Connie Hedegaard is a former European commissioner for climate action and is a member of the Council on Sustainability Transformation
There is no critical mass of organisations with sufficient heft and influence advocating for — let alone demonstrating — the behaviours needed to address the climate emergency
Governments are also being confronted with a false choice between spending on defence and spending on climate, when both are essential to security and to citizens feeling safe
The sustainability transformation the world needs will create massive new markets and opportunities for the private sector to grow
In 2024, for the first time the average temperature across 12 consecutive months was more than 1.5C higher than in preindustrial times. This year began with the hottest January ever, despite the cooling effect of La Niña weather cycle, shocking even seasoned climate scientists.
This trajectory exacerbates future risk and uncertainty and demands concerted action — not just promises — to combat climate change. The devastating impacts of global warming are already here, affecting livelihoods and commerce and costing more lives and resources annually.
Recent events such as the catastrophic Los Angeles wildfires, massive flooding in Spain and Africa, and the deadly heatwave in Saudi Arabia during the most recent Hajj offer vivid reminders that the crisis is escalating.
Some companies, investors and politicians grasp this and are working hard to embed climate-smart strategies into their operations, investment portfolios and policies. They recognise that decisive climate action helps avoid catastrophic risks, drives innovation and creates economic opportunity. These efforts deserve recognition, replication and scaling, but they are far from universal.
Overall, there is a growing disconnect between urgency and action:
Too many companies in industries from energy to retail are slowing or rolling back climate ambitions, while investor support for financing the net zero transition is visibly fraying.
Although some investors prioritise climate change in risk assessment processes, it is proving slow to show up in investment decisions.
Meanwhile, most governments are taking too little action to meet the ambitions of the Paris Agreement, and some are actively undermining it. The US’s decision to withdraw from this landmark agreement — again — will complicate international climate negotiations at a critical time. Governments are also being confronted with a false choice between spending on defence and spending on climate, when both are essential to security and to citizens feeling safe.
When companies, investors and governments all fail to meet the leadership challenge climate change poses because their field of vision is limited to the near term, it creates a triple short-termism threat, which must be overturned.
There is no doubt these are turbulent times. Senior leaders across business, finance and politics often feel overloaded by the many instant challenges they face. As a result, it is tempting to be absorbed by immediate pressures while neglecting the urgent action required today to tackle long-term issues. Although understandable, it is not responsible. Today’s demands are not an excuse to neglect tomorrow’s challenges.
The result of triple short-termism is that there is no critical mass of organisations with sufficient heft and influence is advocating for — let alone demonstrating — the behaviours needed to address the climate emergency. And with each passing year, the problem gets harder to solve.
Each sector has reasons for thinking short term. Companies sense investor scepticism, feel pressure to deliver immediate returns, and struggle to access the capital required to decarbonise.
Many investors underestimate climate risks — if they consider them at all — and are unconvinced climate investments will deliver the returns they seek, due to unstable policies and the flawed business cases companies present to them. Only the most forward-thinking among them understand that they need to act now to future-proof their portfolios.
And government leadership is inconsistent and insufficient due to the ways polarisation has eroded political predictability and courage. The resulting political vacuum stunts the development of the reliable frameworks and incentives needed to encourage and implement long-term solutions.
Companies, investors, and governments would be better off if they co-operated to define and build solutions that address climate threats and boost economic strength — and the potential benefits of collaboration across sectors and silos are enormous.
The sustainability transformation the world needs will create massive new markets and opportunities for the private sector to grow; climate-proof portfolios will generate strong returns for investors while avoiding the risk of value collapse associated with stranded assets; and countries leading the transition stand to strengthen their economies and protect their citizens as they develop new climate-related skills and sectors.
That is not to say that companies, investors and politicians should not focus on some near-term results. Short-term efforts are crucial to addressing global warming and can generate tangible commercial value quickly, which is vital to convincing naysayers of the merit of climate action. Such successes can be stepping stones leading towards necessary long-term change as well.
However, solely leaning into the short term severely limits potential progress. It is essential that companies, investors and policymakers invest in deep collaboration to understand each other’s needs and implement comprehensive ideas that create long-term resilience, both for the company and for society and citizens.
Companies must fully embed sustainability into their operations, hone transition plans and engage with investors to gain access to capital.
Investors must properly weigh and compare the climate risks in their portfolios and prioritise investment in companies with the strongest transition strategies. A recent white paper from the Council on Sustainability Transformation, a small group of business and environmental leaders convened by consultancy ERM, offers some interesting ideas on how to improve investor-company engagement.
Finally, policymakers must streamline regulations and create and maintain incentives that reward long-term investments.
Will this be easy? Not at all. But it should be clear that business as usual invites more disruption and is more costly than embracing change.