Contact us
Innovate, iterate and take action NOW - 2023 must be the year of true climate impact for all
04 January 2023

Innovate, iterate and take action NOW - 2023 must be the year of true climate impact for all

8 minute read
Corporate climate action Net zero
Renat Heuberger Co-Founder and Senior Advisor, South Pole

Innovate fearlessly, iterate consistently and take action now. In a sentence, this is what I am taking forward as the new year unfolds. 2023 must be the year that we sharpen our focus on true climate impact for all and tackle the climate and nature emergency head on. No ifs, no buts, no maybes.

2022 rightly earns the title of unprecedented. We emerged from the Covid pandemic to more brutal and senseless conflicts, an energy crisis which led to a dash for gas, historic levels of inflation, and wave after wave of humanitarian tragedies worsened by climate change. Amongst these historic challenges we are witnessing concerning levels of polarisation, and the environment sector is not immune.

This is the reality we are facing, but I am not here to dwell on what we're up against. Within the growing levels of frustration, anger, and despair, there is hope and reasons to be optimistic. If we can develop a vaccine in record time, shrink computers to smartphones, continue to forge breakthroughs in nuclear fusion, make wind and solar cheaper than polluting alternatives, (the list goes on), it is not unthinkable that we can rapidly unshackle our economies and societies from fossil fuels and adapt to a changing climate in time to avert a catastrophe.

Unite the missing middle: A third way?

Engaged citizens are right to be concerned and angry at the glacial pace of climate action around the world. I share their frustration. Governments are tinkering around the edges of the Paris Agreement; very few NDCs (countries' own climate plans) have substantially improved since last year.

Agile when compared to governments, businesses are also lagging behind. About 2% of companies around the world are taking climate action and only 7% of companies in our survey (self-defined as sustainability leaders) have set net zero targets according to South Pole's 2022 Net Zero Report. Even fewer are taking action to limit the impact of their businesses and supply chains on nature. Of the companies that have set net zero targets, a quarter do not plan to publicise them for fear of being accused of greenwashing. What this tells us is that the deep concern and anger is being turned inward, spooking those companies and CEOs taking their first steps on a long and complex climate journey.

On the other side of the isle, we see companies criticised over the climate action that they are taking. Recent reports on criticism of Blackrock summarise this well. While the state of Texas has reportedly put the investment manager on a blacklist for allegedly boycotting the local oil industry, the state of New York warned it might withdraw billions of investments in Blackrock because it was not doing enough to prompt companies to cut emissions.

It is crystal clear the green-hushing that we found in our survey this year is real and understandable - companies feel like they are damned if they do and damned if they don't. What keeps me up at night is how many of these companies will throw their hands up and do nothing at all.

I see similar critique on a daily basis when it comes to the Voluntary Carbon Market (VCM), which has been swept up in the heated debate around offsets. If we zoom out from the very technical debate and oversimplified headlines, the history of the VCM offers some valuable insights.

After the collapse of the Kyoto Protocol, the VCM had very low profile and limited financing, relying on a committed few to continue innovating in this space. A decade ago the market value of the VCM was around $387 million - a fifth of the estimated market value today - and VCM carbon credits were selling at less than 1$ per credit. Low demand limited the carbon markets back then - only the 'low hanging fruit' or the cheapest and most straightforward projects could get developed.

As the understanding of the real threat of climate change grows, so is the demand for action and carbon credits, which means that prices are rising. This suddenly creates the conditions for advanced technology to step in and take centre stage and more complex projects can get financed.

Currently, what we often see in the media is a critique of the older projects which were cutting edge at the time - and essential to bringing down emissions. An example is renewable energy. To develop a wind or solar project in Chile a decade ago was very difficult - there was no local bank to fund the project so it was clearly additional. Today, those projects may not be additional because there might be financing as technology costs have come down and the rate of return is higher - especially during an energy crisis, as we have seen this year. Renewable energy is suddenly more cost effective than natural gas from Russia...

