Speech to Bovespa, the Brazil stock exchange, on the occasion of UNEP joining its Sustainability Index Board
7 March 2007, Sao Paolo - You can tell there is a new impulse, a new dynamic at large in the world when you pick up the global financial press and magazines.
From the Economist to Gazeta Mercantil and Business Week and the Financial Times the pattern of advertisements over the past 12 months has fundamentally changed.
Indeed almost every other ad seems to be speaking about the environment in a way that they used to pronounce on the quality of the company's management or products.
The ads also tell another story and one that may have eventually far reaching implications for the way in which sustainability is mainstreamed across the entire spectrum of natural or nature-based resources.
The overwhelming number of advertisements are linked with the underlining theme of climate change from renewables, biofuels and clean coal to automotive and energy efficiency.
Ladies and gentlemen,
larges swathes of the corporate world are now making the explicit link to both the risks and the opportunities emerging as a result of the unbridled burning of fossil fuels and unsustainable land use changes.
Risks in terms of the ´bottom line´ with more severe weather events and damage to infrastructure, trade and investments. Risks in term of unpredictability in commodities like agricultural crops and fisheries.
Risks in terms of shareholder perceptions of a company´s sense of wider responsibilities and ´what it is doing about these ´
Risks in terms of consumers and a rising middle class across the developed and now increasingly developing world--consumers who increasingly are exercising choice on the basis of a far wider set of criteria than just dollars and cents or Reays and cents.
Opportunities too however--a chance to be less resource intensive and wasteful.
To reduce dependency on unpredictable fossil fuel imports through energy efficiency and the harnessing of domestic predictable resources like ethanol, solar and wind.
Opportunities to participate in and to develop radically new forms of markets that transfer funds and investments from the North to the South via the carbon markets and in new and creative ways.
Opportunities to join emissions trading regimes and opportunities to demonstrate to consumers in new and challenging ways that a company is dynamic and foreword-looking, efficient, well-managed, cognoscent of shifting patterns and in business for the long term.
Opportunities to also fight poverty and address other sustainability concerns to which I will return later.
Ladies and gentlemen,
I believe the subsidiary at which I am effectively the chief executive officer and its parent company—the United Nations-- have had some small part to play.
The UNEP Finance Initiative, to which many companies here in this room are active partners, has raised awareness, developed networks and catalyzed action not least in assisting to develop the Principles for Responsible Investment (PRI).
I am delighted to see members of PREVI--Banco do Brasil—with us today and congratulate them on their sterling part in this regard in the region.
(It is dangerous to congratulate one company by name as in congratulating one you appear to exclude all the others who have contributed in so many important ways to the initiative in question and others you failed or only skated over in your speech!).
In a speech like this you can only hit a few targets, but let me make it clear that the Principles for Responsible Investments are part of the wider landscape.
They echo to industry’s need to develop ever cleaner technologies, they resonate with the social and corporate responsibility agenda and they contribute to the World Summit on Sustainable Development’s agreements on developing patterns of cleaner production and consumption patterns.
In the end it is about minimizing wasteful and ultimately costly practices in the widest sense of the word in favour of resource efficiency.
Perhaps the summit of the world’s wastefulness is in the production and consumption of energy which in a sense returns me to my theme.
The UN, through the Intergovernmental Panel on Climate Change (IPCC), has pioneered the science of climate change on behalf of member states.
We have, in 2007, the clear and unequivocal—dare me say final full stop—conclusion from the IPCC that human-kind is behind the physical evidence of climate change witnessed everywhere and by us all in our daily lives.
We have the United Nations Framework Convention on Climate Change (UNFCCC) and its Kyoto Protocol—the first legally binding greenhouse gas emission reduction treaty.
We have the Kyoto mechanisms that I referred to earlier—emissions trading, joint implementation, the adaptation fund and the Clean Development Mechanism (CDM).
The CDM is, I know, no mystery to companies in Brazil with somewhere over 17 per cent of CDM projects world-wide happening here.
Indeed it is a measure of Brazil’s emerging power in the world and influence, and also a measure of this corporate community’s engagement and entrepreneurial skills, that CDM is a success story in this part of Latin America.
It indeed would be further proof of Brazil’s regional and global influence if companies here extended a hand to ones across it borders in assisting them to access the CDM better too.
The question, ladies and gentlemen, is what happens now.
