1.2
The Development of Market Forces
Ecos sees four distinct phases in the development of market
forces driving corporate action on climate change. This briefing
is organized around these four stages of development:
- "The Next Ozone Hole" - 1985
- Emerging Corporate Leadership - 1995
- Market Pressure Mounts - 2000
- The Carbon Constrained Economy Emerges - 2010?
In each of these stages, distinct market forces
have emerged and thrived. For a closer look at the development
of each phase, see the accompanying presentation (link).
The driving force for the public
awareness of "the next ozone hole" was a group of
committed scientists analyzing the atmosphere from new vantage
points and a cadre of civil society groups with various perspectives
campaigning to get governments and the international establishment
to act. This first wave of pressure on climate change led
to the Kyoto Protocol and continues to push for national and
international action to sign the treaty and implement it with
effective national and regional policies.
In the Emerging Corporate Leadership
phase, the existence of the Kyoto Protocol spurs early adopters
at both the national and corporate level. On the government
side, the EU and its members have led the way with policies
including carbon taxes, capping carbon emissions and creating
tradable permits as well as the markets to trade them. Even
before these governments acted, a number of companies exercised
leadership and reduced their greenhouse gas emissions whereby
creating carbon credits to sell to others who couldn't reduce
their emissions as cheaply. The forces have taken on a strong
market form with voluntary reductions and trading credits
setting the tone.
In the Market Pressure Mounts phase, the market
aspects have broadened and deepened. Actors in the financial
service realm have begun to take note and respond accordingly,
while the civil society groups have incorporated market aspects
into their campaigns. Investors have filed proxy resolutions
requiring companies to disclose their strategy for dealing
with the competitive landscape changed by global warming.
Lo and behold, these resolutions start getting support from
one quarter of US institutional investors, far beyond the
numbers of religious and other socially responsible investors.
Hard-nosed investors are concluding companies have real value
at stake on climate change and that means the investors have
a fiduciary responsibility to understand what their holdings
are doing to mitigate those risks and capture the opportunities.
Some of this reflects existing policy changes and the anticipation
of more of the same, but some of it is the market saying "don't
ignore this. There's too much money on the table."
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