FOR PROFESSIONAL CLIENTS AND QUALIFIED INVESTORS ONLY. NOT TO BE REPRODUCED WITHOUT PRIOR WRITTEN APPROVAL. PLEASE REFER TO THE IMPORTANT INFORMATION AT THE BACK OF THIS DOCUMENT. MAY 2020 GLOBAL MACRO RESEARCH NEARING THE TIPPING POINT WHY THE TWENTIES REPRESENT THE CRITICAL DECADE IN HUMAN RESPONSE TO CLIMATE CHANGE > Christiana Figueres, a Costa Rican diplomat and architect of the 2015 Paris climate agreement, explains why this decade is the tipping point for taking action before climate change becomes irreversible. R O C R A E M S E L A A R B C O H L • G EXECUTIVE SUMMARY THIS DECADE IS THE LAST IN WHICH WE CAN MAKE A MEANINGFUL DIFFERENCE TO AVOID THE WORST IMPACTS OF CLIMATE CHANGE. IN THIS PAPER, I EXPLORE THE REASONS WHY, AND ASSESS THE GREEN SHOOTS OF PROGRESS THAT DEMONSTRATE HOW COUNTRIES AND FINANCIAL INSTITUTIONS STILL HAVE A CHANCE TO RESPOND TO THIS CRISIS. Science has been shedding light on the facts of climate change for decades, but the extent of our knowledge is more specific and granular now. • Five years after the Paris Agreement, scientists now estimate that if the world were to heat by 2°C (as compared to 1.5°C), there would be three times as much infrastructure destruction, biodiversity destruction, human pain and death. There is already evidence of what a future could look like if we do not attempt to change course. • Within the last 12 to 18 months, we have seen damage being done to Earth in the form of extreme bushfires. In Australia, for example, fires devastated more than 8 million hectares of Australian territory (an area larger than countries like Scotland, Austria and Panama). The direction of decarbonisation is irreversible, and businesses are preparing for this new future in a bid to remain competitive in the future landscape. • A recent study found 65% of the US economy continues to decarbonise. Asian countries are moving to renewables despite the challenges. • The governments of these nations understand that in order to bring their populations out of poverty, they must continue producing energy; however, they also understand that fossil fuels are not as benign as we thought decades ago. Climate change concerns are likely to drive advances. • Progress will be driven by the standardisation of measurement of environmental, social and governance (ESG) metrics for governments and corporates alike. It is likely to be climate change that is going to be the most-focused-on aspect of ESG factors, for the simple reason that it is the easiest facet of ESG to understand and measure. ESG is here to stay in the financial sector. • This is evidenced by the Principles for Responsible Investment (PRI), which has 2,000 institutions as signatories and, more recently, the Principles of Responsible Banking, which includes 130 banks from 49 countries, equating to around USD$47 trillion in assets. Financial institutions are waking up to new opportunities presented by ESG. • One such example is the UN-convened Net-Zero Asset Owner Alliance, a group of 20 asset owners, who collectively hold around USD$5 trillion in assets. 2 WE ARE IN THE CRITICAL DECADE THIS DECADE IS THE LAST IN WHICH WE CAN MAKE A MEANINGFUL DIFFERENCE TO AVOID THE WORST IMPACTS OF CLIMATE CHANGE. The science is now clear: if we continue on our current path, by 2030 we will have loaded the atmosphere so much that irreparable damage will have been done, putting us on a path to unavoidably pass tipping points. Basic ecosystems, including the Amazon, the Antarctic ice sheet and the Russian tundra would be on their way to irreversible transformations. If we do not shift successfully from our current trajectory, many other very sensitive ecosystems could quickly fail, resulting in a cascading and catastrophic domino effect. In this paper, I explore the reasons why this decade could be our final opportunity to alter the current trajectory of human impact on our planet. I will also assess the green shoots of progress which demonstrate how countries and financial institutions still have a chance to respond to this crisis. CHRISTIANA FIGUERES Christiana Figueres is a Costa Rican citizen and was the Executive Secretary of the United Nations Framework Convention on Climate Change 2010 - 2016. During her tenure at the UNFCCC, Ms. Figueres brought together national and sub-national governments, corporations and activists, financial institutions and NGOs to jointly deliver the historic Paris Agreement on climate change, in which 195 sovereign nations agreed on a collaborative path forward to limit future global warming to well below 2°C, and strive for 1.5°C in order to protect the most vulnerable. For this achievement Ms. Figueres has been credited with forging a new brand of collaborative