The Intergovernmental Panel on Climate Change (IPCC) is an intergovernmental body of the United Nations responsible for advancing knowledge on human-induced climate change. It’s April report on mitigation of climate change warns that without immediate and deep emissions reductions across all sectors, limiting global warming to 1.5 degrees celsius will be beyond reach.

On a more upbeat note, the report makes clear that there are options in all sectors to at least halve emissions by 2030, and clear signs of progress (alongside continuing challenges) on the path to a low-carbon, climate-resilient and sustainable global economy.

Our five key insights from the lengthy report:

  1. Despite a great deal of noise, it's not clear that ESG investing – at least as it is currently practised – is driving GHG emissions reductions. The IPCC calls for a much more robust assessment of ESG metrics and impact and applauds efforts to harmonise corporate ESG reporting standards internationally (i.e. TCFD, release of ISSB draft standards).
  2. International standards designed to enable market-led change which assume that requiring reporting and disclosures will lead to reduced emissions won’t cut the mustard though. There is a clear warning against relying only on market-correcting approaches to redirect capital flows without appropriate fiscal, monetary and financial policy. Also needed are mitigation policies (to reduce or prevent actual emissions), more green bonds to finance projects that address climate change, and of course to phase out fossil fuel subsidies pronto.
  3. Litigation is on the rise with an emerging class of claims concerning climate disclosures and targeting private sector and financial institutions as well as governments – government authorisations of high carbon private-public projects have been successfully challenged setting climate-favourable precedents.
  4. The real estate sector has an important role to play – mitigation actions in real estate have the potential to go beyond climate action to address most of the Sustainable Development Goals and can lead to increased productivity, job creation, reduced poverty (especially energy poverty) and improved energy security.
  5. The level of investment needed is staggering – $1tn a year in green energy investment by 2030 to enable transition for low-carbon projects in developing countries. To meet this need in part, private investment in climate goals can be mobilised using blended finance initiatives such as public guarantees. There is also great scope for high-net-worth individuals to lead by role modelling low-carbon lifestyles, investing in low carbon businesses, and advocating for stringent climate policies.

The next few years are critical to limit warming to around 1.5 degrees celsius. The scenarios assessed in the report require that global greenhouse gas emissions peak before 2025 at the latest and reduce by around a quarter by 2030. Closing the investment gap to limit warming relies on public sector finance and policy lining up with available global capital.