THE CHALLENGE OF A DECADE
It goes without saying that the world is markedly different to anything we could have imagined in January. Back then it was recognized that while some progress had been made, the world was overall off track to fulfill the Sustainable Development Goals by 2030. More ambitious action was needed to propel efforts in the right direction. This realization was also behind FMO’s anniversary theme ‘the challenge of a decade, the achievement of the century’ that was launched at the start of 2020.
And then COVID-19 swept across the globe, setting the world even further back from achieving Sustainable Development Goals (SDGs). Despite all the risks, the pandemic also presents an opportunity to refocus on the importance of SDGs. COVID-19 can, and should, be used as a catalyst for change. If we can leverage this moment to build a greener and more resilient economy that can also meet the future needs of people, the social and economic benefits will be profound. The foundation of this greener, fairer and more resilient economy are the SDGs and the Paris climate agreement.
The financial sector must be part of making life on this planet sustainable.
Aligning with a 1.5°C pathway
Unlike COVID-19, which took many by surprise, climate change and biodiversity loss have been understood for decades. In this year’s annual risk report, the World Economic Forum placed the environment in the top five list of concerns likely to have a major impact over the next decade. ‘Failure of climate change mitigation and adaption’ is the number one risk by impact, and number two by likelihood over the next 10 years, according to the survey. ‘Biodiversity loss’ is rated as the second most impactful and third most likely risk for the next decade.
The financial sector must be part of making life on this planet sustainable. In FMO’s strategy, Climate Action (SDG13) has been identified as one of the three top-line Sustainable Development Goals (SDGs) where we can make a particular contribution. In practice, this means pursuing a portfolio that delivers positive outcomes on climate mitigation and adaptation, and as climate change affects developing countries most, we strive to align our portfolio with a 1.5°C pathway.
Since 2015 we have a Green Label policy in place that steers our investments towards reducing greenhouse gas emissions, increasing resource efficiency, preserving and growing natural capital, and supporting climate adaptation. We recognize the importance of growing the green part of our portfolio, but equally important is the need to ensure that our overall portfolio is aligned with the goals of the Paris climate agreement. For us, Paris alignment means a portfolio that is consistent with a 1.5-degree pathway.
Our carbon budget
Climate change is caused by rising levels of greenhouse gases in the atmosphere, which in turn is caused primarily from humans burning fossil fuels. Carbon dioxide (CO2) is the chief culprit, but other gases like methane also play a dangerous role. These gases upset the natural systems that regulate our climate and lead to more extreme weather. For more than two centuries, and especially since the 1950s, economic development has required an ever-increasing amount of carbon emissions. As a world, we have 304 billion tonnes of CO2 left to emit before we surpass 1.5 degrees. From the Union Square carbon clock in New York, we know it takes 7 years at the current rate to exhaust that budget.
Power of partnerships
We do not have much time left to stay safe within a 1.5 degrees Celsius world. Financial institutions and other institutions, governments and business must pick up the pace and ensure investments are delivering across the entire agenda set out by the Sustainable Development Goals. These are collective challenges that need collective action. No one can do this alone. We need partnerships: new, innovative and even unexpected alliances that can drive action on the SDGs. On all fronts, we must harness the power of partnerships to accelerate the realization of the SDGs. That is the opportunity before us.
We believe that to accelerate change you need disruptors, actors and accelerators. Each brings different qualities to the table. The disruptor for instance envisions new business models, and initiates a new approach to an existing problem. The disruptor challenges us and our way of thinking. The actor is already making the difference and can serve as an example for others. We need the entrepreneur who identifies or dares to apply disruptions and develop them into feasible business solutions, and the accelerator who can further scale entrepreneurial solutions. Together they can enable large-scale change that is needed to solve the world’s most pressing issues. By setting enabling conditions, they can pave the way for change.
A future we can foresee, is a future we can create
We have created a number of images of what the future might look like when we are successful in achieving the SDGs. They are meant to inspire us and strengthen our resolve. They are also meant to stir debate. To discuss what that future looks like, to imagine it together, to agree on what needs to be done. For instance, for future mobility, the future we imagine is a fossil-free future. As FMO, we mobilize financing, share our networks and knowledge to provide opportunities for entrepreneurs together with our customers and partners. But with only 10 years left to reach the SDGs, we need to accelerate entrepreneurial solutions to these problems. We cannot tackle these challenges ourselves. We need everyone on board: our partners, our clients, governments and civil society.