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<span/>Throughout 2020,
countries continued to announce targets to achieve net-zero
emissions in spite of an accelerating pandemic and an historic
recession. With the inclusion of China and now the United States,
some 67% of global greenhouse gas (GHG) emissions are covered by
national statements of intent. At the same time, company net-zero
goals flowed throughout the year, and financial institutions
outlined stricter guidance for investing.
Although momentum for climate-related accountability,
measurement, and strategic portfolio testing is accelerating,
against what time horizons should investment plans be tested?
Hydrocarbons (oil, gas and coal) still make up 80% of primary
energy demand; although the installation of renewable capacity is
rising dramatically, the massive existing energy infrastructure
does not turn over quickly. What scenarios should be used to assess
future investments and divestments in order to achieve a smooth but
rapid transition? How can a transition serve shareholder interests,
as well as broad social and environmental goals?
The Task Force on Climate-related Financial Disclosures (TCFD)
recommends the use of scenario analysis, including those that
achieve the goal of keeping global temperature rise to well below
2° C by 2100. In the past two years, a sense of urgency has moved
the goal closer to achieving a 1.5°C pathway and net-zero global
emissions by 2050.
The IHS Markit low emissions cases provide for a short, but
realistic "bridge" from today's energy systems toward a 1.5°C path,
reflecting the time needed to see the results of stricter policies
and actions expected to be taken over the next several years. In
these cases, emissions rise somewhat from the 2020 recession
decline, and then plateau before moving lower.
To learn more about our executive
news for the climate and cleantech sectors, visit our page for
Executive Briefings: Climate & Cleantech.
