The New York State Assembly recently passed what Gov. Andrew Cuomo called the most aggressive clean-energy target in the United States, requiring New York to get 100% of its electricity from zero-emissions sources by 2040. Cuomo is expected to sign the bill into law.
On the other side of the country, Oregon’s state Legislature is attempting to pass another ambitious climate bill, an effort now stalled by the fact that Republican senators have walked off the job. In the absence of federal action on decarbonizing the power sector, states are taking action on their own.
These state goals are ambitious, and they’re potentially unachievable using current technologies. But they are becoming policy reality, not political rhetoric. Businesses and investors thinking of what assets to build and finance, and where, are signaling that they are aligning themselves with these ambitious climate goals.
The Network for Greening the Financial System, a group of central banks and supervisors that assesses climate risk and mobilizes climate finance, doesn’t see climate change as abstract. Rather, it is of a “foreseeable nature,” and “while the exact outcomes, time horizon and future pathway are uncertain, there is a high degree of certainty that some combination of physical and transition risks” will eventually materialize.
If those risks are foreseeable, then they can be priced. And if those risks manifest themselves financially, then they should be disclosed as well. In its most recent status report, the Task Force on Climate-Related Financial Disclosures said that it now has almost 800 supporters, up from just over 100 only two years ago.
The group’s disclosure framework has been appearing as corporate commitments to reduce exposure to climate change or curtail business activities that cause it. Crédit Agricole recently published its 2022 Medium-Term Plan, which not only aligns itself with the TCFD, but also goes directly after its own book of business in thermal coal used for power generation.
In a separate news release, the bank said it would also double its green loan portfolio to 13 billion euros by 2022. Its planned increase tracks an expanding market that could top 2018’s record $182 billion of green bond issuance.
Why the growth trend? Maybe countries and companies are reacting to the United Nations’ October report, which argued that the world has 12 years to avert catastrophic climate damage. Regardless, the diversity of borrowers coming to market stands out as important. About 39% of issuance in the first five months of 2019 came from countries other than China, France, the U.S., Germany, the Netherlands and Sweden, the most since at least 2014, Bloomberg data show.
It is important to note two things about how the corporate world is adapting to a changing climate. First, working to combat it has financial rewards, encouraging more of these efforts; second, almost every big business is building climate change into its forecasts.
Businesses and investors like certainty. Long-term and extremely ambitious policies such as New York’s ensure a bit more certainty, even if the exact mechanisms of achieving those policies remains uncertain.
Nathaniel Bullard is a Bloomberg Opinion columnist.