GO
Loading...

The climate change wake-up call for business?

Friday, 27 Sep 2013 | 7:22 AM ET
Getty Images

At his inauguration in January, Barack Obama said he would make climate change a corner-stone of his second term, arguing that a "failure to do so would betray our children and future generations."

Now, with a new U.N.-sponsored report highlighting the link between human activity and climate change, the world's governments and businesses face renewed pressure to balance the longer-term need to rein in pollution with more urgent priority of encouraging growth.

The new report from the Intergovernmental Panel on Climate Change's (IPCC) argues that it is "extremely likely" that human activity has been the main cause of the global warming observed since the 1950s. This is the IPCC's strongest indication yet that human behavior is the root cause of climate change.

"Our assessment of the science finds that the atmosphere and ocean have warmed, the amount of snow and ice has diminished, the global mean sea level has risen and the concentrations of greenhouse gases have increased," said Qin Dahe, co-chair of the panel.

(Read more: Global warming 'extremely likely' man-made: climate panel)

The IPCC report is important because it forms the scientific basis of U.N. negotiations on a new climate deal. The second report from the IPCC formed the basis in the Kyoto protocol in 1997. The panel's last report preceded the unsuccessful 2009 Copenhagen climate conference, where no concrete measures were agreed..

Governments are meant to finalise an agreement in 2015; however, it's not entirely clear how governments will digest the full report - due on Monday - and whether they will commit to cutting the amount of emissions the scientists call for.

Jonathan Grant, director of sustainability and climate change at PricewaterhouseCoopers (PwC), says that there is hope for a credible deal between governments after the failure of Copenhagen four years ago.

"I think there is some chance there will be a more comprehensive deal in 2015 with more countries making emissions targets," Grant said. However, he added, "There are concerns…there is the view in business that its unlikely governments will adopt targets that are in line with the ones called for by scientists in the assessment."

While U.S. President Barack Obama made climate change a priority during his second term, some have argued that enforcing energy efficiency and cutting greenhouse gases will slow U.S. growth at a particularly fragile time.

(Read more: Fighting climate change could come at a high price)

According to the Stern Review on the Economics of Social Change, U.S. gross domestic product will fall anywhere from two to four percentage points each year over the next 10 years due to potential job losses, manufacturing slowdowns and switching energy sources.

On the other side of the debate, former hedge fund manager and billionaire activist Tom Steyer has started a campaign in the U.S. to urge the administration not to approve the Keystone Pipeline, which would transport oil from Alberta, Canada to the Gulf Coast of Texas.

PwC's Grant said that, "I think in the short term there are pressures on politicians for growth, pressures related to jobs. The financial return of companies in the short term are a higher priority than some of these longer term considerations."

Many companies have already begun changing their strategies on the basis of climate change and the U.N. report should provide businesses with clear indications of the risks posed: global supply chains pass through areas which could be hit by climate change and emerging nations are particularly at risk when it comes to preparing for the worst that global warming could present.

Carole Ferguson, senior research analyst, at SP Angel investment bank, said that, "Companies have been reporting for some time on how climate change risks can impact their business and the well-run companies have put sustainability strategies in place to reduce environmental impacts where they can."

(Read more: Forget the lottery, invest in climate change solutions)

However, Ferguson adds, all this planning has not led to any shift away from using traditional fossil fuels – recognized as one of the major causes of global climate change.

Ferguson said, "in terms of mining and commodities, the fall-off in thermal coal demand which seemed to be obvious has yet to come through."

Grant said that renewable energy and investment in efficiency were clearly going to be part of the eventual solution, but that would depend on what is agreed on by the U.N. at the next climate summit.

"The report will not have an immediate impact on direct investment in low-carbon technology, but what the politicians agree on may change that."