Global heating is happening faster and with deeper compounding impacts than we had expected. Sir David King, former chief science advisor for the government of the United Kingdom, is calling for an upgraded long-term goal of net-zero by 2040.

Simple arithmetic shows there is not enough money in circulation to cover the extreme costs of carbon fuel subsidies and the extreme and rising costs of dealing with the harm they cause. Insurers are already revising policies and offerings to avoid catastrophic risk. Some have said they will not be able to provide mass-market insurance within 2 decades, some within just a few years.

As insurers pull back from critical segments of the consumer and business markets, lenders and investors will have to carry more risk to finance the same activities. This will impact cost and profitability in all areas, and put downward pressure on lending, pay, consumer confidence, and investment returns. In other words, pollution-for-profit will soon be unaffordable for every segment of society.

Companies that rely on unpriced pollution to drive profits must innovate and diversify rapidly enough to avoid having most of their wealth and credit tied up in stranded assets. (A stranded asset is something already contracted or owned which cannot be operationalized, even if the asset-owner is willing to suffer major losses.)

This report is a contribution to the Finance and Carbon Pricing action track of the 2019 UN Climate Action Summit. Orienting finance toward net-zero by 2040 will unlock unprecedented opportunity.

Aiming for net-zero by 2040 makes sense, because we know from extensively peer-reviewed, globally acknowledged science that we cannot afford to live with the dangers of a world that has warmed by more than 1.5ºC. Given that, getting to the climate-safe clean-profit economy of the future sooner is mathematically more sound.

Investors in the public or private sector that hold onto hope that they can optimize investment returns by funding the wrong side of history will be abandoned by the marketplace, sooner than they think. Math will drive the rapid acceleration of change, as will the need to address injustice.

  1. Climate disruption is harm imposed on those without the power to prevent it — in this case millions of species and most of humanity.
  2. With that, the strength and resilience of public institutions is at risk, as they require the confidence of everyone in order to function well and fairly.
  3. Environmental injustice is more than unfairness; it is an existential threat that puts entire populations into situations where conflict or migration are more likely.

Young people, climate experts, and leaders in peace and security, came together earlier this month at the Oslo Pax Summit on Peace and Climate Change, to call for urgent action to reduce these degradations. The Oslo Pax produced a clear call to action, to treat climate disruption as a threat to international peace and security and an issue of fundamental human rights.

Moving decisively to net-zero carbon emissions by 2040 will deliver:

  1. Cleaner, more reliable energy, that can reach everyone affordably, and scale up without disrupting life-sustaining natural systems;
  2. A more secure farming economy and food supply;
  3. A more inclusive and profitable future for the insurance, reinsurance, and banking sectors;
  4. A healthier, more resilient financial sector;
  5. A world less prone to involuntary displacement and conflict.

This is why, as the U.N. reports:

Banks collectively with more than $47 trillion in assets, or a third of the global industry, signed up on Sunday to new United Nations-backed responsible banking principles in a massive boost for climate action and the shift from “brown to green” models of economic growth.

For industry, it is time to welcome smart policy options and blended finance innovations that can accelerate the depreciation of strandable assets. It is smarter to abandon assets now that we know will be stranded and invest instead in viable future operations.

Business model redesign offers transformational opportunity for even the most carbon-dependent industries:

  • Major oil and gas conglomerates can increase their overall value by transitioning into networks of smaller companies specializing in key areas of the integrated distributed clean energy economy.
  • As hydrocarbon molecules lose their place of priority in the minds and budgets of policy-makers and consumers, electrons and data are taking over.
  • Smart breakthrough enterprises will deliver the connective infrastructure and end-user devices that convert data and electrons into everyday value for everyday people.

The shift to light-footprint industry, energy, and urbanization, coupled with nature-based solutions and driven by climate-smart finance, means economy-wide national climate action plans will also be 21st-century prosperity plans.

The U.N. Climate Action Summit and the COP25 provide critical opportunities to share the most efficient and effective means of doing so. Throughout 2020 and no later than the COP26, the world community should come together around the wisdom of achieving net-zero emissions by 2040.

Written by Joseph Robertson

Joseph is Global Strategy Director for the non-partisan non-profit Citizens' Climate Lobby. He is the lead strategist supporting the Acceleration Dialogues (diplomatic climate-solutions roundtables) and Resilience Intel—an effort to move the world to 100% climate-smart finance. Joseph represents CCL in the Carbon Pricing Leadership Coalition, the UNFCCC negotiations, and other UN processes, and is founder of the Geoversiv Foundation and Live Your Democracy—an online periodical promoting engaged, non-partisan civics. His articles appear from time to time in the Guardian.

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