What's Next on the Road to Rio

What's Next on the Road to Rio

As the residents of Durban return to normal life, and weary negotiators together with thousands of representatives of business and civil society try to make sense of the past two weeks, thoughts are turning already to Rio+ 20, the United Nations Conference on Sustainable Development in June next year. So, what lessons might we take from COP17, what hopes dare we harbor for Rio?

Everything is Connected

We used to talk about climate change as an isolated issue. Then we started to wonder if "water is the new carbon" or, as CDP's executive chairman Paul Dickinson says, "If climate is the shark, then water is the teeth." Now we are talking about everything.

This ranges from the energy-water-food nexus, to integrated corporate reporting, and the U.N. push for "sustainable energy for all as a key approach to poverty reduction. The collective mind is gradually realising that everything is interconnected. Our natural resources, communities and economies all rely on each other in myriad complex ways. This leaves many of us overwhelmed. Just what are we trying to fix?

I believe that we are trying to fix the "greatest and widest-ranging market failure ever seen." [PDF] By working out how to internalize the costs of drawing down our finite natural capital we are aiming to solve humanity's greatest problems.

The intricacies and scale of the problem are too great for a conventional approach -- expect more creative collaborations between traditional "frienemies," including partnerships between NGOs and business. Look for double-edged solutions that solve two problems at once: cheap renewable energy to alleviate poverty, or water filtration systems that reduce the need to burn firewood.

Horizon of Change

A minority of those at Durban spoke as though the world should accept as a foregone conclusion that the global temperature will rise above the 2-degree target. While I reject this defeatist stance, the science makes clear that the longer we wait to take action, the more dramatic the required correction will be. 

There are several business sectors positioned as candidates for positive disruptive change in the very near future. Within commercial real estate, it is possible that specialist fund managers will soon invest only in LEED-certified low energy buildings.

The automotive sector has an excited focus on the potential of electric vehicles -- just look at the proportion of engine research and development budget that is being put toward electronic vehicle production these days.

The news from India that solar prices in the latest government auction are falling so rapidly that some believe price parity with coal could be reached as early as 2016 sent happy shockwaves around Durban. It is incredible to think that India could experience a massive solar boom before we have a binding treaty.

Other, slower evidence of inexorable change to a new economic order comes from Mercer's report advising asset owners to shift 40 percent of assets into climate sensitive areas, and CDP's recent report showing that 54 percent of global equities by market cap already disclose information on climate change to institutional investors.

The Importance of Cities as Climate Actors

Action by cities, especially technology and infrastructure, was another popular topic at COP as it has been for some time. Human society is now more than 50 percent urbanized, this figure is growing.

Cities are centers of resource use and GHG emissions but they also have degrees of political freedom that nation states do not. The same is true of states and provinces. While intergovernmental negotiations are slow to produce detailed plans, the world's cities and regions are sources of creative policy and partnerships.

Organizations such as R20 Regions of Climate Action and the C40 Cities Climate Leadership Group (C40), who has partnered with CDP Cities to help expand the programme to well over 100 cities in 2011-12, will use their convening power to drive ambitious programs around the world.

Financial Engineering

We will need lots of this. No, not the engineering that creates invisible toxic assets, but creative, sustainable ways to produce new instruments to deliver the trillions of dollars of capital needed to transition to a low carbon economy.

I expect to see many more innovations akin to the Climate Bonds Initiative. Governments, development banks, private finance and corporations will need all the ingenuity of the finance sector to transform the limited public funds available into masses of long-term finance.

Not the Usual Suspects

Even with a political stalemate in the States and economic distractions in Europe, we are starting to notice China's emergence as a renewable superpower. The solar industry is arguably comparable to the computer industry of the 70s.

There is no reason to believe that the solutions to our global environmental challenges will come predominantly from established players in the developed world. Young upstarts, as Apple and Microsoft once were, will flourish and change the rules of the game.

And institutionally too, the BRICS economies will increasingly be a source of inspiration for policy makers world-wide. South Africa's world-leading King III legislation on corporate sustainability disclosure is a prime example. We all need to have the humility to learn from wherever promising solutions are being developed and understand that nobody has all the answers.

Business Leadership

For Rio+20 to be a success, we will need to see significant policy shifts, but so few governments appear to have the courage to take bold leadership on sustainability and shifting to new economic models. Businesses and investors need to come together to provide powerful voices encouraging regulators to be bold.

Aviva's 'Comply or Explain' initiative and the Cambridge Program for Sustainability Leadership's 2 Degrees Communiqué are two such examples. Let us hope they secure sufficient support in advance of the Rio+20 conference to make it a pivotal event about which we will be proud to say, "I was there."

Downtown Rio photo via the Brazilian government.