Capital Markets Corporate

January 31, 2020

Davos – Climate Action or Hot Air?

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The theme for the fiftieth edition of the World Economic Forum’s annual meeting in the Swiss ski resort of Davos – Stakeholders for a Cohesive and Sustainable World – was a sign of the times.

The theme was a departure from previous years and an indication that climate change, the environment and sustainability have moved to the top of the global business agenda.

A leopard never changes it spots though, and those who attend Davos every year were under pressure to prove their green credentials. The line of private jets parked at Zurich airport suggested that some had fallen at the first hurdle, while others were more determined to showcase their commitment to combating climate change.

A large swathe of corporates made major announcements that aligned their companies with the green agenda, for example, the Big Four accounting groups agreed to the International Business Council’s new framework for measuring environmental and social impact.

Meanwhile, teenage climate activist Greta Thunberg challenged investors to completely divest from fossil fuel investments, which drew the ire of US Treasury secretary Steven Mnuchin who highlighted the economic disruption that such a change would cause.

In truth, there was no eureka moment for the topic of business and sustainability in Davos. On both sides of the argument, there was only hot air.

It is extremely naïve to think that investors would switch off investments in fossil fuel companies overnight – it would trigger a financial crisis like no other. But at the same time, large corporates sitting on their hands while talking about the need to do more to combat climate change no longer deserve their seat at the table.

Perhaps the most significant developments were found not inside the Congress Centre, but on the outskirts of the meeting on the main Promenade, where several blended finance vehicles with committed funding to tackle these issues were launched.

BlackRock provided the first $100 million of funding for the Climate Finance Partnership, along with France, Germany and the Hewlett and Grantham charitable foundations. Meanwhile, Instinctif Partners client Bamboo Capital Partners launched its own investment platformSDG500 ­– as part of a coalition of private and public partners, including United Nations entities and non-governmental organisations to raise $500 million to achieve the Sustainable Development Goals (SDGs).

Ultimately, in the next decade, companies will be judged on their actions and their contributions towards the SDGs, not their keynote speeches.

Businesses which are already positive contributors to environmental or social causes must not rest on their laurels and they should be communicating their impact on the planet to the media, investors and other stakeholders. However, they must be wary of accusations of greenwashing, which would permanently damage their reputation.

In many cases, companies who get the basics right can navigate this reputational challenge. The content they produce must clearly articulate their impact and how it is measured. It is the showing and telling which will be most crucial in the decade ahead.

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