As the devastating effects of the Covid-19 pandemic continue to play out globally, the major long-term threat facing humanity – climate change – has not vanished.
The World Economic Forum’s Global Risk Report 2021 identifies environmental risks, including extreme weather, climate action failure and human environmental damage as the biggest global risks by impact and likelihood.
This reminds us that climate change should be among the top priorities for policymakers in the year ahead. At the same time, it must also be top of agenda for business leaders. The climate debate has shifted. It has evolved into a global business imperative, as investors increasingly direct capital towards economies and organisations that adopt sustainable financing models and practices. The world is increasingly embracing the importance of stakeholder capitalism to address the world’s greatest challenges.
The Middle East is especially vulnerable to climate shocks, facing a range of risks such as: water scarcity, high levels of pollution, reduced rainfall, drought and a loss of biodiversity.
With growing a global population that will require investments in infrastructure to reach $90 trillion globally in 2030, there are opportunities for leaders of the public and private sectors to collaborate and build a more sustainable and resilient Middle East.
The UAE, for example, is serious about tackling the environment threat. In November last year, Dr Sultan Al Jaber was appointed as the UAE's special envoy for climate change. And the country has announced its aims to reduce carbon emissions by 23.5 per cent by the year 2030. That target is set to increase to 50 per cent by 2050, the UAE said. These goals are likely to be met through various means: increasing the capacity for clean energy, boosting energy efficiency, promoting sustainable agriculture, capturing more carbon and implementing environment-friendly waste management.
Across the world, 2021 is set to be crucial year for the global climate, ending with the COP26 summit in Glasgow in November. Even before that date, people across the world expect leaders to take decisive action on fighting the climate crisis.
Major economies and economic blocs, including the UK, China and Japan have already committed to net-zero targets.
In the US, President Joe Biden rejoining the Paris Agreement testifies that his administration will be serious about climate action.
In the EU, compliance with emission and waste targets is increasingly embedded within legislation and the private sector takes a major role in the green transition.
The momentum on the global level is amplified by changing signals from markets. Fund managers increasingly require environment, social and corporate governance (ESG) reports for major financial and investment decisions. And global investors expect companies to provide a clearly articulated vision to promote sustainable business, coupled with a solid ESG strategy for the entire value chain of their business operations. The sustainability debate has become a global business imperative. This marks a big shift from what used to be the norm till just a few years ago.
Some governments in the Mena region are taking critical measures to advance sustainability. Like the UAE's climate goals, Saudi Arabia, too, as the largest economy in the region, has made sustainability a pillar of its Vision 2030. As the Kingdom continues to transform from a carbon-based to a diversified economy, its government has launched many projects related to green energy – including in wind, solar and hydrogen power.
Egypt has issued a first-ever green sovereign bond, valued at $750 million, as part of its efforts to carry out renewable energy projects. In addition, to combat plastic pollution, a new waste management law puts curbs on the manufacture, import or export of single-use plastic bags.
These commitments to net-zero and sustainability efforts create the environment needed for companies to update their business models to meet new ESG standards.
Regional players are making sure that ESG targets are an integral part of their companies' strategies and that these positions are aligned with government policies.
By anticipating the emerging trend of legally binding norms and regulations on net-zero, and by implementing these priorities within business models and operations, such companies build on their relevance for investors in the long term.
Given these changing expectations, progressive companies must look at sustainability through the framework of the triple imperatives of adaptation, mitigation and risk assessment.
First, to design investment strategies for the long-term, regional companies must acquire a solid understanding of how climate variations have an effect on their business units. They must provide protection for shareholders, employees and the wider stakeholder community, and at the same time they must decrease unpredictability.
Second, they must identify metrics to reduce their greenhouse gas emissions, thereby increasing energy efficiency and cutting operation costs, while setting the stage for transitioning to the production of carbon-free energy.
Finally, they should assess future risks in a variety of areas, minimising waste, accessing resources, stabilising operating licenses, adapting to regulations, mitigating potential reputational risks and satisfying customer demand.
In taking these steps, private sector leaders do their bit to add to the information about sustainability practices that exist in the region in the form of educational campaigns and in the media.
Given the urgency of the climate crisis and how it will effect the region, 2021 can be a year of opportunity to drive the sustainability agenda forward and build on existing opportunities. This will be crucial to create a more sustainable and inclusive Middle East.
Mirek Dusek is head of Europe, Eurasia and the Middle East, World Economic Forum
(This article is part of the World Economic Forum’s The Davos Agenda, 25-29 January 2021)