The Kyoto Protocol expires in five short years time and we have no successor. The king is dead but we cannot yet say long live the King and welcome the newcomer.
It is also clear that without clarity on this, investments in CDM will become less attractive—markets, as we know, hate instability and uncertainty.
That would be bad enough, but if emission reductions are suspended in five years time for want of political will, we face an even more economically disruptive future—we face temperature rises beyond the safe threshold of two degrees centigrade.
This is likely to prove not just a market failure but a market failure of unprecedented proportions. The only companies making money, at least for the medium term, will be those who have snapped up high lands like Corcovado in Rio de Janiero!!
But I am an optimist and there are positive signs with the European Union backing a 20 per cent target after 2012 and more if others join.
The question is how do we ensure that indeed others participate. Again I am optimistic that the financial sector and the markets can play a role which is one of the reasons why I came here today to BOVESPA —to a pioneering stock exchange and one of only two in the South with a vibrant sustainability index.
Ladies and gentlemen,
One of the mixed blessings of being Executive Director is that I travel a lot and I meet many, many interesting and inspiring people.
The travel is the´mixed´ bit for a whole variety of reasons, the people are the blessing.
Over the last six months I have been to some countries where climate change is an overwhelming governmental concern and others where it is among a suite of priorities and in a few cases where it can be said politely, to be not quite yet there.
But in those same countries, the business communities are as one. They want regulation, emissions controls and other well-constructed action.
This is a governmental responsibility by democratically elected leaders—but you in this room today can give, along with consumers, the legitimacy to politicians to act.
If there was a year for action, then it is 2007. The momentum, again driven by sound science and new economic figures on the costs of inaction and profits of action, is truly invigorating.
But momentum, as the British scientist Sir Isaac Newton calculated in his laws of motion, can be opposed by equal and opposite forces.
So it vital that leadership, from both the developed and developing world and from governments to business and civil society to individual citizens, is our watchword over the next nine months.
This is when the next round of climate convention negotiations is held on the Indonesian island of Bali.
Leadership that is pragmatic, that has a clear long term goal and is willing to set targets and timetables on deeper emission reductions.
But also leadership that is flexible and inclusive and understands that countries may have different priorities and responsibilities within the overall and primary priority and responsibility of combating climate change.
The world is quite rightly now focused on climate change—it is the challenge of this generation and of the here and now.
However, if we can establish the ground rules and the principles of a global framework for moving beyond Kyoto, I believe it may inspire the global community to address other pressing sustainability issues.
The Doha Round of the World Trade Organization could be completed with all the potentially positive impacts on other areas of resource management, not least fisheries.
The market mechanisms enshrined under the Kyoto accord could also be adapted into new, creative and economically attractive options for more sustainably managing biodiversity and genetic resources to river systems and coral reefs to wetlands and grasslands.
Here in Brazil and also elsewhere in the Americas this is already starting.
At the last Climate Convention talks, coincidentally held at UNEP´s headquarters in Nairobi, Kenya, officials from the state of Amazonas presented a plan for conservation of forests and ecosystem services.
It builds on the four year-old Green Free Trade Zone. Here switches in fiscal policy including taxes have favoured conservation and production of forest products like rubber, non timber products and alternative land uses like fish farming over deforestation.
The state claims that the number or protected areas has risen by 128 per cent, deforestation has declined by over 50 per cent and GNP has grown by nearly 13 per cent a year.
The next phase is to profit from this via the carbon capital markets in what can only be described as a potentially virtuous circle.
The forests carbon sequestration value there is estimated to be worth some $3 billion annually. In doing so, the state estimates it can generate income for an endowment fund to guarantee lives and livelihoods into the future.
So in conclusion,
The imperative of combating climate change has lifted a veil from our collective eyes to a new realm of economics and a new notion of generational but also intergenerational responsibilities.
In doing so it is also making us aware that sustainable development is a long-term investment but, far from being a brake on profits, it offers up new kinds of exciting and potentially highly profitable and socially equitable returns—this applies to corporations as well as to governments.
But perhaps I do not have to tell this to an audience here at BOVESAP--however I felt duty bound to deliver what I hope was a half decent speech given the great honour you (have or are about to bestow!!) on UNEP in inviting us to join the board of your young and dynamic Sustainability Index.
I can promise you that UNEP will be full and UNEP will be an active partner.
Thank you for attention.