2020 was the year of climate pledges: among others, Japan, South Korea, South Africa and China promised to zero-out emissions by 2050 to 2060. In fact, none of the 10 largest economies will soon align with this goal (assuming President Joe Biden will reset US climate policy). There is growing consensus of the climate emergency in the finance world, too- the largest shareholder on the planet, BlackRock, has put its USD$8.7 trillion weight behind a powerful message to chief executives everywhere: we need to minimise emissions, which will require an overhaul to everyone’s business models. However, climate statements from BlackRock CEO Larry Fink and President Xi Jinping of China show how tricky climate terminology can be. Here’s how capitalism is struggling to understand the language of climate change.
Each year, Fink writes a “Dear CEO” letter. For the last two years, the theme of this letter has been climate change. In his latest message, he instructs companies to develop climate-compatible business plans based on their emissions data. He writes, “There is no company whose business model won’t be profoundly affected by the transition to a net zero economy- one that emits no more carbon dioxide than it removes from the atmosphere by 2050.”
However, a few paragraphs later, he defines his ultimate goal for companies to become “consistent with a global aspiration of net-zero greenhouse gas emissions by 2050,” replacing “carbon dioxide” with “greenhouse gas” without explanation. Carbon dioxide makes up only about 75% of the emissions contributing to global warming; methane, nitrous oxide, carbon monoxide and other gases account for the rest, creating confusion, albeit unintentionally. Nevertheless, it is important for companies like BlackRock to get its terminology correct as whatever BlackRock does has a huge impact on the financial and corporate sectors.
Another example of this terminology mixup is seen in Chinese President Xi Jinping’s announcement in September 2020 that the country would reach peak emissions by 2030 and become “carbon neutral” by 2060. However, his use of the word “carbon” is perplexing as it is often mistakenly used to refer to both carbon dioxide and overall greenhouse gases. However, if the Chinese president was indeed referring to only carbon emissions, this won’t be enough to tackle climate change. In fact, if their other gases were considered a nation, it would rank as the world’s seventh-largest emitter.
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China has yet to clarify its goal; does it intend to neutralise ALL planet-warming emissions or just carbon dioxide? An attempt by Bloomberg to contact the environment ministry for clarification was unsuccessful.
These are but two examples in a common misunderstanding of climate terminology by governments. According to the World Resources Institute, many European countries say that their goal is carbon neutrality, but their documents show that the target covers all greenhouse gases.
Ateli Iyalla, managing director of North America for CDP, a group advocating emission disclosures, says, “These are growing pains, as we translate the science into what it means for business and society. It’s important to use the right language and get the terminology right to send the right signals to the marketplace.”
Confusion with terminology could be a result of a shortage of climate expertise in the top ranks of businesses and governments. For example, according to a new study from the New York University’s Stern Business School, of the 1 188 board members of the 100 largest US companies, only three had climate expertise and only 6% offered broader environmental expertise. In the last US Congress, less than 10% of elected officials had scientific qualifications. In Britain, only 16% of members of parliament have backgrounds in science.
Ben Caldecott, director of the Oxford Sustainable Finance Program, says, “It’s revealing that a lot of financial institutions are thinking about climate goals, but they aren’t being exposed to climate scientists who can make sure they get the details right.”
It is very clear that to tackle climate change, rebooting global capitalism depends on new—and clear—operating instructions.
Featured image by: Flickr