Global decarbonization efforts need to accelerate if we are to avoid the most catastrophic consequences of climate change. Current actions and commitments fall short of reaching the 2015 Paris Agreement goal of limiting global warming to well below 2 °C. Governments, corporates, and financial institutions are ramping up their commitments to transition to net zero emissions but, as highlighted by Oliver Wyman’s Climate Action Navigator, the gap between ambition and reality is widening.
The 2022 polycrisis has put the net zero commitments and pledges to the test and exposed a divergence between what is politically feasible and scientifically necessary. This was evident at the 2022 United Nations Climate Change Conference of the Parties (COP27) in Sharm El-Sheikh (Egypt), where negotiations largely failed to scale up pledges to cut emissions and did not deliver on commitments to phase out fossil fuels. This highlights how climate action can be discouraged by a volatile geopolitical landscape and a deteriorating economic outlook with high inflation in many countries.
The current energy and food crises and global supply chain issues illustrate the urgency and the complexities of making progress towards net zero ambition. Corporations need to transition at pace and at scale, and within the normal pressures of sustaining and growing a profitable business. With commitment comes accountability and growing recognition that not only the pace of the transition but also the effectiveness and integrity matters: Climate litigation is increasing and concerns about greenwashing triggering calls for new regulatory oversight for the transition to net zero.
As organizations across every industry move forward with their decarbonization strategies, they need to prepare for new risks and opportunities. The ability to anticipate, measure, and manage risks is a critical advantage as the transition unfolds. Delivering a commercially smart climate transition requires businesses to reimagine their climate governance and risk management strategies.
This Handbook features perspectives from business leaders across Marsh McLennan who routinely help clients in their net zero journey. It provides insights on governance strategies, explores how energy systems are transforming, investigates the evolving role of financial institutions in accelerating decarbonization, and describes progress and obstacles across different sectors.
Businesses are at different stages in their climate transition and tools such as Marsh’s ESG Risk Rating tool and Mercer’s Analytics for Climate Transition (ACT) help to measure performance, assess investment portfolios, and manage risks.