AR6: The IPCC’s final call to action on climate inaction
On 20 March, the IPCC concluded its Sixth Assessment Reporting cycle (AR6), which kicked off after the Paris Agreement, by publishing its final Synthesis Report. AR6 will very likely be the last comprehensive IPCC report before 2030, after which time limiting warming to 1.5°C may be impossible. It is therefore imperative that all stakeholders take action based on the content of this report.
AR6 is the most comprehensive scientific assessment of the current status of climate change, future expectations and risks, and the near-term responses required to mitigate the worst of its effects. The report makes clear that the science is irrefutable, and the IPCC’s message is stark: climate inaction is no longer an option if we want to have a habitable world. As UN Secretary General Antonio Guterres aptly put it: “our world needs climate action on all fronts: everything, everywhere, all at once”.
Key conclusions from the Synthesis Report and implications for businesses
The following table sets out the top-line conclusions from AR6 and reflections on how they may impact businesses. Further analysis follows.
Key conclusion from the Synthesis Report
Some change is baked in: certain harmful climate change-induced alterations to our planet are now unavoidable and/or irreversible, but the worst can be avoided if quick, concerted, widespread action is taken now.
Implication for businesses
Businesses should prepare for the impact of more frequent and extreme weather events on their physical assets, building in forecast buffers for repair and replacement costs and valuation impacts in low-carbon transition plans.
Climate change is a risk multiplier: climate-related and non-climate related risks will increasingly interact and compound, creating complex, cascading risks that are difficult to manage.
Businesses that monitor and measure the interdependencies of climate-related impacts with other business risks will be better positioned to manage and mitigate risk.
Adaptation needs are steadily increasing: policy action to enhance local energy efficiency, reduce rates of deforestation and accelerate technology deployment to avoid, reduce or remove emissions have increased, but inclusive local, Indigenous participation is required to close the action gap in developing countries.
Businesses should prepare for higher expectations in and volumes of climate-related policy interventions aimed at lowering emissions, which may impact long-term cash flow forecasting and viable emissions pathways.
Future finance needs to meet current tools: the tools to adapt to and mitigate climate change impacts are largely available now, but inadequate private sector engagement and mobilisation of funds is a barrier to the rapid, deep action needed.
Businesses will be increasingly expected to engage with stakeholders across their spheres of influence to drive systemic change, and to be transparent about their advocacy activities to influence policies, frameworks and price signals.
There is still time, but not much: In order to limit warming to 1.5°C or 2°C by 2100, action to reduce emissions needs to be taken this decade.
Businesses should consider the term and structure of their decarbonisation plans, as backloading of emissions reductions will not be compatible with limiting warming.
Summary of the Synthesis Report
Some of the content in this article closely references the language of the Synthesis Report to maintain its nuance.
The current status
- Human activities, principally through the emission of greenhouse gases, have unequivocally caused global warming. Changes in the atmosphere, ocean, cryosphere, and biosphere have already occurred and will be exacerbated without changing course.
- Climate change is already causing extreme weather events with greater frequency and magnitude in every region across the globe, resulting in widespread harm to nature and people.
- Vulnerable communities (comprising 3.3–3.6 billion people) have historically contributed the least to climate change but incur the most harm from it. For example, from 2010-2020, deaths due to floods, droughts, and storms were 15 times higher in regions most vulnerable to climate change.
- Modelling based on current Nationally Determined Contributions to 2030 suggests that warming of 1.5°C will likely be exceed during the 21st century.
- Projects to adapt to the impact of climate change have had varying levels of effectiveness. Some of the most effective adaptation efforts have been soil moisture conservation, agroforestry (where crops, trees and shrubs are planted together) and sustainable land management approaches. However, adaptation gaps still exist, particularly between higher and lower income populations, which can be partially addressed with more inclusive planning informed by cultural values, Indigenous and local knowledge.
- Some of the barriers to adaptation are lack of private sector engagement, insufficient mobilization of finance (including for research), lack of political commitment and a low sense of urgency.
- Policies and laws aimed at stopping climate change from progressing further have expanded over the last eight years. In many countries, policies have enhanced energy efficiency, reduced rates of deforestation and accelerated technology deployment, leading to avoided and, in some cases, reduced or removed emissions.
The different scenarios and potential long-term responses
Continuing to emit greenhouse gasses will exacerbate global warming. The more that temperatures increase, the more intense extreme weather events will be. This includes very wet and very dry weather and extreme levels of monsoon precipitation. Deep, rapid, and sustained reductions in greenhouse gas emissions would lead to a discernible slowdown in global warming within around two decades.
Limiting human-caused global warming requires net zero CO2 emissions. Emission reductions that happen this decade will largely determine whether warming can be limited to 1.5°C or 2°C by 2100. Projected CO2 emissions from existing fossil fuel infrastructure, without abatement, would exceed the remaining carbon emissions budget to limit warming to 1.5°C. This means that to successfully limit warming to 1.5°C or even 2°C, a substantial amount of fossil fuel reserves must go unburned, which could strand fossil fuel infrastructure if it is not repurposed.
Climate related and non-climate related risks will increasingly interact. The compounding and cascading of risks will make them both more complex to understand and difficult to manage. For example, climate-driven food insecurity and supply instability are projected to increase as temperatures rise, and will be increasingly impacted by pandemics and conflicts.
Some future climate change impacts are unavoidable and/or irreversible. For example, some sea level rise is unavoidable for centuries to millennia to come, due to continuing deep ocean warming and melting ice sheets. As temperatures rise, currently available options to adapt to climate change will become unfeasible or less effective. Deep, rapid and sustained global greenhouse gas emissions reduction would slow down the acceleration of sea level rises.
Regulatory and economic instruments can support deep emissions reductions and climate resilience. As long as they are scaled up and applied widely. Finance and technology are critical enablers for accelerated climate action. If climate goals are to be achieved, investment in adapting to and mitigating climate change needs to increase significantly.
The actions business can take in the near term
Businesses have a pivotal role to play in addressing climate change and it increasingly makes long-term economic and reputational sense to take action. The costs to respond to future climate impacts will far outweigh the current investment needed to reach net zero, develop climate resilience and create business models that thrive in the low carbon economy.
In light of the call to action from the IPCC, businesses should consider undertaking at least the following four actions:
- Baselining operational- and, where relevant, financed- and insured-emissions in accordance with accepted carbon accounting methodologies and adopting validated science-based decarbonisation and other (e.g., Net Zero associations) targets.
- Undertaking climate scenario analysis to understand exposures to climate impacts under different temperature scenarios, as well as nature and biodiversity impact assessments, and developing response strategies to preserve and create value while minimising external harms.
- Creating low-carbon products and services in real economy and financial services businesses, incentivising customers to switch to greener options, and aligning inventories, portfolios, corporate and investment activities with Net Zero and/or Paris-Aligned pathways.
- Developing decarbonisation strategies and transition plans to drive change in commercial, business and investment models, reduce emissions within spheres of control and engage with and support a broad range of stakeholders on their low-carbon journeys including suppliers, value chains, investors and communities.
The findings of the IPCC make clear that every increment of global warming impacts both average and extreme weather and climate, with catastrophic consequences for economies, societies and nature. Minimising the worst effects of climate change, and reducing the global stock and flow of carbon emissions, will require rapid, bold and deep action from businesses and governments alike.
As AR6 indicates: there is no time to waste, and this may be our last shot.
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About KPMG
KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 15,300 partners and staff. The UK firm recorded a revenue of £2.43 billion in the year ended 30 September 2021.