AXA's David Williams argues that businesses need the right regulatory framework to take climate action
With COP21 well underway it looks increasingly likely that real progress will be made in cutting carbon outputs and agreeing emissions limits.
Governments are pledging emission targets, Intended Nationally Determined Contributions (INDCs), to keep global warming within the 2C maximum limit that scientists agree is needed to prevent catastrophic climate change.
Yet while the current focus is on achieving new international emissions agreements the reality is that affecting change will fall on the shoulders of business and, to a lesser extent, the public.
So can business save the planet? This is the question that AXA posed to a panel of climate change experts and academics recently at its second AXA Futures roundtable, held at The Grantham Institute, Imperial College London to gauge the views of business, academics and politicians.
The consensus was 'no', business alone cannot save the planet but it can help keep global warming within the 2C limit providing regulatory frameworks are in place to ensure a level-playing field that directs investment in the right way.
Views from the panelists
The panel highlighted that preventing climate change isn't merely a burden for business, it's also a huge opportunity. WWF Head of Climate Change & Energy, Emma Pinchbeck, stated that 'it's not a question of what business can do for the planet but what the planet can do for business'.
Companies like Tesla and Google are investing heavily in new clean tech products and services that reinvent the way we use energy. Investment in renewable energy, energy storage and new technologies such as electric and hybrid cars are examples of ways in which business can lead change and cut emissions, while also generating profits.
However, Dr Alan Whitehead MP, Shadow Minister of Energy and Climate Change, warned that simply slashing regulation and 'red-tape' isn't the route to create an environment that encourages 'green' innovation.
Instead he highlighted that 'the right' legislation is important in creating a fair framework that gives a level-playing field and ensures that business as a whole pulls together to prevent environmental change.
Juliet Davenport, CEO and founder of Good Energy, commented that many businesses have benefitted and created new models and markets by focusing on creating new environmental innovations which generate revenue and create jobs, while also cutting carbon footprints.
So business could 'save the planet' given the right framework and help and in doing so could also save itself by reinventing the way we work and life out lives to minimise the impact on the planet. Businesses of the future will be more environmentally focused and friendly.
Professor Martin Siegert, co-director at the Grantham Institute for Climate Change & Environment, agreed that governments should look to increase funding for universities with the remit of finding new research-led solutions to climate change which can be commercialised by business to deliver wide-scale change.
However, Professor Siegert also highlighted concerns that COP21 may not deliver the regulatory framework that is needed.
To date the INDCs submitted would collectively limit global warming to around 2.7C, over the 2C limit that scientists agree is the maximum safe limit.
Indeed AXA's CEO Henri de Castries has warned that any temperature change that reaches 4C will render much of the world 'uninsurable.'
Radical action to avoid this is needed and the panel highlighted this includes leaving many assets in the ground. The panel argued that coal and shale gas assets and many uptapped oil reserves need to remain unexploited if maximum global warming ceilings are to be achieved.
Achieving that requires significant support from governments to compensate businesses and investors for the loss they will realise. Getting agreement on how to finance and organise this type of compensation scheme is something that needs international agreement.
However, at AXA, we believe that while some enlightened firms are pioneering new low-carbon technologies and business models many firms, particularly SMEs, are perplexed about what to do and the impact that climate change could have on their business.
New research from AXA found that around two-fifths of UK SMEs have been impacted by climate change with a third worried about the effect it could have on their business. Despite this only 16 per cent said they had conducted a risk assessment to pinpoint vulnerabilities with the bulk of SME action on climate change focusing on recycling and waste reduction (57 per cent) and energy efficiency (40 per cent).
The study also found that 70 per cent of SME business leaders believe that insurance companies have a role to play in reducing climate change risk with 64 per cent believing insurance companies can help business and consumers adapt to the consequences of climate change.
The insurance industry has significant data and a deep understanding of risk and as a whole the panel agreed that analysing big data and understanding where efficiencies can be targeted should be a key part of the 'business-led' solution to climate change. AXA has invested €131m in 449 research projects in 32 countries via its AXA Research Fund to finance new innovations that focus on creating better understanding on environmental, life, and socio-economic risks.
The overall consensus was that keeping the world below the 2C global warming ceiling is possible, and much progress is being made. However, COP21 has not yet provided a sufficiently rigorous framework to deliver the goal.
The country INDCs aren't yet bold or brave enough. However, if the Paris discussions can deliver a consensus and a framework for change then business and research-institutions such as universities are capable of driving innovation that could yet save the planet. The solution is within reach.
David Williams is AXA UK's managing director of underwriting
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