29 June 2020: As part of this week’s London Climate Action Week, Andrew Ratcliffe, Chair of ICAEW’s Sustainability Committee, asks whether lockdown will lead to sustained action by individuals, government and business.

Climate change as a state of mind

I think the greatest determinant of whether or not we will be capable of clearing up the mess we have made and combating climate change effectively is our capacity for empathy and compassion.  I don’t mean sympathy just for each other now, but concern for the suffering of future generations who will experience the full consequences of our actions if we fail to tackle climate change.

Cast your mind back to those early weeks of lockdown in March and April when not only the economy but seemingly also our minds decelerated as the noise of airplanes and traffic was replaced by the sound of birdsong. There was a wish to rethink our relationship with others, as well as with nature and the planet.

We have been here before. Do you remember the mood at the time of the London 2012 Olympics and the volunteer games-makers? Or the compelling Earthrise photograph taken from Apollo 8 which showed how precious, and yet vulnerable, our planet is? There is evidence, as we emerge from lockdown, that people have a newfound sense of connection with their local communities, are more conscious of the need to safeguard their personal wellbeing and, not before time, an increased recognition of the need to act on climate change.

But will this persist? Or will it evaporate like the post-Olympics euphoria? Will the impact of the pictures of London landmarks deserted during lockdown fade as they become as familiar as the photograph of Earthrise? The end of the Second World War – much longer and more severe than the Coronavirus pandemic – was followed by fundamental change, with the foundation of the Welfare State and the NHS; but can we now make climate action lemonade out of coronavirus lemons?

Whatever the wish for new connections with each other, we do not start from a good place.  We had a fractured society going into the crisis and, far from us being “all in this together”, the lockdown has further exacerbated those inequalities: in incomes and employment, living and working conditions in lockdown, children’s education, the effects on our mental wellbeing and our physical vulnerability to the virus itself now and in the future.

Mobilising consumer preference

Despite the clearer skies over the last three months, we have not achieved nearly enough. The International Energy Authority estimates that CO2e emissions will reduce by 8% in 2020 but, even if that reduction were to be repeated every year from now until 2050, we would not get to the target of net zero due by then. Additionally, there is clear danger of an immediate rebound in emissions as lockdown restrictions are easing.

There is a yearning to return to some form of normality. Shops, restaurants, offices and entertainment are slowly reopening and international holiday travel will be resuming soon too – possibly not as much as before, but still too much in terms of the effect on climate. How can individual consumers make informed decisions about the climatic effect of their personal actions? If there is an opportunity to mobilise this new sense of climate responsibility, it is to provide consumers with better information on the carbon effect of their spending and travel, at least qualitatively. If that changes their buying preferences, then businesses will respond.

What government can do

Can governments be our lemonade makers? They will certainly be more powerful economic actors in the post-crisis world. The UK Government’s loan guarantees and job retention schemes have effectively staved off bankruptcies and protected many jobs, although we are yet to see how those can be unwound. The virus itself has forcibly reminded government of its primary duty to keep people  safe.

In May, in a video message for COP26 – the global climate conference that the UK will host in Glasgow next year – the Prime Minister, Boris Johnson, said that he looked forward to a “fairer, greener more resilient global economy”. ICAEW joined with many others in urging that health, wellbeing and job creation should be put at the heart of the recovery plan.

As part of the UK Climate Assembly Interim briefing, “Covid-19, recovery and the path to net zero”, 79% of the Assembly agreed that "steps taken by the government to help the economy recover should be designed to help achieve net zero.” There needs to be rapid action on home insulation, carbon taxes, electric vehicles and improved broadband to make this a green recovery that cuts emissions permanently.

But there are two immediate priorities for the government: stimulus to get economies firing again, closely followed by consolidation to ensure public finances are stabilised. Stimulus is likely to be a combination of more infrastructure – the “shovel ready” projects – more job support measures and encouraging the resumption of consumer spending. I fear that this will result in us reaching for the most easily available sources of energy, which we all know means hydrocarbons, and increased unmediated consumer spend without regard for its environmental impact. It is imperative that the important is not supplanted by the urgent. More widely, our current political environment and the escalating conflict between the two greatest CO2 emitters – China and the US – is not conducive to the co-ordinated and effective global responses that we need to combat climate change.

Business as a driver to tackle climate change

So that leaves us with business and investors and regulators to whom they are accountable. There is evidence that, even before the crisis, investment managers were showing increased sensitivity to the risks of climate change in deciding where to invest – not least in response to the wishes of increasingly demanding pension funds. In his annual letter to investors in January, BlackRock’s CEO Larry Fink focused on climate change and announced that the company launched a number of initiatives to “place sustainability at the centre of [its] investment approach”. This is an important milestone. 

There is much that business can do, and will need to do, to change the ways they operate. Most significantly, as the UK went into lockdown in March, businesses asked their employees to work from home and by April about half of employed people in the UK successfully worked from home. If this change were to be preserved, even if only partially, it would substantially reduce transport emissions. However employers also need to be aware of the increased risk of social isolation that this could bring. 

Better information is vital to tackle climate change

There are even more fundamental challenges though. For the first time in its history, the 2020 World Economic Forum Global Risk Report was dominated by environmental issues, featuring as the top 5 risks by likelihood and highly in the top 10 risks by impact. The economic shutdown can only have reinforced such changes in view. You can almost hear the rustling as corporate risk registers are dusted off to give greater prominence to resilience, especially for supply chains, and the realisation that planning needs to recognise longer-term risks more seriously.

In order to make any meaningful changes, we need reliable and relevant information of increasing sophistication. In its report last May, The Task Force on Climate-related Financial Disclosures showed the continued progress in companies disclosing information on climate-related risks and opportunities. This is valuable and investors such as BlackRock will increase the pressure on companies to continue such progress and discriminate against those that do not. But climate action lemonade will be made only when this information is robust and used to translate into better decision-making, so other frameworks such as the Natural Capital Protocol and the United Nations Sustainable Development Goals are also important.

What is the solution?

Even if we wanted to we wouldn’t be able to stop all CO2e emission activity today. I for one do not wish it as it would surely cause even greater misery than we have seen over the past three months. While we need greater empathy with future generations we cannot lose our concern for the present one. A careful and thoughtful migration to a new economy is needed, progressively drawing harmful activity to a close while expanding greener alternatives to take their place and exposing the ineffective or inefficient along the way. ICAEW is determined to play its part. The disclosure and use of better information need the skills of measurement, control and enabling accountability which have been at the core of our profession since Luca Pacioli opened his first set of books.