A Year in Review - How Climate Change Shaped 2021
In the second year of this decisive decade in the fight against climate change, more progress was made than expected. Even so, it was still less than hoped. 2021 has been one of the most active years for extreme weather globally, leaving many communities reeling, and their adaptation plans back at square one. One takeaway remains clear: the climate crisis is no longer a future problem; it is a now problem.
2021 cemented the urgency of the climate emergency, as every corner of the globe faced its own host of climate threats including record-breaking heat, droughts, floods, and storms. Climate change left its fingerprints at the scene of almost every occurrence of extreme weather.
At the start of the year, a severe winter storm in Texas left millions without power or water, 196.5 billion dollars of damage, and over 200 fatalities in its wake. These unusually severe winter storms are linked to rapid warming in the arctic, and will only become more frequent as temperatures rise. In May, flooding displaced over 800,000 people in South Sudan, all the while in India, Sri Lanka, and the Maldives, 200,000 tried to escape Cyclone Tuakte. July brought widespread flooding swept across Germany, France, and other European countries. Record-breaking forest fires, heatwaves and droughts continued throughout the summer in the Pacific Northwest and beyond. This trend carried into an unusually warm winter, which brought a forest fire to Montana in December, when there normally would be snow.
The list continues.
Even though these horrific events are occurring more often, it is crucial we prevent the normalization of them. We cannot become desensitized. 2021 was hotter than any year recorded before 2015 and is likely to be one of the ten warmest years on record, continuing the warming trend of the 21st century. Considering this was a La Nina year, which is typically colder, this does not bode well for the future.
Thankfully, the people with some of the largest resources to deal with this crisis, world governments, are awakening to avert this disaster. Hope sprung eternal at COP26, the most significant climate event since the 2015 Paris Agreement.
Expectations were low leading-up to COP26, given the UN emissions gap report was released shortly before the summit. The report revealed that nationally determined contributions to lower greenhouse gasses would result in an alarming warming trajectory of 2.7C (far beyond the 1.5C pledged at Paris in 2015).
Nonetheless, the summit started well with many positives to coming out of its' first week. Important deals on cutting methane emissions, abolishing deforestation by 2030, and India’s net zero emissions by 2070 pledge were made.
COP26 culminated in all 197 countries signing the Glasgow Pact, the most progressive climate accord since the Paris Agreement, and amazingly the first to mention a phase-out of fossil fuel subsidies. It also increased accountability for countries, which has been a fault in past agreements, as there has been no yearly progress report to see which countries were fulfilling their commitments.
Ultimately though, COP26 was a small step forward when a full-blown sprint was needed. COP president Alok Sharma called the event a “fragile win” and apologized while holding back tears for the way the process unfolded, referring to India’s eleventh-hour change in wording from coal “phase-out” to coal “phase down.” 100,000 protestors marched in the streets of Glasgow and Greta Thunberg called the event a “greenwashing campaign” with more “blah blah blah” talking. The Glasgow Pact keeps the dream of limiting warming to 1.5C alive, but on “life support.”
While national leaders debated at COP26, businesses and investors took action. 2021 was the year the private sector took the reins, bringing a swathe of net zero promises from the world’s largest companies.
Climate Technology and Investment
2021 was undoubtedly the year of climate technology. Climate tech startups saw $21 billion in investment - the largest venture capital investments in climate tech to date. Carbon management tools, in particular, saw monumental growth. And legacy climate technologies such as wind and solar power also had their largest growth year (even despite rising materials costs).
Larry Fink, CEO of Blackrock - the world’s largest investment firm - identifies climate change as a “business opportunity", and champions the rise of climate tech. He even maintains that the next 1000 unicorn companies would likely be from climate tech.
Fink's sentiment is shared by the broader financial sector. This year, the Glasgow Financial Alliance for Net Zero - GFANZ (read more about this in Kristina's Full Disclosure Newsletter), which is made up of more than 450 financial institutions with over $130 trillion in assets, pledged to make climate change and the race to net-zero the center of their decision making. This marks huge progress.
The growth in mission-driven companies in 2021 is epitomized by purposeful companies such as Bain & Company and Patch:
This year, Bain, a management consulting firm, celebrated ten years since becoming carbon neutral with the launch of Further, which further embeds sustainability in their practices, doubling down on commitments to reduce travel emissions, and providing their sustainability consulting services pro-bono to NGOs.
Additionally, this year, Patch, a carbon offsetting company, raised $20.75 million in their Series A funding run. Patch’s API-based model revolutionizes how carbon removal and offsetting are performed, offering high-quality validated offsetting and ease of use - allowing their clients to embed carbon offsetting into their products.
Other companies, however, unfortunately use carbon disclosure as a greenwash marketing campaign. An analysis by ShareAction indicates that the world’s largest asset managers ignore 60% of the ESG proposals at companies they hold despite being signatories of the Principles for Responsible Investment. So there is still much progress to be made.
Overall, 2021 was a year fraught with extreme weather disasters and a mixed bag of outcomes post-COP. Nonetheless, there was a clear momentum shift in the financial sector. Investors and key stakeholders understood the economic and societal implications of "business as usual" and brought the need of measuring, managing, and reducing carbon emissions to the frontline.
Let's hope 2022 can advance the momentum started this year. Governments must come back to COP27 with the most ambitious decarbonization plans they can muster. One thing for sure, we can still rely on investors and innovators to continue to build the tools we need to meet our goals.