In 2015, the United Nations Climate agreement set out a global framework to avoid dangerous climate change by limiting global warming to well below 2°C and pursuing efforts to limit it to 1.5°C.
This would be akin to going back to the pre-industrial years. The agreement charted a fresh course in the effort to tackle global climate change.
World leaders committed to balancing greenhouse-gas emissions in the second half of the century, so that the total of greenhouse gasses emitted from human activities reduces to zero. Consequently, more nations, companies and institutions are announcing net zero targets.
It is universally agreed that the cost of climate inaction far outweighs the cost of reducing carbon pollution.
A Stanford University study finds that inaction could cause a stunning 30 percent loss in future global economic output — whereas the world’s scientists and governments have concluded that even the most aggressive climate action costs under 0.1 percent GDP.
Since 2000, global warming has cost the United States and the European Union at least $4 trillion in lost output and tropical countries are five percent poorer than they would have been without climate change impacts, according to Stanford research.
Low interest rates
On the other hand, achieving net zero emissions by mid-century would cost an estimated $1 trillion-$2 trillion (774.83 billion pounds-1.55 trillion pounds) a year of additional investments, or 1-1.5 percent of global gross domestic product.
This is based on a report by the Energy Transitions Commission (ETC). It said the additional investments required “are easily affordable, given current global savings and investments, particularly in the prevailing macroeconomic context of sustained low-interest rates.
Africa accounts for only 2–3 per cent of the world's carbon dioxide emissions from energy and industrial sources.
While the African region has made a negligible contribution to the greenhouse emission problem, the international community largely expects Africa to respond in much the same way as the rest of the world.
Africa is also home to 14 of the world’s forest cover which serves as carbon sinks, it plays a vital role in achieving global net zero.
Standard Chartered Bank recently announced new targets to reach net-zero carbon emissions from its financed activity by 2050, including interim 2030 targets for the most carbon-intensive sectors.
By the end of 2022, we expect all clients in carbon-intensive sectors such as power generation, mining and metals, and oil and gas to have a strategy to transition their business in line with the goals of the Paris Agreement.
We expect them to report their current greenhouse gas emissions preferably in line with the Task Force on Climate-related Financial Disclosures.
We will stop financing, at an individual client entity level (e.g. subsidiaries), companies that are expanding in thermal coal. Ongoing provision of financial services to the client group will be subject to enhanced due diligence.
We aim to reduce absolute financed thermal coal-mining emissions by 85 percent by 2030, in addition to the existing prohibition on financing new or expanding coal-fired power plants. By 2030 we will only provide financial services to clients who are less than five percent dependent on revenue from thermal coal.
However, we are cognisant that, before the start of COP, more than 50 percent of the 59 footprint markets do not have a commitment to reach net zero by 2050.
Our commitment sets to catalyse the achievement of the targeted goals on emissions and is a recognition of the pivotal role that financial institutions can play in the transition.
We are uniquely placed to help by directing capital to markets that have both the greatest opportunity to adopt low-carbon technology, and some of the toughest transition-financing and climate challenges.
To guide organisations, we have published a methodology to calculate emissions and set our emission targets at sector level.
As standards and methodologies evolve, and data quality and availability improve, we will refine our emissions calculations further
In addition, we have identified three specific levers to achieve our net zero targets.
Firstly, we will support our clients on their decarbonisation journey by providing transitional, green financing and counsel.
Secondly, we will continue to engage with our clients to better understand their transition plans.
This will allow us to assess and balance both their intent and ability to transition to lower-emission technologies.
Finally, as part of our journey to net zero, we will be looking to engage with and promote companies that are at the forefront of solving the technical challenges of a low-carbon economy.
Achieving a just transition —one where climate objectives are met without depriving developing countries of their opportunity to grow and prosper — will require capital and specialised support. African countries, especially the large oil producers, lack the means to fully transition from fossil fuels.
The sustainable way forward is hinged on adapting alternative energy and gradually increasing its share in the race to meet the global targets in 2050.
The writer is regional head of client coverage, corporate, commercial & institutional banking, Africa & Middle East at Standard Chartered Bank