As historic forest fires ravage the West and the National Hurricane Center reverts to the Greek alphabet as they run out of names for storms earlier than ever before, we are continually reminded that the climate crisis will increasingly affect the way we conduct business and policy. In turn, businesses will continue to face increasing pressure to communicate and demonstrate their commitment to climate action and must prepare to navigate these turbulent times in the months and years ahead.
Next week’s election will unveil one of two very distinct futures for our country. And while the U.S. elections will have enormous ramifications on the direction we take to address the climate crisis nationally, the outcome will not slow climate action globally. We see momentum on climate action continuing to build and while voters will be presented with two very stark choices on the ballot, we see a continuing push to tackle our shared challenges in either scenario. We see a more sustainable, low-carbon society as preordained.
Thus, business leaders already committing, or planning to commit, to bold climate action should stay the course, no matter the outcome of the election. They must continue efforts to build resilient, sustainable businesses to best prepare for a more sustainable future. We see such action as best positioning companies to reduce risks and benefit most from the unprecedented opportunities that lie ahead, in addition to helping to save the planet.
A Victory by Vice President Joe Biden
A victory by Vice President Joe Biden quickly and significantly changes the dynamic and direction of climate action in the U.S. and would have a ripple effect throughout the world. Depending on the makeup of the Senate and potential agreements in a lame-duck session, a Biden administration’s policy agenda will likely prioritize tackling Covid-19, election reform through enacting HR1 and an economic recovery package to rebuilding the U.S. economy. Climate is likely to be packaged as part of the rebuilding effort through Biden’s Plan for a Clean Energy Revolution and Environmental Justice, the most ambitious climate policy proposed by a leading presidential candidate ever. A Biden administration will move quickly to implement this agenda, cognizant of limited political capital and the two-year window before the 2022 midterms. A wide margin of victory and a larger majority in Congress will, of course, allow for more ambitious plans while Republicans maintaining a Senate majority could thwart any substantial action. For the business community, there are several considerations:
A Sustainability Revolution
- Biden’s $2 trillion plan will aim to significantly escalate the sustainability transition across America, prioritizing investments in transportation, clean energy and the built environment, as part of a sweeping set of proposals designed to generate economic opportunities, embrace environmental justice and strengthen American infrastructure.
- The sustainable economy Biden’s policies could enable provides unprecedented opportunities for businesses already transitioning to cleaner energy sources, retrofitting office spaces, greening fleets, setting science-based targets and further embedding sustainability into their business models.
The Green Regulatory Environment
- A Biden administration will seek to usher in a new regulatory environment through the reimplementation and up-leveling of Obama-era policies, empowering the EPA, and instituting more climate-friendly regulations across sectors at the local, state and federal levels.
- Carbon pricing continues to gain momentum globally. Through a carbon tax, a cap-and-trade scheme or another method, a Biden administration could pursue a carbon price in the U.S. Many businesses are already taking proactive steps to address this reality and would benefit from such prescient action in this scenario.
- The 6-3 conservative majority on the Supreme Court could stymie more sweeping regulatory changes. This could mean increased action and regulatory battles in the state and local arenas as Democrats seek to avoid cementing policies at the federal level. Biden will likely only have one opportunity to replace a justice in Judge Breyer, who already sits in the minority.
Stakeholder Empowerment and Corporate Purpose Level Up
- Businesses are facing increasing pressure from a diverse set of stakeholders. A Biden administration puts winds in their sails. Employees, activist groups and investors will be emboldened to hold companies accountable for their actions, particularly on climate, and will expect more ambitious commitments validated by more ambitious action to usher in a new standard of sustainable activity.
- As activist groups like the Sunrise Movement and Extinction Rebellion continue to target lagging businesses, as the wealth transfer from Baby Boomers to more purpose-driven generations continues, as Millennials continue to make up a larger share of the workforce and as employee activist groups continue to mobilize, businesses will continue to face mounting pressure to address stakeholder primacy as a core business principle.
- Nominal action and broad pro-climate POVs will no longer be sufficient in a Biden era. Speaking out against anti-climate policies will require transparent demonstrations of action. That action will need to be quantified—through setting and communicating clear pathways to climate action, increased disclosures and policy advocacy. Those entities building a foundation around long-term shared value creation today will thrive in such a setting tomorrow.
Global Progress Continues
- Much of the world has and will continue to move forward on climate action regardless of the U.S. election result. The EU is leading the way by committing to and financing ambitious plans for a green recovery. The bloc has vowed to spend at least 30 percent of its coronavirus recovery stimulus on climate action while also pledging to increase its emissions-cutting goal to at least 55 percent by 2030 to reach climate neutrality by 2050. Coupled with Boris Johnson’s recent call for UK leadership, Europe is undoubtedly the global leader driving the green transition, changing global markets and best positioning itself to take advantage of a sustainable transformation.
- EMEA, Japan and South Korea have just this week announced ambitious plans to reach net-zero emissions by 2050. These bold announcements complement China’s historic net zero commitment to provide fresh optimism towards meeting Paris Agreement targets. These pledges will require monitoring, but they are unprecedented unilateral decisions by world powers to hold themselves accountable, changing the dynamic of the global climate conversation and mounting increasing pressure for U.S. action.
