"I’d rather not rely on technological unicorns to save us in the latter half of the century," says Iain Watt, Principal Climate Specialist, Forum for the Future. Read on for a view of the future where investors ask companies difficult climate risk questions (and don’t accept poor answers), and we move beyond net zero, to a regenerative economy, sooner than 2050.

In this Climate Leadership Series, we ask experts and influencers in business climate action to share their insight into best practice, discuss current and future trends, and debate the most impactful solutions. 

Rosie Helson (RH): The most recent IPCC report stated that we need to reach net zero emissions as a planet by 2050 to minimise global warming to 1.5 degrees. Do you think we’ll meet that target?

Iain Watt (IW): If you apply the precautionary principal to the carbon budgets, we need to reach net zero much sooner than that. The budgets only give us a 66% chance of remaining under 1.5 degrees, and I’d like better odds. This 2050 timeframe also assumes a future ability to extract large volumes of carbon from the atmosphere. We don’t yet have the means of doing that at the scale required, and I’d rather not rely on technological unicorns to save us in the latter half of the century.

Climate change is exactly the sort of issue that humanity deals with badly; it’s framed as a far-off problem that impacts far-off places first. The fact that there’s so much action going on to address it despite that, is a source of hope. However, I’m not hopeful we’ll meet the 1.5 degrees target. We have to achieve an incredibly steep downward curve for societal emissions and we haven’t even levelled them off yet.

 

RH: What do you think are the key reasons for that?

IW: I think there’s still a huge amount of complacency within society – and even within the sustainability movement – around climate change. It comes in two forms. There’s complacency around how disruptive a 1.5 degree, never mind a 2 degree or beyond, world might be – we have simply not yet internalised that. And then there’s complacency around how comprehensive and rapid the transformation of society has to be in order to stay within the budgets for either 1.5 or 2 degrees.

Climate change is also still often framed as an energy system problem and that means we downplay, or ignore, the need to transform sectors like agriculture (and land-use more broadly), cement, aviation and shipping.

The change that’s taking place within the electricity part of the energy system (in terms of the cost curves of renewables, and innovation in storage and flexibility) is brilliant – and does offer real hope – but if we’re serious about 1.5 degrees then we can’t give those other sectors a “get out of jail free card.” Given how tight the budgets now are, each of those sectors represents a potential “budget buster” – and we have to collectively face up to that.

 

RH: What would you say is the role of business here? Are companies doing enough?

IW: Business and the investor community are going to be critical for moving things forward.

I like the emphasis on “net zero” that’s emerging as an aspiration for both companies and governments. It’s a clear, simple objective. And, quite frankly, aspiring to be low carbon no longer cuts it as leadership.

But I think there are also opportunities for companies to think about going beyond zero (or beyond neutral) – and to step into restorative or regenerative territory. Even if very few companies have moved into that space.

I do think an increasing number of companies are waking up to the fact that climate change poses genuine strategic risk to their supply chains or markets. And they’ve realised it’s not enough to look after their own bit of the puzzle; they also have to become effective advocates for, and agents of, societal decarbonisation. They can get their emissions to zero, but if the world doesn’t decarbonise then it’ll become difficult for them to continue doing business.

The investor community is really starting to be a driver of change in the climate space too. At this stage, I’d categorise investors as asking really good questions of companies (about their exposure to climate risk), but then accepting pretty rubbish answers – with the possible exception of coal companies. But that’s not going to last: at some point soon, investors are going to skill up as to what’s actually a good answer - and start taking action against those companies that can’t provide it.

One of the main reasons for inaction in climate change remains this pernicious meme that climate action is bad for the economy or bad for business. That’s increasingly demonstrable as a load of rubbish and is patently false over long timeframes, but it’s an excuse consistently given by certain governments for why we’re not being bold on climate. Once you have business and the investment communities tackling that message head-on, I think it will be hard for that pernicious meme to retain traction. Environmentalists can shout out against that thinking, but a business voice is much more effective in making the case. Businesses have the clout, influence and money to tackle their own footprints, become either carbon neutral or regenerative, expand the concept of their footprint up their supply chain and throughout their customer base, and then talk about it.

 

RH: What, in your opinion, will the role of offsetting be in the future?

IW: If a company can demonstrate that it has a future place in a zero carbon economy, and has ambition – and a plan – to tackle its baseline, then offsetting is a useful tool that enables leading companies to reach net zero sooner than they otherwise would have done. That’s something I, and Forum, have always supported.

Indeed, if the concept of net zero, or beyond zero, gains traction as the appropriate goal for any company aspiring to lead on climate change then this should provide a boost to offsetting, given the practical trickiness of getting there over short timeframes without offsets. However, I think we can also expect more questions to be asked about the validity of offsetting if it is used to prolong the existence of high-carbon industries that don’t have a plan to decarbonise. Offsetting should be an acceleration option for the ambitious, rather than an escape clause for the stuck.

I think there’s real potential for offsetting to provide the investment needed for us to rethink agriculture and land-use – such that soils and ecosystems are able to act, once again, as effective carbon sinks.

Quality will continue to be critical to protect the integrity of the offset market and ensure projects are genuinely financing something that wouldn’t otherwise happen. If done well and done right, offsetting can channel investment to parts of the world that really need it - and help to bring new technologies to market, and to scale.