The Case for Global Action

A scientific consensus has emerged on the risks from climate change – without timely action the world appears likely to lose its ability to contain warming to 2°C, a level beyond which irreversible changes to natural and socio-economic systems become much more likely.

The 2007 assessment by the Intergovernmental Panel on Climate Change (IPCC) was clear that climate change is caused by human activity, that it is already occurring, and that warming greater than 2°C presents a severe danger to human society. Many, especially developing countries, are already facing significant adaptation challenges such as agricultural loss, water shortages, flooding, severe weather, and the spread of disease vectors. At the bottom of the pyramid, the poorest 1-2 billion people on the planet are, as ever, the most exposed to climate risk.

The economic crisis is temporarily slowing the growth of greenhouse gas (GHG) emissions but not fundamentally changing their trajectory – we estimate only a 1% to 3% cumulative reduction by 2020. Furthermore, despite the economic slowdown, the developing world will add massive amounts of infrastructure during the next two decades and the developed world will replace a large share of its physical assets – more than 75% of the world's power supply for 2030 has yet to be built. Right now, we have an opportunity to ensure that today's business investments put the world on a low-carbon, energy efficient path.

If we miss this opportunity, we risk locking in high-carbon infrastructure for decades to come. Failure to act decisively now means that, within the next two decades, CO₂e concentrations in the atmosphere will almost certainly exceed 450 ppm – the threshold at which the IPCC estimates only a 50% probability that global warming can be limited to 2°C.

The effects of climate change on business are real, and already occurring. This is not tomorrow's problem or a complex inter-generational game. Individual catastrophic events can have a major impact in terms of asset destruction and business interruption (e.g., 130,000 claims and €5.5 billion in insured flooding losses in the U.K. in the summer of 2007) and the effects of climate change in combination with an increasing concentration of assets, exacerbating the losses associated with such events. Affected business assets include not only production facilities and retail spaces, but also commercially-managed forest and agricultural supply chains.

Given the many decades required to scale up low-carbon infrastructure and restructure high-carbon value chains, smart policies and large-scale investment are needed now to mitigate the risk of increasingly severe damage. We believe they can be achieved with net economic benefits to both society and business.