Being part of the solution is going to create tremendous value

 “Being part of the solution is going to create tremendous value”

Those were the words of Mark Carney today (UN Special Envoy on Climate Change, prior Governor Bank of England, Governor Bank of Canada), when speaking about COP 26 today.  It was a great summary, so I’ll grab a few highlights.

Paris was about pledging to 2C with a stretch goal of 1.5C.  Glasgow was about pledging to 1.5C.  There was a serious commitment to this new number now that the science has clarified the consequences of even a 2C raise.  Global policy is currently putting us (roughly) on a 2.6C trajectory, so there is a gap between policy and 1.5C pledges.  In Mark’s opinion, that gap is going to close, and it’s only going one way - with policy driving towards 1.5C.

A consequence of this is that there is a push, in totality, for net zero emissions, with a 50% reduction in CO2 emissions by 2030, so things are going to happen in a big way in the short term.  This will be led by the financial community (which was led by a sub-sector of the financial community - the insurance industry - which have been noticing the consequences of climate change for a while).  Every financial institution of serious scale, either debt or equity, is going to own the emissions of their investments.  If a bank loans money to a company, they are going to own the financial liability of the Level 1, Level 2, and Level 3 emissions of that company.  Because of that, financial institutions are going to be asking pointed questions to the companies that they work with, which will start with the large public companies, and work downwards.  Those companies, to meet financial compliance, will then ask questions of their supply chain, and make purchasing decisions based on that information.  This chain of Finance —> Corporates —> Suppliers is the lever that moves the world.  He gave even just a simple example of a large fast casual restaurant being asked these questions, digging into their supply chain, and discovering, of all things, vast differences in carbon footprints of their various feta cheese suppliers, causing them to shift purchasing decisions in that part of their supply chain.  As Mark then said, about 90% of global emissions are going to be covered by this dynamic, which then forces financial institutions to question whether they want to move their business to the 10% that is remaining, or whether they are going to be part of this change.

Finally, when discussing the speed of these changes, he said, “We need quantum leaps in climate finance”.  I love what is happening in the financial world.  Long vilified (and reasonably warranted), the financial community is such a powerful force for change, it gives me great hope.  It also gives me great pride for my ability to have Thin Line Capital be a small part of pushing on this lever.