Climate change caused by man-made carbon emissions threatens the basic necessities of human life all around the world - access to water, food production, health, land, biodiversity, peace and stability. Climate change is an unprecedented issue, unique to our civilisation, and action is needed to prevent dangerous anthropogenic (human induced) interference with the climate system.
Transitioning to a low carbon economy (LCE) has been identified as a key method by which climate change can be mitigated and remediated against. In addition, reference to the “Green Economy” is becoming more frequent , this refers to a wider movement that considers resource efficiency and social inclusion in addition to a LCE.
Participating in the LCE is defined as delivering the products, goods and services which through their use enables the adaptation, mitigation and/or remediation of the impacts of climate change, resource depletion and/or environmental erosion. It may also be assumed to be an economy powered by low carbon energy (renewables or nuclear), and where a variety of actors are engaged in ensuring the mix of the products, goods and services business delivers is increasingly 'green'.
According to wider definitions, businesses whose products, goods and services don’t contribute to the LCE can still support the transition by making operational changes in the way these products, goods and services are provided (e.g. by moving to low carbon energy sources and increasing resource efficiency).
The Paris Agreement on climate change is a landmark agreement to combat climate change and to accelerate and intensify the actions and investments needed for a sustainable low carbon future. Its primary aim is to limit the global temperature rise this century to well below 2 degrees Celsius above pre-industrial levels. It brings all nations into a common cause to undertake ambitious efforts to combat climate change and adapt to its effects, with enhanced support to assist developing countries to do so. While the USA withdrew from the accord in 2017, to date 175 countries have made pledges explaining how they intend to deliver on the goals, as have individual American states in defiance of the federal government. As such, the Paris Agreement remains a binding global climate effort of unprecedented force and ambition and sets favourable conditions for all economic actors to transition to the LCE.
Given goals and agreements made at national and international levels, business action and inaction on climate change is an increasing source of investment risk and opportunity. Many investors already have long track records of addressing the impacts that climate change may have on their portfolios and have adopted policies to guide their investment decision making. Investors have influenced corporate practice and reporting on climate change and encouraged governments to adopt policy measures that accelerate the transition to the LCE. The transition to the LCE will affect company cash flows and profits. It is therefore the view of mainstream investors that businesses must to determine how to manage this transition and its impact.
For individual companies the transition to the LCE includes setting and achieving reduction targets for key resources and emissions (which are a focus of a parallel Responsible 100 scorecard), greening the products and services mix, and engaging suppliers and other stakeholders.