The Roles of Stakeholders in the Net Zero Transition

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In order to achieve net zero, economies and societies will have to make significant adjustments. Governments, businesses, and enabling institutions can best support many of these adjustments by coordinating actions and by extending planning and investment horizons. All stakeholders must participate in a spirit of unity to make the transition successful. Nevertheless, some stakeholders will bear a greater burden than others as a result of the transition’s responsibilities. The most affected stakeholders may be unlikely to do their part to advance the transition unless real efforts are made to address these effects in a spirit of fairness. Thus, all stakeholders shall play their roles diligently in the transition to net zero.

Roles of Companies

Companies should consider inputting climate risks and impacts into their strategies and decision-making. Some strategies include creating a compelling argument for change, communicating it to others, and upskilling staff to help firms achieve net zero goals while promoting broader societal and economic changes. This action set a strong foundation for the companies to move towards a net-zero transition.

To capture changes in regulations, consumer habits, and investor preferences, companies must continuously develop skills to comprehensively evaluate transition-related risks and opportunities. These skills will enable the companies to plan agile and practical strategies to overcome and capture the risks and opportunities in a net zero economy.

Roles of Finance Institutions

Financial institutions are capable of assisting with large-scale capital reallocation while still managing their own unique risks and opportunities. They will need to consider evaluating and exposing their risks and measuring and promising to reduce funded footprints in the coming years. 

Some of the actions that financial institutions can take include evaluating and outlining climate risk. For instance, many regulators and supervisors now mandate that banks evaluate the environmental risks and more plans to begin this requirement.

Secondly, financial institutions may start to commit to emissions measurement and reduction for funding. Financial institutions are pledging more frequently to match their portfolios with 1.5°C or 2.0°C warming targets or to attain net zero funded emissions by a specific deadline. These commitments have begun to be translated into targets for many industries and regions. Financial institutions may find it beneficial to assist those counterparties in their transition plans, such as by offering new financial solutions, counselling them on emission-abatement strategies, and introducing cooperation opportunities.

Roles of Enabling Institutions

To coordinate activity across sectors and locations, it will be essential to have the support of organisations like standard-setters, industry associations, and civil-society coalitions. The requirements of all stakeholders may not be fully satisfied by individual companies and government measures, even though they can support a variety of stakeholders during the transition. Numerous current institutions may need to be redesigned, and new ones may need to be established in order to communicate information, promote capital deployment, manage uneven effects, and coordinate collective action. This is because of the speed and scope of the shift. In addition to gathering stakeholders and promoting collaboration, enabling institutions to play important roles in defining and implementing regulatory standards, tracking, and market processes. They provide a voice to marginalised workers and communities who will be affected by the net zero transition too.

 

To attain net zero emissions by 2050, the economy will need to undergo a tremendous and intricate shift. A wide range of stakeholders will find the transition problematic since it will result in significant shifts in demand, capital allocation, costs, and employment. However, the costs and disruptions brought on by a less orderly transition to net zero emissions would be much higher, and the transition would stop the continued accumulation of physical risks. The essential question is whether the world can UNITE with the necessary bravery and resolve to the challenges, which will determine the form of the transition. 

Talk to us now to discuss how you can play your roles in the net zero transition: hello@bernardbc.com

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