Climate change’s surprise twist
The economics, politics and science of climate change are converging and catapulting this problem from a joke among critics to a prominent concern.
Driving the news: Shifts across Washington, D.C., among corporate leaders and within financial institutions are creating a foundation that could produce big movement on this problem for the first time since, well, forever.
Why it matters: If the world’s political and business leaders are going to seriously move to cut heat-trapping emissions, they first need to pay attention to the problem. They are starting to now, fueled by unrest from the world’s youth, cheaper renewable energy, more bouts of extreme weather and other evidence of global warming itself.
The big picture: We’ve written about these shifts individually here and here and here over the past year or more. It’s worth examining them together as a whole because the amount of new attention on climate that’s occurred in a matter of weeks is staggering.
- Big caveats exist and the prospect of substantive action on the problem remains deeply uncertain, but the arc of change is forming.
In Washington, congressional Republicans and even President Trump are scrambling to acknowledge the problem after years of denying it — and in some cases mocking it outright.
- At the World Economic Forum in Davos last week, Trump announced the U.S. would support an initiative to plant trees — natural ways to capture carbon dioxide emissions — even as he slammed climate activists as “prophets of doom.”
- For the first time ever, the House GOP leadership is pushing policies to address the problem.
- These policies, in and of themselves, aren't nearly enough to sufficiently tackle the problem, but the shift in GOP rhetoric over just the past year has been stark.
- Flat-out denialism of humans' role in warming the planet has all but disappeared.
“The issue of climate and the environment is rising in priority for the American voter and you’re seeing the political dynamic shift where people are really demanding their elected officials to address this problem,” Rep. Tom Reed (R-N.Y.) told me last week.
Among corporate executives and financial leaders, climate change is quickly becoming a concrete worry. In addition to it being the sole official topic of the World Economic Forum last week in Davos for the first time, pronouncements on the matter have come from the following entities in just the last several weeks:
- BlackRock, the world’s largest asset manager.
- The International Monetary Fund, whose mission is to ensure global financial stability.
- Most of the world’s central banks, including America’s, and the Bank for International Settlements, known as the central bank for banks.
- Commitments keep rolling in from corporate America, but in a month's time, news has broken about goals from Goldman Sachs, BP, Microsoft, Starbucks, utility Arizona Public Service and Pepsi.
These pronouncements — which, by the way, are mostly just rhetoric for now — aren’t coming out of the goodness of the hearts of the rich and powerful. They're coming from a messy mix of activist and investor pressure and an increasing awareness that as extreme weather becomes more common, its economic toll could too.
- Climate generated the highest degree of public pressure on corporations by activists, policymakers and journalists last year, according to data analyzed by consultancy High Lantern Group.
Skeptics of this newfound attention to climate change among corporate leaders point to a survey released last week in Davos showing that the topic didn’t even break the top 10 list of risks company CEOs say they’re facing.
- This highlights the inherent mismatch of a risk like climate change that unfolds over decades, if not centuries, and the challenges facing publicly traded companies trying to turn quarterly profits.
- That’s why right now we’re seeing stronger rhetoric from money managers and financial institutions whose missions are more rooted in longer term risks.
But, but, but: All this does not necessitate a path to big global action to curb emissions. It lays the foundation for that, but a lot more would have to happen to make actual change possible.
- Goals from corporate and financial entities deserves close and frequent scrutiny for how much is substantive and how much is extra-heavy greenwashing.
- Trump continues to roll back climate policies, and the Paris Climate Agreement's goals are in serious doubt.
Another big caveat is that although climate change itself poses huge risks, aggressively acting on it does too — and those risks are realized far more quickly and thus may have swift political consequences hindering more action.
- For example, when energy prices rise, especially when it happens quickly, populations have shown to respond angrily. I’ve called this the big climate disconnect.
What I’m watching: The levers that could incite change — namely, big government policy — from this newfound foundation of attention, including this one:
- To what degree the current economic status quo of corporate profits becomes threatened seriously enough that businesses really start to lobby Congress for new policy. Big action on climate change is never going to come from pure altruism or activism; an existing economic reason must exist too.