Economist ‘The Paris climate-change agreement endorses the low-carbon approach to doing business. More companies now need to embrace the new disclosure regime and set goals to help to meet the new climate targets, argues Paul Simpson, chief executive officer of the international not-for-profit CDP.

When it comes to climate change, there are few moments that come close to December’s history-making Paris Agreement. Judging from the flurry of headlines, praise from business and civil society, and celebrations from environmental campaigners, you might assume that this was an accord plucked from the jaws of unrealised potential and catapulted, to everyone’s surprise, to become the most ambitious climate deal in history.

There may be some truth to this. However, the Paris Agreement does not represent a total departure from history, but is instead confirmation that the low-carbon approach to doing business—already taken by many—will soon be the only way of doing business.

The need for better transparency and accountability

Take the enhanced transparency and accountability regime confirmed in the new deal. The regular submissions of national climate action plans will enable companies to anticipate each country’s intentions around climate policy and provide clarity on the direction of travel. While this may be a relatively new transparency and accountability mechanism at the international level, many leading corporates will already be familiar with this disclosure regime.

From sustainability reports to annual disclosures to shareholders, over the years companies have got better at identifying climate-related risks and opportunities. With more and more investors considering how climate change impacts a company’s valuation and thereby their own portfolios, the most successful businesses are those that are able to show they have a sophisticated understanding of environmental considerations and are acting accordingly. This is why investment professionals consider companies such as Unilever and Apple to be among the best at identifying material sustainability issues confronting their business.’

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