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The Turning Point: New Hope for the Climate

Page 5 of 6

Nevertheless, the president is clearly changing his overall policy emphasis to make CO2 reductions a much higher priority now and has made a series of inspiring speeches about the challenges posed by climate change and the exciting opportunities available as we solve it. As a result, Obama will go to the United Nations this fall and to Paris at the end of 2015 with the credibility and moral authority that he lacked during the disastrous meeting in Copenhagen four and a half years ago.

The international treaty process has been so fraught with seemingly intractable disagreements that some parties have all but given up on the possibility of ever reaching a meaningful treaty.

Ultimately, there must be one if we are to succeed. And there are signs that a way forward may be opening up. In May, I attended a preparatory session in Abu Dhabi, UAE, organized by United Nations Secretary General Ban Ki-moon to bolster commitments from governments, businesses and nongovernmental organizations ahead of this September's U.N. Climate Summit. The two-day meeting was different from many of the others I have attended. There were welcome changes in rhetoric, and it was clear that the reality of the climate crisis is now weighing on almost every nation. Moreover, there were encouraging reports from around the world that many of the policy changes necessary to solve the crisis are being adopted piecemeal by a growing number of regional, state and city governments.

For these and other reasons, I believe there is a realistic hope that momentum toward a global agreement will continue to build in September and carry through to the Paris negotiations in late 2015.

The American poet Wallace Stevens once wrote, "After the final 'no' there comes a 'yes'/And on that 'yes' the future world depends." There were many no's before the emergence of a global consensus to abolish chattel slavery, before the consensus that women must have the right to vote, before the fever of the nuclear­arms race was broken, before the quickening global recognition of gay and lesbian equality, and indeed before every forward advance toward social progress. Though a great many obstacles remain in the path of this essential agreement, I am among the growing number of people who are allowing themselves to become more optimistic than ever that a bold and comprehensive pact may well emerge from the Paris negotiations late next year, which many regard as the last chance to avoid civilizational catastrophe while there is still time.

It will be essential for the United States and other major historical emitters to commit to strong action. The U.S. is, finally, now beginning to shift its stance. And the European Union has announced its commitment to achieve a 40-percent reduction in CO2 emissions by 2030. Some individual European nations are acting even more aggressively, including Finland's pledge to reduce emissions 80 percent by 2050.

It will also be crucial for the larger developing and emerging nations – particularly China and India – to play a strong leadership role. Fortunately, there are encouraging signs. China's new president, Xi Jinping, has launched a pilot cap-and-trade system in two cities and five provinces as a model for a nationwide cap-and-trade program in the next few years. He has banned all new coal burning in several cities and required the reporting of CO2 emissions by all major industrial sources. China and the U.S. have jointly reached an important agreement to limit another potent source of global-warming pollution – the chemical compounds known as hydro-fluorocarbons, or HFCs. And the new prime minister of India, as noted earlier, has launched the world's most ambitious plan to accelerate the transition to solar electricity.

Underlying this new breaking of logjams in international politics, there are momentous changes in the marketplace that are exercising enormous influence on the perceptions by political leaders of the new possibilities for historic breakthroughs. More and more, investors are diversifying their portfolios to include significant investments in renewables. In June, Warren Buffett announced he was ready to double Berkshire Hathaway's existing $15 billion investment in wind and solar energy.

A growing number of large investors – including pension funds, university endowments (Stanford announced its decision in May), family offices and others – have announced decisions to divest themselves from carbon­intensive assets. Activist and "impact" investors are pushing for divestment from carbon­rich assets and new investments in renewable and sustainable assets.

Several large banks and asset managers around the world (full disclosure: Generation Investment Management, which I co-founded with David Blood and for which I serve as chairman, is in this group) have advised their clients of the danger that carbon assets will become "stranded." A "stranded asset" is one whose price is vulnerable to a sudden decline when markets belatedly recognize the truth about their underlying value – just as the infamous "subprime mortgages" suddenly lost their value in 2007 to 2008 once investors came to grips with the fact that the borrowers had absolutely no ability to pay off their mortgages.

Shareholder activists and public campaigners have pressed carbon-dependent corporations to deal with these growing concerns. But the biggest ones are still behaving as if they are in denial. In May 2013, ExxonMobil CEO Rex Tillerson responded to those pointing out the need to stop using the Earth's atmosphere as a sewer by asking, "What good is it to save the planet if humanity suffers?"

I don't even know where to start in responding to that statement, but here is a clue: Pope Francis said in May, "If we destroy creation, creation will destroy us. Never forget this."

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