What transformations are needed in the global economy and the finance sector to meet the Paris Agreement objectives?
Five years after the Paris Agreement, and with calls by the IPCC for urgent action in the coming decade to prevent climate change catastrophe, 2020-21 has been billed as a key year for climate action. The COVID-19 crisis that has accompanied this year marks a point of transformation for the economy and society: it has demonstrated how remarkable and rapid systems change can be. The global pandemic has given us a clear opportunity to pave the way for building back better and establishing new norms, as well as lessons that can inform how we might face the unabated climate crisis and future climate shocks.
A paradigm shift is needed if we are to move towards a limited or no-overshoot climate scenario. Stakeholders in financial markets, capital and investment represent important levers of change, as they have a key allocative role in society, and can enable investment into a net-zero low-energy future. Financial intermediaries can effectively support and enable societies to mobilise the investment required for the systems change needed to transition economy and society onto a net-zero pathway that is compatible with 1.5°C by 2100.
EIT Climate-KIC has partnered with UNEP FI to develop a series of thought leadership papers that aims to inspire financial actors worldwide to move from risk to alignment, challenge current assumptions around climate alignment and develop ideas and concepts on how alignment can best be achieved. We hope to encourage stakeholders that a proactive climate response is not only about disclosing risks, but also about investing in green opportunities that can enable the low emissions societies of the future. This series convenes innovators and industry experts to provoke discussion, challenge the status quo and guide the transformation of business and finance towards a sustainable future.
The papers in this series will respond to a number of key questions :
- What economic system transformation is required to deliver the Paris Agreement?
- How do financial institutions achieve alignment with the Paris Agreement and how does it differ from transition risk transparency as captured in the TCFD?
- What is the future of financial institutions as a result of these changes?
- What are the various strategies and action tracks through which financial institutions can enhance and achieve full portfolio alignment?
- What are the pathways and choices needed for financial institutions and the financial system to drive an active transition to a net zero-carbon economy?
The second paper of the series “Transformations Required for 1.5°C Alignment and Global Sustainability ” is written by Dennis Pamlin, founder and CEO of 21st Century Frontiers and Senior Adviser to the Research Institutes of Sweden. Pamlin, who is also a member of EIT Climate-KIC Advisory Council, discusses the transformations that are needed in the global economy and the finance sector to meet the Paris Agreement objectives, as well as the opportunities that these transformations represent for both sectors.
*N.B. the Thought Leadership Series is intended to provoke discussion and debate, and reflects the views of the authors and not necessarily those of EIT Climate-KIC, UNEP FI, nor those of the Advisory Panel participants or their organisations.