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In August 2021, the United Nations Intergovernmental Panel on Climate Change (IPCC) published the first part of its Sixth Assessment Report “AR6 Climate Change 2021: The Physical Science Basis”1.
These reports assess scientific, technical, and socioeconomic information concerning climate change and they will form the basis for intergovernmental negotiations at the COP26 conference. Some of the major conclusions include:
- The planet is warming faster than previously thought, with projections of 1.5°C to 1.6°C warming within the next two decades, i.e., by 2040 itself.
- Limiting warming at 1.5°C is unlikely unless there are “immediate, rapid and large-scale” reductions in greenhouse gas emissions. To enable this requires a coordinated and whole-of-government policy approach, redirecting economies and investments towards sustainability goals, including on climate.
The report has been called ‘code red for humanity’ by the UN Secretary-General. It is unequivocal that human influence has warmed the atmosphere, ocean and land, and human-induced climate change is already affecting many weather and climate extremes in every region across the globe. The world’s publicly listed companies are emitting nearly 11 gigatons of greenhouse gases collectively every year. That puts them on a trajectory to exceed their share of the global carbon budget as soon as 2026 . According to the IPCC, there is only a 50% chance of remaining below 1.5 degrees even if the net zero targets for 2050 are met. It is therefore imperative that all actors (governments, corporations, and people) in all regions and all sectors act now to affect the necessary change.
As investors, we need to widen our lenses on climate change and the demand for climate action from our investee firms beyond the high-emitting sectors. The Information and Communication Technology (ICT) sector has long escaped the scrutiny of investors, regulators, and other actors in the climate change debate because of its low carbon profile. But as data consumption grows exponentially, the carbon footprint of the entire industry could very likely grow as well. Expert predictions have forecasted that internet usage will annually increase by 30-40% implying that there will be 30 times today’s internet traffic in just 10 years.
In its annual update report in January 2020, the European Telecommunications Network Operators’ Association (ETNO) stated that the entire ICT sector generates 2-4% of global GHG emissions. By comparison, the aviation sector has just under 2% of the global footprint in emissions and steel production accounts for just below 3% – that is a strong reason to take a closer look.
The ICT sector is vast, and although the lines are blurring, Telecommunications firms are at the heart of the digital revolution.
Telecommunications companies are alone responsible for up to 40% of emissions from the ICT sector, representing about 1.5-2% of global GHG emissions . Almost the entire carbon footprint of the Telecommunications sector comes from the networks – both fixed and mobile. This is a major area where effective climate strategies for these firms contrast with the technology firms, for whom data centers are a major source of GHG emissions . Physical risks from climate change can be significant as the Telecommunications sector has a significant amount of infrastructure assets.
(1 ) IPCC, 2021: Climate Change 2021: The Physical Science Basis. Cambridge University Press. In Press.
(2) https://www.msci.com/documents/1296102/26195050/MSCI-Net-Zero-Tracker.pdf
(3) Telecoms & ESG: I Feel The Need…. The Need For Balance; Exane BNP Paribas, August 2020
(4) See our Carbon Impact Quarterly from February 2021 for a discussion of the climate transition strategies in the Technology sector and Microsoft as a case study. blueroom.la-francaise.com/carbon-impact-quarterly-2/
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