You don’t have to listen very carefully to hear the rattle of bandwagons being boarded as governments, quangos and interest groups issue their calls to action on behalf of Planet Earth, writes Dr Brian Keegan.

It is over 20 years since the Kyoto Protocol was signed. With hindsight, the aspirations back then were relatively modest, amounting to little more than a commitment by governments to reduce carbon output. That hasn’t got us very far, as highlighted by the report over the summer from the Intergovernmental Panel on Climate Change (IPCC). There is no one to blame except us when it comes to increases in planetary temperature.

The political difficulty with the climate crisis is akin to the political difficulty facing many countries in relation to pensions. Everybody knows there is a problem, but the crisis is happening too slowly for urgent remedies to be acceptable. It is painful to increase the retirement age (an approach currently under examination in Ireland and the UK) or add to the tax burden. Both or either option would correct the ratio of pension beneficiaries to pension funders. Yet, there will be no immediate political benefit.

The political dilemma is the same when it comes to decisions over climate policy. We have fixed climate problems before. Forty years ago, the big environmental concern was the hole in the ozone layer. Changes in industrial policy resulted in the virtual banning of chlorofluorocarbons in refrigeration and other industries to help repair it. But where is the political dividend for those who took these actions?

This is the nub of the problem for both the Kyoto Protocol and, more recently, the 2016 Paris Accord. Both initiatives depended primarily on government action, but government action on its own isn’t sufficient. A similar fate awaits the Irish Government’s Climate Action Act and the British Government’s Climate Action Act of 2019. It is all very well setting legally binding emissions targets – net-zero by 2050 in both cases – but people still have to travel, work, eat, and stay warm. Even when governments mandated the curtailment of normal life, as was the case with successive lockdowns in the past 18 months across the world, the impact on global carbon emissions fell short of the 7% reduction per annum promoted as necessary by the UN.

Preparations for the next international gathering on climate change, known as COP26, are being finalised for November 2021 in Glasgow. However, while all this activity and wordsmithery is happening, the real progress on climate change may be taking place elsewhere. There is evidence that private sector financing for non-sustainable business activity could dry up.

Speaking to a TASC think-tank event recently, the chief executive of AIB, Colin Hunt, put the matter succinctly: “Companies that don’t take this seriously won’t be around to talk about it in ten years’ time”. He is echoing a sentiment that seems increasingly prevalent in the investment community and is supported by academic research.

Of course, all this comment could be mere virtue signalling and a form of greenwashing in itself. Nevertheless, it does seem that environmental investment considerations are genuinely more prevalent. It follows that environmental, social and governance (ESG) reporting will come more to the fore, even without government prompting.

The chief executive of the International Accounting Standards Board has suggested that if ESG reporting for investors is correct, by addressing investor concerns, we will also address broader societal concerns.

Government carbon targets might indeed be met, but by private investment strategies rather than climate legislation.

Dr Brian Keegan is Director of Advocacy & Voice at Chartered Accountants Ireland.