When the U.K. assumed the Presidency of the G8 in January, Tony Blair announced that his focus would be on two of the world's biggest challenges: climate change and conditions in Africa. Much of the agenda at the July summit of G8 leaders will focus on these two daunting issues.

President Bush, for his part, will face continually mounting pressure from his colleagues in the G8 to take more substantive action on climate change. The U.S. stands alone as being the only member of the G8 which has not ratified the Kyoto Protocol. To many, this reflects what is perceived as a lack of interest from both our government and our citizenry. But dwindling support for his policies at home, and the administration's renewed interest in patching up relationships with Europe, may push Bush to go further than we could have expected just a few months ago.

Meanwhile, action in the U.S. on climate change is occurring on other fronts -- in state legislative bodies, at publicly traded corporations, and among institutional investors. Developments which occurred in early May are indicative of the American approach to climate change with a focus on voluntary action and the market rather than regulation. They signal momentum in the private sector to move the U.S. from laggard to leader on climate change action.

On May 9, General Electric (GE), the fifth largest U.S. company, announced Ecomagination, a core business initiative to bring new environmental technologies to market. By 2010, GE will double its investment in clean technology research (to $1.5 billion annually), and double revenues from environmental products it manufactures (to $20 billion). Ecomagination focuses on renewable sources of energy and on products which make energy production and consumption more efficient, as well as those which make clean water more available.

This announcement follows many other individual corporate actions to bring climate change action to market. For example, the country's largest financial institutions -- Citigroup, Bank of America, and J.P. Morgan Chase -- now all have lending policies which build greenhouse gas emissions and climate change risk into credit evaluations and criteria for loans. Ford is following Toyota's very successful introduction of hybrid vehicles by introducing more hybrid models into its product offering sooner than previously planned. And DuPont has committed to a 25% share of its revenues by 2010 to come from non-depletable sources, which means in part moving away from fossil-fuel based (and greenhouse gas generating) products. Yet GE’s announcement stands out for the magnitude of the commitment to shift its product mix to those which support environmental improvement.

Complementary to the GE initiative, and coming the day after GE’s announcement, leading institutional investors met at the United Nations in New York for a summit on climate risk. At the summit, a group of 26 fund managers, representing over $3 trillion in assets, released a ten-point plan identifying specific actions that U.S. companies, Wall Street firms, and the U.S. Securities and Exchange Commission should take to disclose and address financial risks associated with climate change. It also includes specific commitments by the signatories to lead by example.

Again, this announcement is not an isolated event, but rather a milestone in a movement. In November 2003 the Investor Network on Climate Change was launched at the first Climate Risk Summit. Since then investor momentum -- and concern -- has grown. In 2005, more than 30 shareholder resolutions addressing climate change risk were filed at U.S. companies (up from 22 in 2004). Twelve companies have agreed with the filers to report on the risks and the company’s plans to address them and the resolutions have been withdrawn.

While it is unlikely that any of the remaining resolutions will garner a majority of votes, growing support for them sends a message to corporate leaders -- climate change is a business issue which must be addressed.

SustainAbility’s 2003 report, "The 21st Century NGO," includes a graph which identifies the stages in an issue’s life cycle, and the activities which define each stage. In the Emergence phase, local activists and networks are the first to get involved, followed by international NGOs and U.N. agencies in the Expansion phase. Mainstream media attention marks the Extension phase, which is also when public figures (though few politicians) become active. This is also when commitments and action from leadership companies emerge. Finally, in the Embedding phase, politicians and regulators take action to respond to societal concerns and drive broad implementation.

Climate change is now in the Embedding phase. The decision U.S. companies must make is whether to be driven by the regulators or to drive the market themselves.

------
This column has been reprinted courtesy of SustainAbility Radar. It first appeared in the June 2005 edition of that publication.