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The climate for change in 2020

Wai-Shin Chan, Head of HSBC’s Climate Change Centre

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Five key issues to watch

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Wai-Shin Chan
Head of Hsbc's Climate Change Centre

This year was supposed to see countries and companies focus on raising ambition levels to counter climate change. However, the global climate process backtracked in 2019. No major emitter made ambitious pledges at September’s Climate Action Summit and the December Climate Change Conference in Madrid failed to finalise Paris Agreement guidelines.

The leftover work for 2020 includes seeking consensus and resolving the policy framework – before thinking about ambition.

Until now there has been a simple mismatch between the urgency of addressing climate change and insufficiently ambitious policies. But we think 2020 will see the mismatch become much more complicated as five key issues – politics, science, impacts, business and awareness – move in different directions and at different paces.

Politically, some countries are pursuing ‘climate nationalist’ rather than ‘global collectivist’ policies, resulting in discord and dissent over the Paris Agreement goals of reducing emissions.

And although the advancement of climate science should highlight the urgency to act, it is also revealing that significantly deeper changes to the global economy are required. Some countries are thus ignoring the science to avoid responding accordingly.

Meanwhile climate-related events are impacting all regions with fires, floods, unseasonable temperatures or extreme weather while records are now seemingly broken in quick succession.

Business leaders are increasingly discussing climate matters: that might be a result of public, consumer and employee pressure, but pledges do not always translate into company strategy or targets.

However better understanding of the science, direct experience of climate impacts, and frustration with the slow pace of change at a political and corporate level has raised public awareness.

Without being able to separate political developments from global climate ambition, 2020 faces a big uphill challenge. November’s climate negotiations in Scotland must conclude the Paris rulebook and raise ambition levels through pledging to stricter climate targets.

The hope is that if one big emitter pledges to raise its ambition levels, others will follow. But while 73 parties signalled intentions in Madrid to increase their 2030 targets this year, they account for only around a tenth of global emissions. The US has already announced that it will withdraw from the Paris Agreement on 4 November 2020.

Parties to the Paris Agreement have been asked to detail strategies for long-term low greenhouse-gas emissions this year but some are reluctant because of the potential economic and political disruptions that might follow such policy change.

So the gap between where we are and where we should be on greenhouse-gas emissions is getting wider with little sign of change.

It means even deeper reductions are now required to get back on track, requiring tougher policies by both countries and companies. Global emissions would need to fall 25 per cent to limit global warming to the 2°C pathway by 2030, and by 55 per cent to achieve the preferred 1.5°C.

But as the general public becomes more aware of the need for climate action, we believe that 2020 will see even more pressure applied to institutions, whether public, private, or non-profit. It may take time, but the seeds of change are being sown.

First published 6 January 2020.

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The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s) whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Wai-Shin Chan, CFA

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