COP28 and the Wealth of Nations
I think COP28 and 2023 will be remembered as the event and year that investors and corporations discovered global climate policy, viewing the annual meeting as an opportunity. Indeed, I joked with a few friends on my return that we should have called this meeting COrP28.
That term would be easy to see as an anti-business slur. I would rather the phrase be heard as part of at least two transitions.
The first is the long-delayed welcome of the private sector into the climate space. You could argue that they’ve been there for along time, at least around energy and carbon management issues (are you old enough to remember BP as “Beyond Petroleum”?), but for the most part those efforts have been “climate light,” consigned to ESG teams. The companies that sent large delegations to COP28, especially the big management consultancies, clearly see the transition to adaptation and resilience as a new narrative and investment path. The Boston Consulting Group (BCG) allegedly sent the largest delegation of any company to COP. McKenzie Consulting was one of several large companies that essentially donated staff to the COP presidency over the past year.
Concern about the corporate influence in this space is well justified. But such influence is inevitable and actually a little later in arriving than I would have expected. To use a finance term, the private sector now is beginning to see the materiality of climate change to their operations, facilities, personnel, customers, and strategy. They need to be present. This isn’t just a communications or public relations issue.
The second transition is in how they see risk, resilience, and opportunity. We should be concerned about the agility of capital to move in response to real or perceived climate drivers — away from some spaces, towards other spaces. De-investment and overexploitation are two sides of the same coin. And as we saw in 2008, capital can flee from danger quickly, introducing fragility into regional and national economies. We need to be working with businesses to ensure they see investment in local adaptation is important. I would argue that climate risk is less about where than about how, but I don’t think that is a message most businesses are receiving.
I suspect most business are still de-risking relative to their perceptions around climate impacts. They probably also have a narrow vision of who they should be concerned about — primarily their own risk exposure. Our most important risks are broadly shared — exposure in energy or water or data or to flooding or extreme heat apply to whole cities and regions. Do we want businesses to drill their own boreholes or to encourage investment in a diversified regional water supply system? Do we want power plants to build flood control walls around their facility, or to back efforts to use riparian wetlands to increase both upstream and downstream water retention?
We need the private sector involved in adaptation and resilience. We also need to define their role and relationship relative to other actors as we make larger decisions about economic resilience more broadly. Businesses often are heard more carefully by policymakers than other actors about issues and needs to address. I hope that most businesses see their commitments extended to the communities where they work, to the families of their employees, to the ecosystems that sustain their local environment. The voices of businesses in these choices should be part of a harmonizing chorus.
John Matthews
Corvallis, Oregon, USA