The Climate Is Changing

In Greek mythology, Sisyphus was a king who was punished for chronic deceitfulness by being forced to roll a huge boulder up a hill. Each time he got near the top, the gods would roll it back down. He was forced to keep repeating this action for all eternity. This metaphor could also be used to illustrate the lack of progress governments have made forging a path forward on a climate change treaty.

However, if one takes a step back and connects the dots that have been going on in and around the topic of climate change, another perspective begins to emerge. I believe that the climate is changing, where we are approaching a tipping point where there is sufficient momentum to finally push the boulder up the hill. And, when this happens, it will upend traditional business models and create an economy that picks winners and losers based on their ability to find profitable ways of doing more with less--less fossil fuels and less natural resources.

A convergence is emerging

To a large degree, the events that took place last month inside the UN Climate Summit are not where the momentum is coming from. It's coming from diverse segments in society, not being led government. This confluence of interests is beginning to change the climate on climate change.

More companies are speaking out

Over the past year or so, we've begun to see a greater willingness by certain industries to speak out in favor of action on climate change. No longer willing to remain silent, a growing movement of companies is beginning to talk about the risks associated with climate change and signal their support for some type of carbon pricing. According to an announcement made by the World Bank during the U.N. Climate Summit last month, it had received pledges of support for carbon pricing from 1,000 companies and investors, while 31 companies committed to being "carbon pricing champions."

Additionally, companies -- mostly consumer brands -- are forming coalitions with environmental organizations that are becoming incrementally more visible in communicating their belief that it's time for governments to help accelerate the transition to a lower carbon economy. One such organization that formed over the summer is We Mean Business, a "coalition of coalitions" representing a diverse group of global and U.S. based businesses, including General Motors, UPS, Nike and Sprint.
Last month, the organization released its first report titled, "The Climate has Changed." Among its recommendations are specific public policy goals--including the enactment of a carbon tax.

Companies are calculating carbon costs

More than 150 corporations have filed information to the CDP that indicates that they have already determined an internal cost of carbon. These companies cut across many different industries and include such businesses as Dow, Microsoft, Google and energy companies like Chevron, ConnocoPhillips and Exxon Mobil. "The risk of climate change is clear, and the risk warrants action," is not a quote from a niche lifestyle brand -- it comes from the VP of Strategic Planning, William Colton, of Exxon Mobil.

Millennials are coming

It should be no surprise that the generation that grew up with school recycling drives and Earth Day celebrations is becoming engaged in this issue. This demographic, which will be the largest driver of spending in the US in three years and make up three-fourths of the global workforce in 10 years, places a greater value on social and environmental concerns both when purchasing a product and choosing an employer. Fully 72 percent of them rank the environment as the top issue with which they want businesses to engage. Recognizing this, several dozen corporate competitors, including Pepsi, Coke, Google, Facebook and Twitter, joined forces this month to reach out to Millennials to encourage them to become activists and speak out against climate change.

There's no reason to think that they will set aside these beliefs when they are running companies, setting public policy or driving investment strategies. Rather, look for millennials to transform business in a way that reflects their values -- both from the inside as C-suite executives and on the outside with their purchasing power.

Investors are beginning to look at climate risk

There is a growing community of financial institutions taking action on climate change. Some institutions are allocating capital and steering financial flows towards more low carbon activities. Others are taking steps to change corporate behavior; influence policy outcomes; and build the data, tools and transparency required to embed climate change into how the market functions. Some are even beginning to limit their investments in what is known in the finance community as "stranded assets." In other words, as more regulation is put into place to address climate change, fossil fuel assets like coal may be deemed "unburnable" and left in the ground, thus rendering them a stranded asset on a balance sheet and potentially creating considerable financial risk for investors.

Growing divestment from fossil fuel companies

A small but growing number of colleges and universities have begun to divest from fossil fuels, most notably Stanford University, whose endowment is valued at over $18 billion. This movement scored a symbolic victory of sorts this month when the Rockefeller Brothers Foundation, an $860 million philanthropic organization named after the family's oil barons, announced that it will support the divestment movement.

Adding to this movement are key vestiges of the anti-apartheid movement who consider climate change a social injustice inflicted on the poor. According to Desmond Tutu:

The most devastating effects of climate change - deadly storms, heat waves, droughts, rising food prices and the advent of climate refugees - are being visited on the world's poor. Those who have no involvement in creating the problem are the most affected, while those with the capacity to arrest the slide dither. Africans, who emit far less carbon than the people of any other continent, will pay the steepest price. It is a deep injustice.

No Longer "if" but "when"

Taken in isolation, each of these elements is significant but not sufficient to move the needle on climate change. But, taken together, they send a clear signal that we are moving away from business as usual. The People's Climate Change March, which drew nearly a million people worldwide before the U.N. Climate Summit began, was a significant public statement that climate is not a marginal issue. However, it is not just grassroots mobilization that matters in shaping the politics of climate change. Equally as significant is the growing number of investors and businesses that are beginning to make their voices heard too. A low carbon economy is no longer just an idea being promoted by activists and academics; it is something mainstream investors and businesses are beginning to take seriously.

Will we get a climate treaty in Paris next November? Who knows. It certainly would accelerate the transition to a lower carbon economy. And, it would begin to clear up the regulatory uncertainty that is preventing large scale investment by companies who stand to profit from this transition. But, action on climate change is no longer if, but when.

The climate is indeed changing, bringing with it new challenges and opportunities for business. Companies that accept and plan today for these realities are likely to be the ones that prosper and maintain a license "to grow" in an economy where dwindling availability of natural resources and increased urbanization in developing countries will shape future patterns of profit and loss while creating new and smarter markets.