Rewiring for Success – Our values based economy

Mark Manning, Mark Gough, Susy Glass, James MacPherson, Rupert Pearce, Zsuzsanna Schiff, David Marriage, Christian Heller, Sarah Reay

Alarm bells should now be ringing for all of us:
On 17th November 2023 the global average daily temperature breached 2°C warming relative to pre-industrial levels for the first
time. And in February 2024 the 365-day average warming level exceeded 1.5°C for the first time. These striking statistics underscore the message in the UNFCCC’s 2023 global stock-take report that we are off-track and need “urgent action and support to keep the 1.5°C goal within reach and to address the climate crisis in this critical decade”.

We need to make business and finance a positive and regenerative force to avert catastrophe – and to do so fast. Substantial progress has been made towards enabling systemic change across a range of initiatives. But boards and key decision makers are often hamstrung by lack a compelling business case to move early on climate and sustainability, especially against a backdrop of challenging economic headwinds. And without an obvious reward for taking early action or a clear path to regulatory change or new capital market norms, individual companies are reluctant to be ‘first movers’.

Change-makers from more than 20 organisations came together at Chartered Accountants’ Hall in February 2024 to explore how we can tackle some of these headwinds and unlock systemic change by effectively valuing sustainability impacts in business and finance*. The discussions highlighted three key barriers to a common system response:

1: Lack of societal voice, engagement, and buy-in. Information on both societal sustainability preferences and the sustainability
characteristics of products and services is insufficient and unreliable. Consumers are therefore not offered the sustainable choices they need and the market is not operating effectively. The same is true in the political realm, as frictions in the electoral process lead to missed opportunities to align policy with widespread support for climate action.

2: Mis-valuation, risk mispricing, weak incentives, and uncertainty regarding legal duties in business and finance. Organisational factors including short investment timelines and inappropriate performance criteria, shortcomings in knowledge, data, and capabilities (e.g. in climate scenario analysis), and lack of clarity over the legal and fiduciary duties mean that companies and financial services firms are often underestimating or ignoring – the rising economic, human, and environmental costs of climate
inaction. As a result, finance is not yet creating a sufficiently strong impetus for change in the real economy and boards and key decision makers do not see a compelling case to accelerate their efforts.

3: Insufficient policy clarity, coherence, and commitment. We lack clear and coherent national (and sub-national) policy frameworks for action on climate and wider sustainability. This leaves corporates and capital providers with insufficient confidence to commit
capital at sufficient scale to deliver on climate goals.


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