diplomacy, for which she has received multiple awards. Since then Ms. Figueres has continued to serve her one and only boss, the global atmosphere. She sits on multiple boards and is a founding partner of Global Optimism Ltd., a purpose driven enterprise focused on social and environmental change. She convenes Mission 2020 and co-chairs the Global Covenant of Mayors. In this cautionary but optimistic book, Figueres and Rivett-Carnac – the architects of the 2015 Paris Climate Change Agreement – tackle arguably the most urgent and consequential challenge humankind has ever faced: the world’s changing climate and the fate of humanity. In The Future We Choose, the authors outline two possible scenarios for the planet. In one, they describe what life on Earth will be like by 2050 if we fail to meet the Paris targets for carbon dioxide emission reduction. In the other, they describe what it will take to create and live in a carbon neutral, regenerative world. They argue for confronting the climate crisis head on, with determination and optimism. How all of us address the climate crisis in the next thirty years will determine not only the world we will live in but also the world we will bequeath to our children and theirs. The Future We Choose presents our options and tells us, in no uncertain terms, what governments, corporations, and each of us can and must do to fend off disaster. 3 SCIENCE ILLUMINATES THE PATH AHEAD 1 SCIENCE HAS BEEN SHEDDING LIGHT ON THE FACTS OF CLIMATE CHANGE FOR DECADES, AND THE EXTENT OF OUR KNOWLEDGE IS MORE SPECIFIC AND GRANULAR THAN EVER. IN 2018, WE HEARD THE UNEQUIVOCAL EVIDENCE FROM THE INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE, WHICH INVOLVES HUNDREDS OF CLIMATE SCIENTISTS AROUND THE WORLD. It is clear to us now that the margin set out in the Paris Agreement1, for the target temperature that could keep us within manageable boundaries, was too broad. Five years after the agreement, scientists now estimate that if the world were to heat by 2°C (as compared to 1.5°C), there would be three times as much infrastructure destruction, biodiversity destruction, human pain and death. As the science has improved, particularly on carbon measurement and effects, we now know that at an average of 2°C of warming, some large landmasses would become uninhabitable, sea levels could rise 5 20 to 30 feet, and the world’s coral reefs could be completely lost2. A recent study predicted that a billion people will either be displaced or forced to endure insufferable heat for every additional 1°C rise in the global temperature3. That is over 10% of the global population for each degree. Before 2020, the detailed data was not available to be clear on these facts, but now we have a high level of certainty as to what our trajectory needs to be. There is no excuse. If we continue with current levels of emissions, it is certain that by 2030 we will have closed the door to a path that takes us toward a 1.5°C increase in global temperature. This represents an astonishing responsibility that our generation bears on its shoulders: we now have the knowledge to understand the desperate need for change. If we do nothing, by 2030 we will face a planet where our species is completely at the 7 mercy of natural disasters. In order to deviate from our current trajectory, we will all need to make changes to how we live. 1 The Paris Agreement is the first-ever universal, legally binding global climate change agreement, adopted at the Paris climate conference (COP21) in December 2015. Among other things, governments agreed a long-term goal of keeping the increase in global average temperature to well below 2°C above pre-industrial levels and aiming to limit the increase to 1.5°C, since this would significantly reduce risks and the impacts of climate change. Read more here: https://ec.europa.eu/clima/policies/international/ negotiations/paris_en 2 https://www.nationalgeographic.co.uk/environment-and-conservation/2019/11/ climate-change-driving-entire-planet-to-dangerous-tipping 3 https://www.pnas.org/content/ early/2020/04/28/1910114117 4 ACTION POINTS FROM ‘THE FUTURE WE CHOOSE’ Let go of the old world. Make profound shifts 2 1 in how we live, work and relate to each other Face your grief but hold a vision of the future. 2 Accept the realities of climate change but look to what we can still create Defend the truth. Learn to distinguish between 3 real science and pseudoscience3 4 4 See yourself as a citizen, not a consumer 3 5 Move beyond fossil fuels 6 Reforest the Earth 7 Invest in a clean economy 8 Use technology responsibly. Artificial intelligence, robotics and the internet of things may be great allies 9 Build gender equality 8 10 Engage in politics.