Big companies and investors in the world’s largest economies should prepare for a turbulent transition to a low-carbon future, as none of the G20 countries are on track to achieve their climate ambitions, according to a new report.
There is “no longer a realistic chance” for an orderly transition for global financial markets, as political leaders will be forced to rely on “handbrake” policy interventions to reduce emissions, according to a study by risk intelligence firm Verisk Maplecroft.
At the same time, the report adds, investors will face the “increasingly disruptive” impact of severe weather events – made worse by the global climate crisis – which are expected to weigh more heavily on the global economy in the years to come. .
The consultancy, which is part of the $ 28 billion global risk group Verisk Analytics, used the report to warn its multinational clients to prepare for a future that could be “messy” at best or at worst to prepare. to a surge of sudden political changes. for the global economy. Verisk is one of the world’s largest providers of data used by the global insurance industry to assess the risks faced by large businesses.
This stern warning comes from an analysis of the looming gap between the G20’s current greenhouse gas emissions and their reduction targets by 2030, the emission reduction policies planned by governments and a measure of the carbon intensity of each economy.
The report found that if the UK leads global efforts to reduce greenhouse gas emissions among G20 countries, the failure of all major economies to ensure an orderly low-carbon transition would be a failure. “Bad news for markets and businesses”.
The performance of the “global carbon heavyweights”, the United States and China, will be the most important factor in achieving the climate ambitions set out in the 2015 Paris Agreement, but none are on track to achieve this. avoid economic turmoil. Although the European Union has taken steps to ease the transition to the Paris climate goals by increasing its ambitions to reduce carbon emissions, according to the report, the best climate players in the G20, France and Germany, remain lagging behind the UK.
Will Nichols, Environment and Climate Change Manager at Verisk Maplecroft, said: “Large economies like the US, China, UK, Germany and Japan will need to pull the handbrake on emissions. to meet agreed climate goals – at the same time as dangerous increases in extreme weather events are playing an increasingly disruptive role in the global economy.
“These conditions will leave companies in carbon-intensive sectors facing the most haphazard transition to a low-carbon economy, with measures – such as restrictive emission limits for factories, purchasing mandates. clean energy and high carbon taxes – imposed with little care. “
Although highly polluting companies, such as fossil fuel producers, are likely to be hit hardest by the growing risk of instinctive political repression aimed at limiting dangerous levels of greenhouse gas emissions, Other industries, including transportation, agriculture and mining, should all brace for a turbulent future, according to Rory Clisby, one of the report’s authors.
“Our data underscores that it is clear that there is no longer any realistic chance of an orderly transition,” Clisby said. “Businesses and investors of all asset classes need to prepare at best for a messy transition and at worst for a boost from a succession of rapid policy changes in a multitude of vulnerable sectors.”