Entry 02: A Decade of Climate Commitments: Progress or Performative Virtue Signalling?
On February 26, 2015, Senator Jim Inhofe brought a snowball into the US Senate to challenge the scientific consensus on climate change. Despite support from Tea Party activists, his actions did not prevent the signing of the Paris Agreement on December 15, 2015, committing to a 1.5°C target. Fast forward to February 26, 2025, and BP is set to hold its annual general meeting, where it is expected to announce a retreat from its 'green' commitments. In 2020, BP pledged to cut oil and gas output by 40% by 2030. The carbon and climate market is keenly awaiting updates from Ursula von der Leyen on the future of the EU Corporate Sustainability Reporting Directive (CSRD). The pressing question is whether key elements of the EU Green Deal regulations will be delayed, paused, or abandoned.
Today's economic chaos, polarization, and the end of globalization were unforeseen. However, It is a moment of inflection when it is fair to question whether we are at the end of a decade of focusing on reporting standards and frameworks that don't truly shift the dial has led to performative virtue signaling from major investors and companies. This view is shortsighted unless the pullback from carbon and climate is considered within the broader context of the economy and global policy priorities.
The statistics offer a mixed picture. Since the Paris Agreement, global temperatures have continued to rise, with 2023 being one of the hottest years on record. The Earth's land and ocean surface temperature was around 1.2°C warmer than the 20th-century average. Sea levels have risen by approximately 8-9 inches since 1880, with the rate of increase accelerating in recent years. Arctic sea ice extent has shrunk by more than 40% since 1979. So for any investor, asset manager or business the capital threats to future supply chains and their for fundamentals of getting products to market have increased in terms of capital and unforseen shocks in the form of wildfires and a wide variety of natural capital shocks.
Corporately, many global companies, including those in the oil and gas sector, have set ambitious sustainability targets, only to pull back or take the opportunity of a change in the white house and the arrival of chaous economics to wipe commitments and webpages. This is in many ways is to be expected for the simple reason that after the rush to set targets which were marketted to customers and stakeholders to gain market share the reality of the task in hand became real.
BP, for instance, aims to reduce operational emissions by 20% by 2025 and 50% by 2030 against their 2019 baseline. However, the expectation now is that companies like BP may scale back these commitments, reflecting a broader trend of retreating from ambitious climate goals under economic pressures. In the post mortem one has to consider fundamentally how many targets were set, were they ever achievable, perhaps focusin efforts in other areas might have delviered more movement of commitment. Either way i do see the rush to set targets and the over focus on reporting instead of doing which are triggering the EU’s next steps with the CSRD and other Green Deal Regulaations.
While the political reason for the the upcoming omnibus simplification Package will be spun as reducing the regulatory burden on businesses to drive competativensess, that ignores the fundamental and historic market and political conditions required to make progress on carbon, climate and sustainability issues. Times of progress fundamentally always come under two scenariso the first is when we push the elements to disasater, the second is when there is alignment of economic distribution and wealth and politics, economies which are growing and proividing opportunites and a strong global concensus.
Today we have none of these elements. Along with chaous economics current geopolitical trends, including political movements, conflicts in Europe, all governments have failed to deal with the big issues in the US, Europe and China like inequality, inflation, and housing prices. While markets are dominated by forecasts of economic wealth, activity, and growth driven by crypto, new advances in media and podcasting, and the allure of AI they still ignore the intricate dynamics of society, culture, and economic growth which history tells us are core to getting on a footing to fix carbon and climate. This does not mean the challenges to capital markets, portfolio manage or the durability of supplychains goes away, if anything it means these capital risks increase. What it does mean that a serious analyis needs to be taken as to what has really achieved over the last decade. Where did things go right, where did they go wrong - or was Jim Inhofe right all the way along?
