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16 August 2021

Corporates talk fast so they can act really slowly

This article was first published in the Business Day on 11 August 2021.

The latest report by the UN Intergovernmental Panel on Climate Change (IPCC), published on Monday, 9 August 2021, is further proof that corporate “journeys” to climate action will condemn us to an uninhabitable world.

The report is the first part of the IPCC’s sixth assessment report, and summarises the “physical science basis” for climate change.

It confirms that “unless there are immediate, rapid and large-scale reductions in greenhouse gas (GHG) emissions, limiting warming to close to 1.5°C or even 2°C will be beyond reach”, and that even under low emission scenarios, it is “more likely than not” that we will cross the 1.5°C warming level by 2040.

The key message of this report is therefore essentially the same as the key message of the IPCC’s 2018 “Special Report on Global Warming of 1.5°C”: unless we reduce global GHG emissions by almost half this decade, all our efforts in the 2030s and 2040s will be insufficient to avoid the most severe impacts of climate change.

But there appears to be no threshold of scientific evidence that can trump the power of the short-term profit incentive. Because the IPCC’s key message is inconvenient for many decision-makers in government and the private sector, it is consistently ignored. As a direct result, thirty years after the publication of the IPCC’s first assessment report, the International Energy Agency estimates that 2021 will set new records for global energy-related CO2 emissions.

In South Africa, there are certainly corporate leaders who grasp the magnitude of climate change, and who appear to be genuinely committed to addressing it. There do not, however, appear to be many who grasp the urgency, or at any rate who are willing to take action which is commensurate with the risk.

Corporate commitments to tackling climate change are a dime a dozen these days, especially in the financial sector. But in almost every instance, they are immediately qualified by the assertion that climate action is a journey, which must be taken very slowly, ideally only really kicking off in ten or twenty years’ time, to avoid the alleged disastrous consequences of “moving too fast”.

In the interim, so the favourite narrative goes, we need gas as a “transition fuel”, a very useful term because it sounds climate-friendly, but is really a lever for opening the door to unlimited extraction of another climate-destroying energy source. This may boost returns for a few years. But replacing one fossil fuel with another will make little difference to the socio-economic conditions of the millions of people in energy poverty, who proponents of a “gas economy” say it will benefit. Recent developments in Mozambique are proof enough of that.

A just transition to a low-carbon, inclusive economy is indeed a process (the clue is in the name) which must be carefully managed. But repeatedly warning against “moving too fast” expediently distracts from the implications of moving too slowly: the intensification of climate impacts and consequent job losses; further damage to our already-crippled global competitiveness; missed opportunities for transformative international climate finance support; and the benefits – for health and well-being, affordable energy access, development and inclusivity – of a rapid move away from the shackles of fossil fuel dependence.

Taking it slow is a convenient approach for those who stand to benefit from a lack of action, especially those whose financial incentives are aligned with profitability in the next three to five years.

If you are sceptical of this view, ask yourself why, despite their near-universal commitment to responsible investing and climate action, 94% of Anglo American’s shareholders voted earlier this year in favour of Anglo demerging all of its remaining coal assets into a new, listed entity, Thungela Resources. In doing so, Anglo neatly offloaded decades of legacy environmental liabilities, and responsibility for a complex transition process, onto a new company that now intends to expand its coal operations.

Or why Sasol, one of the world’s top 100 corporate GHG emitters, is consistently let off the hook by its major shareholders: for its inadequate 2030 emission reduction targets, its repeated, unexplained delays in the release of its promised “2050 Roadmap”, its membership of industry associations which have lobbied to delay and weaken climate regulation, and its refusal to table shareholder-proposed climate resolutions.

I’ve lost count of the number of times I’ve had mansplained to me how important Sasol is to the economy and how difficult it is for it to navigate the transition. Of course it is. Which fossil fuel company is not economically important, or is finding it easy to transition? This is precisely why it is so important for investors to escalate pressure now, while there is still time to manage its transition – or decline – responsibly.

Instead, we see the opposite approach, with investors giving the company as much time and flexibility as it wants. The CEO of Ninety One, one of Sasol’s biggest shareholders, said at Ninety One’s AGM last week: “We have confidence in Sasol’s management team and board for the position that they have taken”.

This gamble may pay off in the short term, but the people who are taking it are doing so using your money. In ten or twenty years’ time, when ever more extreme weather events batter the economy, and stranded assets are piling up, it is your pension fund that will suffer the effects.

Don’t be fooled by those who claim that we must “balance” climate action with economic growth and poverty reduction. A recent report by the Wealth Inequality Lab concluded that there is “no evidence that wealth inequality has decreased since the end of apartheid”. There is also no basis to assume that maintaining the status quo, including our now completely unnecessary outsize reliance on expensive fossil fuels, will now miraculously improve poverty, inequality and unemployment. In fact, it is looking increasingly likely that our only hope for significant change is to wholeheartedly and immediately embrace every kind of green energy, just transition-based initiative we can lay our hands on.

“Moving too fast” should not concern us at all – it would be an unprecedented achievement in this slow-burn nation. We should be worrying, rather, about whether we will move at all. What the IPCC report makes abundantly clear, once again, is that all of these corporate commitments must be followed by unprecedented action, now.

By Tracey Davies

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