- A Biden victory adds the U.S. back into the fray. As Climate Analytics CEO Bill Hare framed it, “this would mean the world’s top three emitters…accounting for nearly half (45 percent ) of global emissions, would all have net-zero by mid-century targets, placing the 1.5˚C warming limit of the Paris Agreement firmly in reach.” Through such a united front, the sustainability dominoes could fall rather quickly, fundamentally changing the geopolitical landscape in short order and overhauling global positioning towards climate efforts.
A Biden administration could re-establish the U.S. as a global sustainability leader, recommitting the U.S. to the Paris Climate Agreement and accelerating the transition to a green economy. His campaign promises and proposed agenda consist of aggressive climate action and environmentally friendly policies. Businesses already working to build more sustainable operations will have unique opportunities to benefit from this shift. The opposite is also true.
A Victory by President Donald Trump
A victory by President Donald Trump means an emboldened mandate. A Trump victory could mean Republicans have maintained a majority in the Senate, although likely a smaller one. But any majority allows for a strong front for which to advance deregulation efforts pursued over the last four years. Progress on decarbonization will slow at the federal level and with it, global climate efforts will be hindered. No global coalition will be formed in partnership with a Trump Administration. Several considerations should be considered in such a scenario:
An Emboldened Mandate
- A second term could allow the Trump administration to lock in the numerous environmental rollbacks and deregulation efforts actioned in the last four years, bolstering current policies and setting precedent, all of which could be decided by justices Trump has or could appoint.
- With Congress potentially gridlocked in a second Trump term, sweeping legislation is unlikely to be passed, but inaction will be detrimental to the climate movement. The U.S. could fall behind in the race to capitalize on the sustainable solutions rapidly being developed and deployed both in the U.S. and by other world powers.
A Shifting Ideology on the Courts
- In the absence of legislation, Trump will likely continue to lean on the judicial branch to enforce his agenda. A second term continues a successful partnership with Senate Majority Leader Mitch McConnell to stack the courts. This also provides four more years to lock in anti-climate policies and retry previously lost environmental cases on new grounds - including the scaling back of the Clean Power Plan and National Environmental Policy Act, rolling back fuel and emissions standards, and opening or reopening the leasing of public lands to oil and gas development. The Brookings Institute recently published a tracker for guidance on deregulation efforts by the Trump administration.
- A Trump win could provide him the opportunity to appoint another judge to the Supreme Court, installing a 7-2 conservative majority, while allowing the continued packing of the lower courts in parallel. The rightward shift could allow for the reversal of precedent and new interpretations of previously opaque cases fundamentally shifting the future of American jurisprudence, directly affecting climate and environmental policy.
- Amy Coney Barrett’s academic writings indicate she could favor a limited role for agencies like the EPA in regulating emissions of carbon dioxide and other greenhouse gases that contribute to climate change. A battle over the oft-cited Chevron Doctrine looms with it the potential to define or redefine the power of federal agencies and, ultimately, affect the authority the EPA will have during a Trump or Biden administration and beyond.
But the Economics Matter
- A Trump victory will stymie the climate agenda, grounding any federal green stimulus as we know it. Trump could continue efforts to fortify the fossil fuel industry, which could lead to the expansion of oil and gas exploration and production within the energy sector, impacting the global economy.
- Yet, advancements in technology, economies of scale, and increasing competitiveness of renewable energy sources, shifting capital allocation and the rise of ESG investing all present a very different global marketplace than in the recent past. Opposition to this new reality could leave Trump facing mounting pressure to address this shift as well as economic headwinds that could thwart his agenda.
- Despite the absence of leadership at the federal level, the climate conversation has advanced drastically over the last four years, due in large part to corporate action. In a second Trump term, even more will be expected of business leaders to tackle the challenges ahead. Corporate climate action will accelerate in the leadership vacuum, which could take the form of more net-zero commitments and emissions reduction efforts, more collaboration through coalition building and partnerships, more vocal advocacy for policy proposals and also more rigorous attention to internal procedures and operations.
A Trump victory paints a bleak picture for the prospects of urgent climate action and a green recovery at the federal level. Deregulation efforts and attempts to repeal environmental and climate policies should be expected. Such efforts could be buoyed by a conservative bench. But this does not mean progress on climate action will cease. As droughts, floods, wildfires and other climate-related disasters continue to devastate the country, we foresee a growing chorus of opposition to an agenda based on inaction. The makeup of Congress and the demeanor of the courts will play a key role in determining the shape and efficacy of this opposition, but, like in a Biden administration, we see the climate movement marching on and businesses embracing this evolution being best prepared to take advantage.
What it all means
It is our view that no matter the outcome of the election, corporate action on climate will continue and accelerate. As climate disasters persist and stakeholder demands increase, climate-friendly policies and a resulting greener global economy are increasingly likely. Increased activism, geopolitical pressure, market forces, and enhanced corporate leadership will continue to drive momentum toward climate action. Therefore, businesses committing to bold action—making sustainability commitments with clear, measurable pathways to net zero, continued monitoring and reporting of their progress, and embedding long-term, multi-stakeholder principles into their businesses—are best positioned to avoid risks, navigate volatility and ultimately benefit in a more sustainable, low-carbon future ahead.