3 critical takeaways from Davos 2020 and predictions for 2021
14 February 2020 Sustainability
Clim8 Invest’s CEO, Duncan Grierson, shares his thoughts on Davos 2020 and predictions for Davos 2021.
It has been almost 50 years since the first Davos conference in 1971, later evolving into the official World Economic Forum in 1987. And for the first time since that gathering, climate change has finally climbed to the top of the agenda. Many would argue that this should’ve happened 5 or even 10 years ago, but at least it has reached the top now.
Of course, the climate crisis has been impossible to ignore over the past year. 2019 was the second hottest year on record, extreme weather events have become much more frequent, and Australia has been ravaged by wildfires, made far more likely due to a rise in average temperatures. In many ways, the WEF had no choice; they had to make the climate crisis a top priority this year.
But what was the outcome? As the world’s political and business leaders converged on the stunning Swiss resort, did they actually make any headway? What can we learn from this first-of-its-kind WEF conference?
Here are our top takeaways from Davos 2020 and predictions for 2021.
1. Money talks – the rising fiscal risks of climate change
One of the key climate conversation drivers at Davos this year was the ever-rising fiscal risks of the climate crisis. Some of the world’s largest asset managers are beginning to wake up to the significance of climate change and how it will affect international markets over the next decade and beyond. In a statement just before the conference, Blackrock said that climate change has led them to a “fundamental reshaping of finance” and a complete rethink of its strategy as fossil fuels, among other areas, become riskier. Meanwhile, the IMF announced that the crisis “already endangers health and economic outcomes.”
Clearly, there is a need for a “better capitalism”, a term widely used at this year’s Davos. Investors and corporations wield huge power and the ability to enact a new approach; however, the question stemming from this year’s Davos is: will they use this power responsibly or not? Or will governments have to step in?
Either way, there’s no denying the financial risks now. This year’s conference has done a good job at highlighting this. In turn, this focus should provide valuable context as we strive for a more sustainable global system. Next year, we will see this area become even more prominent. Sustainable investing will have further grown in importance.
However, this year the WEF merely talked about the shift towards better investments; it’s time for action to back up the words. This clear takeaway from Davos 2020 helps shape predictions for 2021. Next year, they should be reviewing how far we have shifted, and how this drive for sustainable investing will only increase in the years to come.
2. Greta vs. Trump
We live in truly bizarre times. This year at Davos, one of the most powerful men in the world, US President Donald Trump, went toe to toe with 17-year-old climate activist and global green icon Greta Thunberg. Who could have predicted this 10 years ago?
Greta’s message to the WEF was clear. The science from the IPCC shows an urgent need to act now and stop emissions. Strong words here:
“Let’s be clear. We don’t need a ‘low carbon economy’. We don’t need to ‘lower emissions’. Our emissions have to stop if we are to have a chance to stay below the 1.5-degree target. And, until we have the technologies that at scale can put our emissions to minus, then we must forget about net zero. We need real zero.”
This was followed by three demands:
- Immediately halt all investments in fossil fuel exploration and extraction
- Immediately end all fossil fuel subsidies
- Immediately and completely divest from fossil fuels
Trump hit back by criticising Greta and her fellow activists, ridiculing them and their demands as “prophets of doom and their predictions of the apocalypse”. This was then backed up by Steven Mnuchin, US Secretary of the Treasury, who highlighted how Greta wasn’t a qualified economist and therefore shouldn’t be commenting on the matter. Clearly, the current leaders in the US aren’t going to move on the issue.
If a green-focussed Democrat, such as Sanders, Warren or Bloomberg, is elected later this year, this would provide a much stronger platform for further climate action. It could be argued that the upcoming US Presidential election in November is the most important ever. While Trump’s continued climate inaction was one of the key takeaways from Davos 2020, predictions for 2021 depend dramatically on the election’s outcome.
3. The science is brutally clear, and the WEF knows it
In 2018, the IPCC said that the world had a limit of 420 gigatons of carbon to emit if we are to have a 67% chance of keeping warming below 1.5 degrees. This figure is now down to 340 gigatons. As a result, warming over 2.0 degrees is looking more likely than ever before. This is highly distressing, but there is hope. The good news is that this Davos was like no other. Meaningful commitments are finally being made. For example, even the Trump-led US is joining the One Trillion Trees Initiative, which could make a “huge difference if we do it right”. In the face of overwhelming scientific evidence, the penny has seemingly (finally) dropped for more leaders than last year, causing perhaps the most sombre mood at the conference in recent memory. However, there is still a very long way to go, and urgent action is needed, but at least there’s no dodging the topic now. The scrutiny has never been higher, largely thanks to the efforts of relentless activism, brilliant scientific research and bold financial moves.
As we look ahead, we can expect even higher scrutiny and pressure on leaders to back up their words from this year. The calls for sustainable investing, divestment from fossil fuels, better food systems, and innovations in transport will be even stronger. Let us hope that when Davos 2021 comes about, we’ll have seen far more action than words, and stronger, smarter leadership from all countries.