These calls follow yesterday’s publication by the Intergovernmental Panel on Climate Change (“IPCC”) a report that warned of the increasing impact of climate change on economies and societies. The report highlighted adaptation as a key theme, prompting Antonio Guterres (United Nations Secretary-General) to declare that mitigation and adaptation must be pursued with equal force.
Federated Hermes’ Responsibility team spokesperson warned that shareholders’ capital is at significant risk over the long-term if companies don’t adapt to climate change already occurring and “even more so, if they don’t take drastic action to reduce emissions and limit heating immediately.”
They also stated that the report highlighted the overlap between biodiversity and climate changes, proving that these global challenges are interconnected and must be addressed together.
“The IPCC Report emphasizes the urgency for immediate and more ambitious action and greater investments in adaptation. This is something we hope will finally get addressed in the lead-up to COP27. As the window of opportunity rapidly narrows, adaptation becomes increasingly expensive and more difficult.
Asset managers defend role in response to ‘stark reminder’ of IPCC climate change report
Wai Shin Chan, head of ESG research for HSBC, stated that although most climate actions are still feasible, they need to be financed.
Chan stated that governments, investors, and businesses must work together to plan for the long term – assessing risk and working towards transformational adaptation. “The IPCC report’s next edition will be released in April. There will be more options for responses.”
Lombard Odier commentators described the report “a call for action”, pointing out that there is an urgent need to invest in climate mitigation and adaptation efforts as well as the need for preparation for the “real economic implications” of failures to prepare or adapt.
Christopher Kaminker, group leader of sustainable investment, and Thomas Hohne–Sparborth (head of sustainability research), said that adaptation finance can play a crucial role following the agreement at COP26, where the pre-existing goal for $100bn in adaptation financing will now be the minimum goal until 2025.
According to the IPCC, adaptation finance needs could amount to as high as $400bn per annum.
Kaminker, Hohne-Sparborth and others stated that a significant increase is required in order to achieve a positive economic returns.
“The more ambitious you are, the better the economic or environmental outcomes that will follow.” This ambition must be focused first and foremost on mitigating further climate changes, but adaptation investment must also be part of any climate resilient plan.
Matthew Jellicoe, cofounder of OnePlanetCapital warned that the window for limiting global warming below 1.5C is “very narrow” and that we are on a trajectory to 3C warming.
Jellicoe stated that “What’s fascinating about the IPCC report” is that it must be focused on climate adaptation as much as proactively reducing emissions levels.
“The world needs to look at energy, infrastructure and disease management, just to name a few, to help tackle the risk of 3C warming…Supporting the companies of the future will be key in slowing the path to a 3C warming.”