Michael Watson

Undoubtedly, the climate emergency represents the greatest risk to society and to business and is the defining characteristic of our generation. But something has happened in the past 18 months – companies talked before about sustainability, green credentials and climate crisis mitigation – but for most, action was muted. No longer.

The climate crisis is now the lens through which many consumers and stakeholders see an organisation, it’s at the forefront of the minds of investors, fund managers and financial institutions. Major banks and investors are under pressure to demonstrate that they are funding solutions to the crisis, not adding to the problem.

Governments are under pressure to set and reset increasingly challenging targets and then implement law and regulation to deliver them, with new rules on reporting and transparency making organisations more accountable than ever.

Former UK minister and COP negotiator in Copenhagen in 2009, Douglas Alexander, told Pinsent Masons’ Brain Food podcast that the financial sector’s conversion has been as swift and decisive as it has been surprising.

He said: “In the financial sector the momentum has continued to build because finance comes down to a calibration of risk as well as a calibration of opportunity. If you misread the climatic risks, you are not going to get access to capital in the future, you are not going to get insurance, and you will have to undertake stress tests to establish that you are a resilient business.

“The understanding of risks that is fundamental to the capital markets is a very powerful instrument of change in the corporate sector, because your access to capital in the future is going to be based not only on whether your business is resilient, but whether it is transitioning effectively to that net zero future.”

Speaking at the 43rd TB Macaulay Lecture on Tuesday, which we were proud to support, Christiana Figueres, the UN executive secretary and public face of the Paris Agreement, highlighted the pace at which climate and sustainability responses have moved to centre stage. She told the University of Strathclyde audience: “It will take all of us working together, pushing and pulling each other, with honesty and respect to accelerate the urgent solutions.”

The role of a lawyer as adviser is to assist the board or executive team to fully assess and understand the risks and opportunities that their organisation is facing. We can put ourselves in the shoes of the corporate and say: “If I were you, I would do the following”.

Whilst having one eye on the risks, this is a great opportunity for general counsel and lawyers generally to use their influence and to help their own businesses, and clients’ businesses, transition to net zero.

Michael Watson is a partner at Pinsent Masons