2016 brought significant progress on global sustainability issues.
The beginning included the launch of the United Nations Sustainable Development Goals, aimed at addressing global poverty and environmental protection.
Then, about halfway through the year, the Paris Agreement received a significant boost with support from the two biggest greenhouse gas emitters: the U.S. and China.
Despite the headway made, the end of the year brought serious uncertainty and fear about some gains being reversed. While we can expect progress on many fronts in 2017, in others, environmental advocates will have to cross their fingers. To that end, here are four highlights to watch in 2017 — the good, bad and the ugly.
1. The race for climate leadership is on
From a U.S. perspective, 2016 was a roller-coaster year for climate leadership. The U.S. ratification of the Paris Agreement and other initiatives such as the Clean Power Plan helped temporarily position the country as a global player in driving climate leadership. However, uncertainties around the next administration’s priorities have dampened this sense of leadership; now, the door remains opens for other national governments to lead in one of the biggest opportunities for innovation in the next decade.
Will emerging markets take the lead if the U.S. stays on the sidelines? Emerging economies already invest more in renewable energy technologies than developed economies, led by China’s $100-plus billion investments in renewable energy in 2015 (by comparison, the U.S. invested $44 billion). And while the idea of federal carbon regulation in the U.S. seems a fleeting memory, next year China plans to launch a national cap-and-trade system that may be more than double the size of the EU’s Emissions Trading System. The opportunity for leadership is up for grabs.
2. The green finance train is picking up steam
2016 marked a remarkable year for green bonds, with its market expected to reach $100 billion (more than double the 2015 total).
These investments will matter not only for achieving the climate goals of the Paris Agreement, but also for modernizing our aging infrastructure. Earlier this year China adopted a set of principles that call for the creation of a national green development fund, and that require local governments to support green infrastructure projects.
Municipalities are also getting in on these investments, and are expected to increasingly do so. Moreover, just this month Mexico City became the first city in Latin America to issue a muni bond, designed to fund infrastructure and mobility projects with environmental benefits. The strong momentum in green finance should remain a priority in 2017.
3. More than ever, sustainability leadership will come from cities
As champions of sustainable development, several cities have been taking action on climate leadership much more swiftly than their national governments.
Earlier this year, we saw the formation of the Global Covenant of Mayors for Climate & Energy, a global coalition of cities committed to climate leadership. Local governments played a strong role at COP21 in Paris and again last month at COP22 in Marrakech.
The role of cities looks all but certain to grow. For cities, the benefits of investing in sustainable projects (and the risks of not doing so) are clear: less congestion; cleaner air; healthier communities; and mitigation of damage from natural disasters, among others. The sustainability challenges facing cities are tangible and will continue to necessitate action even in the absence of national leadership.
4. Investors will have more access to companies’ sustainability-related risks
The link between corporate sustainability and risk management is becoming clearer to investors. To help investors better evaluate these risks, last year the Financial Stability Board formed the Task Force on Climate-related Disclosures, and beginning this month, stakeholders will have a chance to review the task force’s initial recommendations. The work of the task force will help companies provide investors and other financial stakeholders with much-needed disclosure on climate-related financial risk.
This is timely, as analysis by the Conference Board finds that average support for shareholder resolutions calling for disclosure on climate change risks surged to 26 percent in 2016, up from only 16 percent last year.
The coming year also will see the beginning of the compliance period of the European Directive on Non-Financial Disclosure, which requires public companies operating in Europe to report on a variety of nonfinancial metrics (notably, this also applies to non-European companies operating in Europe). Initiatives from stock exchanges also will feature significantly in the coming year, with as many as 21 stock exchanges expected to introduce sustainability reporting guidelines.