This blog originally appeared in Forbes.
The new year represents a new paradigm of private sector action on our global sustainability challenges and seizing the greatest opportunities of our time.
While climate change, water scarcity, and nature loss continue to impose hundreds of billions of dollars of damage, aligning strategies with the transition to a cleaner zero emissions economy has always been smart investment and solid business practice.
We have now decisively shifted to a new era where that is the default assumption of institutional investors and companies. For all of us who have championed a healthier, more resilient, and more inclusive economy, this is a time of optimism. But it is also a time of risk. As much momentum as we have behind us, we are still woefully behind in meeting the global goal of slashing climate emissions in half by 2030. We have no time to lose.
That’s why the coming year will be critical. It will present both new challenges and new opportunities for the private sector. With just seven years left to meet our goal, here are seven actions that will be key to our success in 2023 and beyond.
Deliver climate transition plans
More investors and companies have committed to a zero emissions future than ever before. Over the past two years, 347 asset managers and owners responsible for $70 trillion in assets—more than half of world’s total professionally managed assets—committed to net zero goals as part of the Net Zero Asset Managers and Paris Aligned Asset Owners initiatives. Yet, while some investors have begun the hard work of planning how to transition to net zero, many more need to develop and implement their climate action plans in 2023, with emission cuts by 2030 a critical piece of these plans.
On the corporate side, last year, more companies set emissions reduction targets and disclosed progress against those goals and shored up on their governance of climate risk. But much more progress — at speed and scale — will be necessary for a successful net zero transition.
Transform high-emitting sectors
Hundreds of companies are acting on climate change. Yet the most ambitious actions of a few companies, or even a few hundred, are no longer enough. In September of 2021, we launched Ceres Ambition 2030 to meet the urgency of this moment by shifting the focus from company action to decarbonizing six of the highest-emitting sectors in our economy, which together account for roughly 80% of total U.S. greenhouse gas emissions— banking, electric power, food and agriculture, oil and gas, steel, and transportation. Through Ceres Ambition 2030, investors and companies can support and catalyze momentum across the highest emitting sectors in the U.S.
Implement the Inflation Reduction Act
Last year’s passage of the historic Inflation Reduction Act capped years of effort to achieve robust climate legislation that will serve our economic interests. But it will mean little without solid execution. The landmark law is built on a strong foundation of tax credits and is designed to attract investment, so its implementation will benefit mightily from the private sector’s expertise. Ceres has begun working with investors and companies to provide input to federal regulators and will remain engaged throughout 2023 to ensure this momentous law is properly rolled out to maximize its climate and financial benefits.
Support a just and inclusive transition
Communities of color and marginalized populations are disproportionately impacted by the climate and water crises. Investors and companies can support a just and inclusive transition toward an economic future by putting in place sustainable business models that protect the well-being of workers and their communities. Without a just transition, the economic transformation underway will be rocky. Investors and companies can invite workers and affected communities to the table when making capital decisions to ensure they incorporate plans for just transitions into strategy. Building a just, inclusive and sustainable economy will benefit not only society in general but investors and companies individually.
Value water
For too long, the water crisis went ignored. Not anymore. From the shocking images of destructive floods in California to the satellite pictures of Lake Mead drying up starkly, these images sum up the water crisis and its escalating impacts on investors, companies, and communities. The Valuing Water Finance Initiative—a groundbreaking effort to engage with companies with substantial water footprints to address water as a financial risk and make the large-scale change needed to protect water systems—was launched last August with the support of 64 investors signatories managing $9.8 trillion in assets. In 2023, we call on more investors to lead the charge and move water to the forefront of corporate risk management.
Tackle nature and biodiversity loss
The growing losses of biodiversity mark another massive economic risk, as mass extinction threatens to undermine supply chains for food, clothing, medicine and countless other industries. Half of global GDP depends on nature, and tens of billions of dollars are under threat in the coming years as deforestation and a changing climate put more species in danger. Adding to momentum of the historic pledge by nations at the COP15 biodiversity summit to protect 30% of the world’s land and seas, investors announced the formation of Nature Action 100 — a new effort to drive greater corporate ambition and action on tackling nature loss and biodiversity decline.
Treat climate risk as financial risk
Last year, U.S. regulators made tremendous progress in acting within their existing authority to address the systemic impacts of climate-related financial risk—230 public actions, ranging from new proposed regulations to speeches, according to our June scorecard of nine federal financial regulatory agencies. The most notable is the U.S. Securities and Exchange Commissions’ proposed rule requiring public companies to provide information on their climate risks and impacts. These regulatory advances are the result of the calls for action from investors, companies, and the public, who understand that climate change represents a significant risk to supply chains, infrastructure, workforces, and communities, and that companies and financial systems that fail to adapt will fall behind in a shifting economy.
Last year’s progress comes as old incumbent forces in our economy are lashing out. Stung by the unmistakable momentum of the transition to a cleaner future that is better for the economy, for workers, and for the planet, they are engaging in coordinated efforts across the country to discourage investors from considering sustainability concerns. This political pressure will continue during the coming year, but investors and companies must remember the reason they are acting on climate and other sustainability threats has nothing to do with politics. It is and has always been about the same good business sense that guides smart investments and creates a resilient, competitive just economy— to minimize clear financial risks and deliver sustainable long-term returns.