The current debate is applying a 2022 vision to a very different context and world. Put simply, the VCM is not flawless. But it's the only viable system we've got that rose from the ashes of Kyoto. Time is running out so improving it at pace is crucial to securing a stable climate.

Witnessing problematic projects being cherry picked and splashed across the media, it's clear we have a long way to go to win this argument. But we can't let the perfect become the enemy of the good. The VCM offers measurable, scalable, and growing benefits. Right now, the market is channelling major financing into projects that avoid and reduce our carbon emissions. And it has huge potential to help us reach net zero, so long as more businesses go above and beyond decarbonisation (as recommended by the Science-Based Targets Initiative) and add the important step of financing climate action as a milestone on their climate journey.

So while the frustrated and angry gather on social media to one-up and offer nothing but criticism, I am calling on the missing middle to unite around bold climate action, taking risks, and engaging results-based climate finance. Bring your ideas, solutions, and innovations and let's work towards improving the VCM at the pace that meets the speed of this historic climate challenge.

As the saying goes, 'When the winds of change blow, some people build walls and others build windmills.' I know what side I'm on. So let's up the ante, iterate, improve and deliver record levels of finance to the emerging net-zero economy.

Time to innovate

The scale of the opportunity the VCM represents is hard to overstate. Let's take nature-based solutions as one of the many examples of climate solutions that are at our fingertips. The World Economic Forum has calculated that investment in nature alone could generate over US$10 trillion by 2030. The VCM is already channelling results-based finance into protecting and restoring precious natural areas that are important carbon sinks.


Find out more about the links between biodiversity and carbon markets in this interview with Renat Heuberger.

Excitingly, it has the potential to go further, mobilising billions of dollars a year to finance nature-based solutions. The booming number of new projects like mangrove restoration, climate smart agriculture, forest protection and restoration and more at the cutting edge of climate action desperately need financing to scale. By uniting around, and developing mechanisms to finance these opportunities we can deliver a triple-win. We can reduce carbon emissions, boost biodiversity, and channel money from the Global North into the forests and ecosystems of the Global South, on which all life depends. This is where climate action meets development - we are working hard to ensure the money goes to local and indigenous communities, the stewards protecting and restoring vital ecosystems, on which we all depend.

Most importantly, the VCM paves the way for regulatory and economy-wide climate action. It does this in two ways.

From a buyer's perspective, purchasing carbon credits means a voluntary pricing of carbon emissions in anticipation of carbon pricing regulation.

From a host country's perspective, projects under the VCM bring technology, know-how and - perhaps most importantly - financing to reach and increase ambition of its contribution to the Paris Agreement, the so-called NDC. Moreover, a large amount of CO2 calculation, monitoring and verification methodologies that have been proven and tested on the voluntary markets are now being adopted to use under emerging compliance markets.

2023, the year of solutions and impact?

We now have a once-in-a-decade deal to halt the destruction of Earth's ecosystems agreed at COP15 and a new dedicated fund for Loss and Damage agreed at COP 27. But the last decade has shown us, painfully, that targets do not lead to impact.

Many of the creature comforts that we now take for granted - cars, smartphones, energy systems - started life as unwieldy, impractical and inefficient. But companies innovated and competed year after year to deliver the amazing products we have today. So why should the VCM be any different? It is crucial that we see consistent improvements to the VCM that enhance the clarity of claims and improve the quality and durability of such reductions. This requires a coordinated and collaborative approach to continue refining the market, from methodologies to updated additionality provisions.

If 2022 has taught us anything it is that there is little point in predicting the future. Committed colleagues and I are not interested in predicting the future, we are laser focused on shaping it. 2023 must be the year of more solutions and true climate impact for all. It is time for all of us in the middle - not on the polarised extremes - to unite and speak candidly and courageously about the challenges without getting shot down by the media to the point where we are silenced. It's time to innovate fearlessly, iterate consistently and take action, now.

Let's get to work.

Learn more about true climate impact and how you can start your climate journey.
Learn more about true climate impact and how you can start your climate journey.
Available Languages