
According to the Federal Reserve, climate-related events have already cost the U.S. economy over $500 billion in the last five years, and could shrink GDP by as much as 10.5 percent by the end of the century. More disturbingly, recent studies show we may be significantly underestimating climate risk, which makes managing that risk difficult for businesses indeed.
So as top brands including BlackRock, Microsoft and Pepsi are making new commitments that respond to the climate emergency, we have to ask, is the bar being raised high enough?
The climate crisis is reshaping finance
In his annual letters to CEOs and clients, BlackRock CEO Larry Fink announced a plan to make climate change and sustainability central to the way that BlackRock manages risk, designs products and portfolios, and engages with companies to accelerate progress toward the goals of the Paris Agreement.
Given that BlackRock manages nearly $7 trillion in investments, and that the firm's commitment follows recent announcements from Goldman Sachs and Credit Suisse (both of which announced plans to stop financing new coal-fired power plants), it's fair to say that climate change has emerged as a top priority for asset owners and asset managers. The pressure is on for BlackRock to deliver and for Vanguard, State Street, Fidelity and others to follow suit.
Microsoft aims to beat Amazon, by a decade
Big tech has received a lot of scrutiny in the past year, from employees, customers and investors alike, so it's not surprising that they're becoming competitive on climate.
Microsoft just announced that it would be carbon negative starting in 2030, saying "those of us who can afford to move faster and go further should do so." This sounds like a challenge. In September, Amazon committed to go carbon neutral by 2040. And Google, which has been using offsets to be carbon-neutral since 2007, is getting heat from workers to instead address the root of its greenhouse gas emissions.
Besides accelerating the timeline, Microsoft also plans to leapfrog competitors by committing to remove more carbon from the air than it produces — an important distinction backed by a $1 billion investment in developing carbon removal technologies.
Stakeholders are holding big tech's feet to the fire on many issues, such as their intense energy use in data centers and doing lucrative business with fossil fuel companies. But this race to zero (and below) is inspiring, and should motivate every company to get in the game.
Pepsi brings global best practices to the U.S.
PepsiCo stepped up with a near-term goal: to achieve 100% renewable electricity for its U.S. direct operations in 2020. Since nearly half of its total electricity consumption occurs in the U.S., it's good to see Pepsi follow the example set by its operations in nine European countries.
And in the world of beer, AB InBev followed in McDonald's footsteps, announcing a 10-year power purchase agreement with a global renewable energy developer. The deal will provide 100% renewable electricity for InBev's European brewing operations when the Budweiser solar farm powers up by March 2022.
The time to raise the bar is now
From big money to big tech, there are two areas where corporate climate commitments need to step it up: policy and innovation.
First, the blind spot in current corporate commitments is a lack of focus on public policy.
Political influence is a company's most powerful tool for fighting climate change, because environmental problems can't be solved through voluntary corporate actions alone.
Any corporate sustainability commitment in 2020 and beyond must include advocating for climate policy, aligning with trade associations on climate and allocating political spending to advance climate action, not obstruct it.
Second, corporate leaders need to put their money where their mouth is and invest in the technologies that drive sustainability.
In a recent survey of 600 executives, 92% said they believe that emerging tech can boost both sustainability and ROI, yet only 59% are investing with this purpose in mind.
By investing in the Climate Innovation Fund, Microsoft is taking a proactive stance in researching the feasibility and cost-effectiveness of carbon removal technologies that are crucial to meeting its goal. More businesses need to follow suit.
Through the support of smart climate policy and environmental innovation, business leaders can address the pressure coming from employees, investors and consumers, while also raising the bar for climate action. And there's no time to wait.
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