Moving from red to amber in tackling climate change

Much more urgent action needs to be taken to meet the Paris Agreement, and that is where investor initiatives can help, says Robeco’s climate change specialist Lucian Peppelenbos. Currently the world has moved from a red traffic light – with previously no chance of hitting the temperature control ambitions – to amber, but is still far from green, he says.

The Paris Agreement remains the mother of all initiatives to tackle climate change, as it is the only truly global accord that all nations have committed to. Its core aim is to limit the rise in global average temperatures to below 2°C above pre-industrial levels by 2100. This means the world must become carbon neutral by 2050 at the latest.

The agreement was ratified on 22 April 2016, which the UN designated as Earth Day, and signed by 196 countries. Since then, many have committed to becoming carbon neutral by 2050. Some have made more ambitious plans – Austria and Uruguay have pledged to do so by 2040. China, which has the world’s largest carbon footprint, has set a longer-term target of 2060.

So, are we on track to meet the Paris Agreement? “No, we’re not,” says Lucian Peppelenbos, climate change strategist at Robeco. “If we use the traffic light system of red, amber, and green, I would now give it an amber light, although a year ago, I would have given it a red.”

“The step-up to amber is due to the recent policy commitments in Asia, China, Japan and South Korea, but also because everybody knows now what the US will do, now that it has rejoined the Paris Agreement. With all this in place, the countries responsible for 63% of global emissions will be in line with the net zero ambition.”

“If we can actually deliver on our promises by 2050, the world will be on track to limit global warming to 2.1 degrees Celsius; previously we were heading for 3 degrees. This recent wave of commitments is now more ambitious than ever.”

Moving from amber to green is going to take much more collaboration, Peppelenbos says. “I like the term ‘distributed leadership’ that was coined by the architect of the Paris Agreement, Christiana Figueres,” he says

“In the real economy, you need policy frameworks, and you need the consumers and technology to be onside. All of these pieces need to come together. As investors, we can redirect capital towards the green, circular, low-carbon economy… and that's vital. But we critically depend on other pieces of the puzzle to move as well.”

Some of these pieces are embodied in various initiatives that investors including Robeco have joined to try to move the world from amber to green. The top 10 of these initiatives regarding their importance for investors are listed below.