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An investor’s look ahead to Copenhagen
Investors need a common playing field with clear long-term rules of the game in terms of greenhouse gases.
The little mermaid, Copenhagen
Between December 7 and December 18, the 15th United Nations Climate Change Conference will take place in Copenhagen, Denmark. Nearly 200 states are to meet to draft the international treaty which will replace the Kyoto Protocol, expiring in 2012. Also, many third-parties, including industrial lobby groups, NGOs, unions, climatologists, etc. will join the debate. The stakes are very high as the new Protocol will determine the world’s objectives in order to mitigate climate change and to decarbonise the world economy. In 1997, while the United States signed the Kyoto Protocol, Bill Clinton’s administration never succeeded in getting the support of the US Congress to ratify it. The following US President, George W Bush, maintained a stance that the protocol would significantly hamper the US economy and that emerging economies should make more efforts. Fortunately, the current US President, Barack Obama, seems to be more favourable towards tackling climate change. The House of Representatives passed an historic American Clean Energy and Security Act in June that plans to reduce the US greenhouse gas (GHG) emissions by 17% below 2005 levels by 2020.
While this is clearly a move in the right direction, these targets are less ambitious compared to other developed economies who have also committed to progress on this issue. For instance, the European Union’s goal is to cut GHG emissions by 20% below 1990 levels by
2020 (and by up to 30% if an international agreement is reached). Let’s not forget that developing nations have a large stake in curbing greenhouse gas emissions as well. The emergence of China as an economic powerhouse should not be discarded. The booming Chinese economy has recently overtaken the US as the largest emitter of carbon dioxide in the world. Nonetheless, China, like the majority of developing economies, argues that it has the right to foster its economic development and that the US has historically been a much larger emitter than China. It is clear that tensions between developing countries that feel they have the right to advance their economies and developed nations are a continuing threat to reaching an international climate agreement. One challenge of defining the new Protocol will therefore be to strike the right balance between economic interests and ensuring sufficient action to mitigate climate change. The framework and the incentives the Copenhagen summit should provide are great stimuli to low carbon-future. It is in the interest of all parties and particularly human kind. From an investor’s point of view, climate change is a serious long-term challenge with a material impact on all kinds of business models. The investment community, and particularly the sustainable and responsible investment (SRI) community, has already made some positive steps to promote the integration of climate change in its investment decisions. First, by
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