Business & Society

Warming to the challenge

While politicians debate the reality of climate change, a clear consensus for action has emerged in the business world. Brunswick’s Phil Drew and Jordan Bickerton report

Politicians and the media may still be debating climate change, but in the business world there is a clear consensus that action is needed. Many leading investors, prominent business heads and large organizations are answering the call – and taking serious action.

Climate initiatives, renewable energy projects and green bonds now attract hundreds of billions of dollars in investment annually. Far from being an expensive drain on a company’s bottom line, a growing body of data suggests that companies leading the way on climate change tend to outperform their peers financially.

Many are setting their sights even higher, publicly pledging to commit more resources to tackle the problem and become energy neutral themselves.

The following research provides a snapshot of the movement among some of the world’s leading businesses to address climate change today.

It also shows how businesses can become, and already are becoming, leaders in society by taking action to solve a global crisis.

Climate-related disruption is the dominant threat to global economy, in the view of 750 experts from business and academia who take part in the World Economic Forum’s annual analysis of global risks. Failure to take action on climate change amplifies many other risks – from food crises and water security, to migration and social instability.
Business has an “important” or “very important” role in tackling climate change according to 86 percent of respondents surveyed by GlobeScan/SustainAbility. Respondents included professionals in the public and private sector, as well as those working in NGOs and academia.
Climate change risk has arrived as an investment issue, according to Ewen Cameron Watt, chief investment strategist at BlackRock: “Even if you are skeptical of global warming and its causes, no one should ignore that significant regulatory, economic and technological factors make this a major investment issue.”
Financial returns are stronger for companies taking a lead on climate issues, according to a 2014 study of the S&P 500 by CDP. Businesses ranked by CDP as climate leaders generated 18 percent higher ROE than lower-scoring companies, and 67 percent higher ROE than companies that did not disclose any information at all. And the returns leading businesses enjoyed were more stable – their earnings were 50 percent less volatile over the previous decade than those of their low-scoring peers. 

630 companies wrote to US President Donald Trump, urging him to take action on climate change – they included DuPont, General Mills, HP, Johnson & Johnson, VF Corp. and Unilever.
We Mean Business is a coalition of more than 320 companies and investors committed to reducing their carbon footprints. Its members include IKEA, BT Group, Commerzbank, H&M and Unilever.
Business for Innovative Climate and Energy Policy is an effort on behalf of more than 1,000 companies to pass meaningful legislation to combat climate change. Apple, Intel, GM, Gap, eBay and Nike are signatories.

APPLE issued $1.5 billion in green bonds in 2016 to finance renewable projects.
GOOGLE invested $2.5 billion to help take new green technology to scale.
WAL-MART vowed 100 percent renewable energy by 2020, and 20 percent less energy per square foot.
GOLDMAN SACHS pledged $150 billion to clean energy finance, plus advocacy efforts.
IKEA says by 2020, through wind, solar and biomass, it will produce as much energy as it consumes.
GE, with the world’s largest clean energy portfolio, pledged to invest $10 billion in green technology.
CITI is lending, investing and facilitating $100 billion over 10 years to environmental solutions.

 

Phil Drew, a Director, is part of Brunswick’s Business & Society Practice. Jordan Bickerton is an Associate. Both are based in the firm’s London office.

According to CDP, a nonprofit that runs a system for companies, cities and states to disclose their environmental impact, 827 investors, with a combined $100 trillion in assets, requested information on climate change, water or forests. Cities are joining in the effort, too: CDP reports that 533 cities disclosed their impact in 2016.

Sixteen of the world’s 20 largest banks, representing $1.7 trillion by market capitalization, are taking action in their core business, according to data from Nazca, a platform created by the UN that tracks climate action. The same data set recorded that companies from 145 countries are taking some form of action.

 

Charts: Peter Hoey

 

 

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