January 17, 2020
Apple Inc. CEO Tim Cook noted in 2019: “If you are an executive who has not developed an innovation strategy to address your impact on the climate, then you are failing in your responsibility as a leader.” Cook was addressing the 30th anniversary celebration of CERES, a non-profit working for more sustainable capital markets, because, as he also said: “It’s our most successful, innovative and agile companies that have a responsibility to lead on climate and sustainability because they have the greatest capacity to act in a transformative way.”
As 2020 begins, the “capacity to act in a transformative way” has never been more needed. Swedish teen activist Greta Thunberg was selected Time Magazine’s 2019 Person of the Year for her admirable ability to focus attention on what she described in her address to the UN COP25 in Madrid in December as “chapter 2, page 108 of the IPCC Special Report on 1.5 C” which details the 420 Gigaton “carbon budget” the world’s relevant leading scientist agree is the most we could still emit in January of 2018 before we had less than a 67% chance of avoiding the most catastrophic impacts of the climate emergency – including the possibility of self-accelerating, irreversible, ecologic collapse. Unfortunately, global emissions are about 42 Gigatons a year – and growing.
Consequently, although Greta Thunberg has been quite clear the science does not support the contention that “the world will end in 11 years”, she is correct to highlight that, without reducing global emissions 45% by 2030, it will be more likely than not that we will be unable to avoid the most catastrophic effects of climate change, including crossing possible “tipping points” to irreversible, self-accelerating, ecological collapse. The young and extensively educated generally understand this shocking challenge the best. And most growing firms – all around the world – are especially interested in these same younger and better educated citizens as their most sought-after customers, employees, investors and host community supporters.
So it is not surprising that Bank of America’s giant Global Wealth Survey found that the Climate Crisis was top of mind for the millennial and female investors who cared the most about a company’s Environmental, Social and Governance (“ESG”) management and that these ESG conscious investors would grow into a $20 trillion market. Furthermore, Bank of America found that ESG high-performing companies outperformed their peers over the last 5 years by more than 3% annually in shareholder value and had a lower cost of capital. They also found that 90+% of the firms that went bankrupt in the last five years were ESG low performers and that ESG Management was the best indicator of risk – better even than debt.
I am confident that the Governor of the Bank of England, Mark Carney, would agree that the “climate risk premium” will only grow. He regularly asserts “a question for every company, financial institution, every asset manager, pension fund and insurer is: what is your plan?”. Carney sees the transition to a low carbon economy as fraught with opportunity and challenge. He has said: “there will be industries, sectors and firms that do very well during this process because they will be part of the solution.” And Carney has added: “companies that don’t adapt will go bankrupt without question.”
The CEO of Blackrock, the world’s largest private investment firm with more than $7 trillion assets under management, agrees. Larry Fink’s letter to the 2,700+ CEO whose companies Blackrock invests in, has become an annual event in the field of Corporate Sustainability. In the first weeks of 2020 Larry Fink is echoing Mark Carney saying: “every government, company and shareholder must confront climate change.” And Fink has become more specific than in years past, warning: “every company, investor and government must prepare for a significant re-allocation of capital.” Fink has also become more prescriptive in requesting CEOs: (a) “publish a disclosure in line with the industry specific Sustainability Accounting Standards Boards (SASB) guidelines by year end; and (b) “disclose climate-related risk in line with the Task Force on Climate-related Financial Disclosures (TCFD).”
Fortunately, there has been an impressive, worldwide, move to ESG Management Reporting with 8,361 firms reporting on climate to the CDP (formerly the Carbon Disclosure Project) in 2019. And now more than 775 global companies are participating in the rigorous Science Based Targets initiative (SBTi) that grounds company goals in climate science and has prompted scores of top companies to realize they must develop a vision in 2020 for how they can drive profitably to Net Zero Emissions. The science Greta Thunberg highlights requires nothing less of global companies in developed countries. It entails developing a clear vision of our shared responsibility, need and opportunity that might well be called #NetZero2020.
Jim Boyle is CEO & Founder of Sustainability Roundtable, Inc. For more than ten years, Jim has led full-time teams of diverse experts to assist nearly 100 Fortune 1000 companies on a multi-year basis in their move to more sustainable high-performance. Specifically, SR Inc has helped world-leading corporations, real estate owners and federal agencies to Set Goals, Drive Progress & Report Results in greater Corporate Sustainability. Mr. Boyle led in the creation of SR Inc’s Renewable Energy Procurement Services (REPS), which advises and represent Fortune 1000 Member-clients and fast growth technology companies across the U.S. and internationally in the development of Renewable Energy Strategies and the procurement of both on and off-site advanced energy solutions. Before founding SR Inc, Mr. Boyle co-led Trammell Crow Company Corporate Advisory Services in San Francisco and returned to his native Boston and Trammell Crow Company’s market leading team in Greater Boston where he received the Commercial Brokers Association’s Platinum Award for the highest level of commercial real estate transactions. Earlier, he advised companies on real estate and environmental matters as as attorney at a large law firm based in Boston. Jim is a graduate of Middlebury College where he co-captained the football team and Boston College Law School, who early in his career served as a federal law clerk, an aide to John F. Kerry in the U. S. Senate and on Vice President Al Gore’s campaign for President.
