Investors and experts scrutinise wealthy nations for falling short in combating climate change, with financial and legal consequences looming as per ASCOR study
Investors in government debt, who are concerned about climate change, are closely examining how countries are reacting to rising global temperatures. They are increasingly noticing that rich countries are not doing enough to contribute to the fight against global warming.
According to the Assessing Sovereign Climate-related Opportunities and Risks Project, wealthy countries are not aligned with the 1.5C future based on 2030 national pledges for cutting emissions. The review of 70 countries’ emissions and policies shows “no overwhelming trend” that rich countries are not contributing to tackling climate change as per the Bloomberg report.
As 2024 is on the track to become the hottest year as global temperature touches 1.5 Degrees Celsius with global temperatures reaching 1.5 Degrees Celsius above pre-industrial levels as per a report from the World Meteorological Organization released earlier in November, the urgency to act is clear.
“Investors need to see more credible action by governments,” said Victoria Barron, Chief Sustainability Officer at GIB Asset Management and ASCOR co-chair, in a statement. “Investors play a pivotal role in driving capital” and “these flows require robust and tangible national climate and energy policies,” she added.
Despite this growing concern, investors believe that the financial markets don't completely account for the risks of climate change. Researchers are now looking into something that they’re calling the “climate-sovereign debt doom loop," which is a way to estimate how climate change could increase costs for countries, especially when it comes to their national debts.
ASCOR’s findings come at a time when countries are facing legal threats for allegedly failing to protect their citizens from raging fires and floods. The International Court of Justice will hold hearings next month.
The outlook is not improving in the US where President-elect Donald Trump is expected to withdraw from the Paris climate agreement. He also nominated a fracking-company executive to head the Energy Department.
In Europe, corporate pushback is testing policymakers’ commitment to sustainability initiatives, already under attack because of what’s seen as high administrative costs.
However, some countries are making progress. Costa Rica and Angola stand out for being close to hitting their 1.5C benchmarks, the report said.
Meanwhile, less than 20 per cent of countries have committed to halt the approvals of new coal, oil and gas production and more than 80 per cent don’t have transparent and credible commitments to phase out fossil-fuel subsidies.
Climate financing too is lagging behind. More than 80 per cent of wealthy countries aren’t contributing their proportional share of an annual USD 100 billion international climate finance goal, escalated to USD 300 billion at the COP29 climate summit in Baku, as per the Bloomberg report.
Demand for more and consistent information led ASCOR to expand the project’s scope beyond an initial 25 countries to the 70 countries.
On the positive side, 40 countries now have in place legal frameworks for addressing climate change and three-fourths have plans for managing physical risks, according to the researchers.