The new film Don’t Look Up tells the tale of scientists warning inept government officials that a massive comet is hurtling toward earth, only to be met with indifference, greed, selfishness, and neglect. You can likely figure out how this story ends, but this isn’t a film about how humanity would respond to a planet-killing comet; it’s a film about how humanity is failing to respond to a planet-killing climate crisis.
It certainly captures how many of us in the sustainability sector have felt like we were screaming into a void for years. But on our better days, we can also take stock of the tremendous progress that has been made across the spectrum of Environmental, Social, and Governance (ESG) issues: 2021 was a turning point. Sustainability issues are now integrated into global commerce, bringing hope that capitalism will better align with the needs of people and our planet.
So what will 2022 bring? Here are our top seven predictions:
1. The weather will get worse
Climatologists are confident that 2022 will be one of the hottest years on record. Already, on January 1st, the UK recorded its warmest New Year’s Day on record. And with La Niña (which brings colder weather) forecasted to end in 2022, it’s likely the next 12 months will deliver more extreme hurricanes, flooding, fires, and droughts. This is not news to most: An Ipsos study revealed that 60% of people polled globally believe that there will be more extreme weather events in 2022 than in 2021.
With increased extreme weather, funding for loss and damage and climate adaptation will demand more attention in 2022. The countries which are least prepared (and least responsible) for climate change will bear the brunt of climate-related damage. The United Nations Environment Programme (UNEP) estimates that funding for climate adaptation and damage must quadruple to $280 billion by 2030. This will be a focus of the COP27 meeting in Egypt.
2. Climate disclosure will be required
In 2021, the UK, Japan, New Zealand, and Singapore mandated climate disclosure for publicly listed companies based on the framework from the Task Force for Climate-Related Disclosures (TCFD). In 2022, the U.S. Securities and Exchange Commission (SEC) and the European Union (EU) will require disclosure of greenhouse gas emissions and potentially other ESG issues as well. These new regulations will impact thousands of companies but sadly, it’s unlikely that the U.S. and Europe will align on the detailed requirements.
3. Standards will converge
There is hope for better alignment, as the new International Sustainability Standards Board (ISSB) finds its footing in 2022. The ISSB has already issued a draft climate standard and expects to release two reporting protocols on disclosures in the second half of 2022. With support from 40 of the world’s leading finance ministers, the ISSB will become the dominant standard for ESG disclosures integrated into financial reporting.
4. Voluntary ESG reporting will continue
In 2021, the business world hit peak sustainability reporting, with 92% of the S&P 500 and 70% of the Russell 1000 companies issuing reports. All of these are voluntary disclosures motivated by stakeholder expectations and the desire to building the company brand. With the advent of mandatory ESG disclosure, resources will be pulled away from voluntary reporting, but they will continue. Companies have invested too much time, effort, and reputation to walk away from these efforts.
5. ESG investing continues to grow
Money flowing into ESG-branded financial products will continue its upward trajectory. 2021 was a record year for ESG investing. For the first time since the Paris Agreement, banks earned more fees arranging “green bonds” than by helping fossil-fuel companies raise money in the debt markets.
In fact, 2022 looks like it might smash the 2021 record. The trend will be stimulated by investment from new U.S. infrastructure funding and the capital flows from the $130 trillion pledged to finance net zero ambitions by the organizations in the Glasgow Financial Alliance for Net Zero (GFANZ). Bloomberg analysts predict that up to $2.5 trillion ESG-oriented debt will be issued in 2022, nearly doubling 2021’s $1.5 trillion.
6. Politics could ruin everything
All this progress has the potential to be reversed quickly in Washington. We saw this when Senator Manchin, Democrat from the coal-rich state of West Virginia, sided with Republicans to help block Biden’s Build Back Better plan, which contained billions to help drastically cut the country’s carbon emissions. With the 2022 midterm elections looming in the U.S., this legislative defeat will add fuel to the partisan divide and align conservatives behind climate denialism as democrats fight for unity.
7. It’s the economy, stupid
Even without government action, economic reality will continue to drive the transition to clean energy—but perhaps not as fast. The transition to renewable energy will gain speed in 2022. One study indicates that 2022 will be a record year in the U.S. for wind power, solar energy, and battery storage; the latter two will double and quintuple their previous records, respectively.
But fossil fueled energy will also make a comeback in 2022. COVID lockdowns depressed coal and oil by 8.4% and 4% respectively, and emissions fell by 5.8% in 2020. Fossil fuels rebounded in 2021, and in 2022 emissions could be higher than ever. It’s expected that demand for coal, the highest emitting fossil fuel, could reach an all-time high as economies continue to recover from the pandemic.
Emissions need to fall by 7.6% each year until 2030 to limit warming to 1.5C. While renewables will continue to grow market share, they won’t grow fast enough to meet the goals of the Paris Agreement. This adds even more pressure to the climate negotiators who will convene again in Egypt in late 2022.
Tim Mohin is the chief sustainability officer for Persefoni. Formerly, Mohin served as chief executive of the Global Reporting Initiative; he also held sustainability leadership roles with Intel, Apple, and AMD, and worked on environmental policy within the U.S. Senate and Environmental Protection Agency. He is the author of Changing Business From the Inside Out: A Treehugger’s Guide to Working in Corporations.