COP26: Why Addressing Climate Change Requires New Metrics And Women

“The question that needs to be asked is, how do we make the economy serve society? How do we make the economy serve nature? How do we change the economy from that extractive, consumptive model that we’ve inherited from the industrial revolution, to one which is genuinely restorative and regenerative?” That provocative statement is from Ellen MacArthur, founder and CEO of the influential foundation that bears her name, at a session on transformational leadership at the huge United Nations Climate Conference known as COP26 in Glasgow, Scotland this past week.

Treasury Secretary Janet Yellen seems to agree, having said at COP26: “The climate crisis is already here. This is not a challenge for future generations, but one we must confront today. Rising to this challenge will require the wholesale transformation of our carbon-intensive economies.”

To do this transformation, we need new economic metrics, from GDP and GNP (i.e., gross domestic and national products) to company and stock valuations, which will measure how “restorative and regenerative” a country or company is, not only how profitable it is.

What metrics will drive this massive pivot?

We can take a page from the ESG metrics investors use – for Environment, Social and Governance – to provide transparency about the organization’s impact on the environment and all their stakeholders, including the diversity of their teams. There’s currently an alphabet soup of such standards, though efforts are underway to consolidate them. The Securities and Exchange Commission (SEC) is developing financial ESG reporting rules, having requested public comments to do so, and the IFRS announced the formation of the International Sustainability Standards Board at COP26 to consolidate those.

“The time has come for mandatory disclosure,” former SEC chair Mary Schapiro said in June. Schapiro is now Vice Chair of the newly-formed Glasgow Financial Alliance for Net Zero, or GFANZ.   It’s “a global coalition of leading financial institutions committed to accelerating the decarbonization of the economy.” GFANZ announced at COP26 that “over $130 trillion of private capital is committed to transforming the economy for net zero…^.from over 450 firms across 45 countries…over the next three decades.”  Its co-chairs are UN Special Envoy for Climate Action and Finance, and former head of the Bank of England, Mark Carney, and Bloomberg Founder/CEO Mike Bloomberg.

To pivot to driving net zero, “Every company, bank, insurer and investor will need to adjust their business models, develop credible plans for the transition to a low-carbon, climate resilient future and then implement those plans,” the GFANZ press release said.

This means transitioning every industry, from food to fashion to infrastructure, each of which needs to be measured differently. Reinventing farming or manufacturing to reduce waste, energy and water use while producing more, for example, is different from reinventing the energy system to fuel the economy on clean, renewable and reliable power.  According to MacArthur, the ideal would be an economy where “companies compete on their benefits” to people and nature, as well as one that, “designs out waste and pollution, including carbon.”

This requires new thinking, and new definitions of “credible” and “success.”

Five reasons women’s thinking is key to reinventing the economy

“The new economic thought leaders are very much women. And some of these exciting women are inventing new models, such as doughnut economics, which are very much like the wellbeing indicators,” Sandrine Dixson, Co-President of the prestigious Club of Rome said on my podcast from COP26. Here are five reasons female economic thought leaders are critical:

(1) Women focus on the well-being economy: Dixson cited Scotland’s “Prime Minister Sturgeon, who clearly has put in place not only clear objectives with regard to climate change, but also…is working on systems change across the economy. She’s one of the first that adopted the well-being economy…. looking at indicators in a very different way. We don’t want to just have GDP growth. We want to bring in social economic and environmental indicators.” Sturgeon did a TED Talk on the well-being economy in 2019.

(2) Women are natural innovators: The workplace, governments, and economies have been designed by men for men, so women have had to find another way to get things done. Women build influence differently, leverage relationships differently, find resources in different places and tap them in different ways. This builds innovative thinking muscles. Diversity expert Laura Liswood describes is as being in the “nondominant” role, without access to the levers of power, resources or influence. 

(3) Women are on the ground in communities: “If you look at community leaders, if you look at solution providers across Africa, across most of the world,” Dixson said, “it is usually women that step up to the plate that are bringing new, innovative solutions, because they’re there on the ground….They’re the ones that need to try to figure out how to best simplify their lives and protect their loved ones.”

(4) Women are collaborative leaders: A number of studies have demonstrated that women are collaborative leaders, and we need that to collaborate on a massive scale to reinvent the economy and save the planet.

(5) Women are coming into an “unprecedented amount of assets”: This wealth shift that McKinsey described will drive investment in the ESG direction, because women have historically favored that approach. McKinsey says this is “representing a $30 trillion opportunity by the end of the decade.”

The commitments countries made at COP26 to decarbonize and support vulnerable communities are a big step forward.

Now we need new metrics and more women in leadership – fast – to pivot the economy and save the planet.