In this blog, we discuss just a few of the opportunities we have in dealing with this crisis and yet the ongoing challenges we face in this regard.
Harnessing AI for a Greener Future
Collecting timely and accurate data on GHG emissions continues to be a hurdle for both the public and private sectors. Financial institutions deal with this issue daily as they seek to assess the climate impacts of their client financing, their own operations, and their so-called “green” investment offerings.
The good news is that artificial Intelligence (AI) and climate technology have revolutionised our approach to some of environmental data challenges. By enabling the analysis of vast datasets, AI supports more informed decision-making and contributes to both PTNZ planning and the development of innovative financial products tailored to sustainability. The integration of AI in climate research and modelling allows for more accurate forecasting of carbon prices and the assessment of climate risks, thereby facilitating the creation of financial instruments that can incentivise carbon reduction efforts. Gartner’s identification of “sustainable technology” as one of the Top 10 Strategic Technology Trends for 2024 underscores its importance.
The World Economic Forum’s Davos 2024 meeting emphasised the impact of AI and climate technology on global growth, security and cooperation, suggesting that these technologies are at the forefront of shaping a sustainable future. The forum served as a platform to generate new ideas and develop partnerships aimed at improving outcomes for people, economies and the planet, reinforcing the idea that technology and sustainability can be deeply interconnected.
Urgent Action Needed and Yet Inconsistent Government Responses
In the past year, the global response to the climate crisis has been marked by alarming trends as average global temperatures have surpassed the critical 1.5°C threshold, climate-related disasters are on the rise, and whilst nature-based solutions have increased, they fall short of the more ambitious 1.5°C goal. The Guardian article outlines the IPCC’s “final warning” highlighting the dire need for immediate and significant action to prevent irreversible damage, as billions are already facing severe climate impacts and water scarcity.
China is making progress in the adoption of renewable energy through public funding, yet their dependence on coal still accounts for more than 25% of the world’s emissions. And while India is making significant efforts to reduce carbon emissions, they are concurrently dealing with record heat and flooding driven by climate change.
The global response to the climate crisis has seen both advancement and challenges. Looking at just the UK and the US, we see mixed results. The Gov.uk 2023 climate report outlines progress was made as the UK government acted on 85% of the Climate Change Committee’s priority recommendations, demonstrating a commitment to reducing emissions by at least 68% by 2030 compared to 1990 levels. On the other hand, London Mayor Rishi Sunak announced in September that he was standing down from earlier climate goals and a divided US Congress is pushing back aggressively on the climate commitments made by President Joe Biden.
Misaligned Regulatory Landscapes Across the Globe
The global regulatory environment in 2023 has been characterised by rapid evolution and misalignment, presenting significant challenges for businesses worldwide. According to KPMG, companies across all industries continue to navigate a complex landscape of regulatory changes, emphasising the critical importance of global alignment both on standards and on the cross-border collaboration needed to drive meaningful change.
The Green Divide
There is a growing optimism about the potential for climate-related finance flows, particularly in regions like Latin America and Asia, where subsidies and incentives are creating strong tailwinds, as outlined by BCG. However, this enthusiasm is tempered by concerns over the slow and intricate rollout of these financial mechanisms, leaving investors with lingering questions about their viability. In addition, whilst private equity and venture capital firms recognise green finance as critical to their business planning, there is a notable divergence within the sector - with some viewing it as less integral to their overall business strategy.
Conclusion:
Technology, particularly AI and climate tech, is catalysing our response to the climate crisis, with double materiality analyses emerging as a crucial tool for understanding business impacts. Despite the challenges of a global regulatory environment in flux, both the public and private sectors need to assume responsibility for addressing the indisputable impacts of climate change. Consumer awareness on issues like packaging and food waste is on the rise, influencing investor attitudes towards green business practices. Financial institutions are at the very fulcrum of dealing with the environmental impact of their decisions on financing -- and indeed how they operate on a daily basis. A greater level of cooperation and collaboration across the banks, regulators and public policy makers would go a long way toward achieving more effective solutions to adverse climate impacts.
How Delta Capita can help
Delta Capita offers Regulatory and ESG Consulting and Technology Services that provide insight, capacity, and expertise to help companies maintain their commitment to global sustainability objectives and comply with regulatory requirements. To find out more about Delta Capita’s Risk and Regulatory Consulting Services or ESG capabilities, today.
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