Regnan: Navigating climate strategy amid regulatory turbulence

Navigating climate strategy and regulatory uncertainty calls for nuanced action, writes Regnan’s Oshadee Siyaguna

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THE urgency of climate change is clear. But despite rising global temperatures, extreme weather events, and increasingly dire scientific warnings, policy momentum appears to be slowing.

That’s according to Regnan Senior Thematic Investment Analyst Oshadee Siyaguna, who provides insight into these complex dynamics in the sustainable investor’s latest report: Navigating climate strategy amid regulatory turbulence.

A shifting political landscape

Recent policy reversals in the United States have cast a shadow over global climate governance. And the US federal government’s retreat from greenhouse gas (GHG) regulations has sent a troubling signal worldwide.

“The pullback from GHG regulations signals a broader disruption to global climate governance,” explains Oshadee.

“Despite ongoing state-level initiatives, this federal shift has encouraged other nations to reconsider their own commitments.”

Yet Oshadee also points out that countries like Argentina and Indonesia face significant economic and diplomatic constraints that prevent them from easily abandoning their Paris Agreement obligations.

“Unlike the US, these countries are economically and diplomatically tied to proponents of the Paris Agreement – walking away isn’t straightforward for them,” he notes.

Economic pressures cast a long shadow

Climate policy does not exist in isolation – it intersects deeply with socio-economic realities. The lingering effects of COVID-19, coupled with the ongoing conflict in Ukraine and persistent inflationary pressures, have reshaped the landscape.

Oshadee highlights how these intertwined crises have created a challenging environment for climate action.

“The pandemic left behind record government debts and disrupted labour markets, while the Ukraine conflict has significantly exacerbated energy insecurity,” he explains.

“Together, these factors have made emission reduction policies appear as additional drivers of energy cost inflation.”

This perception has sparked social unrest globally, with many citizens viewing climate policies as yet another burden during already difficult economic times.

Protests reveal societal tensions

The rise in global protests underscores growing dissatisfaction with current climate policies – but not always in ways we might expect. While many protests demand stronger climate action, there is also a notable surge in anti-climate demonstrations, particularly among labour groups.

“Workers in transitioning industries often bear significant costs,” says Oshadee.

“These anti-climate protests reflect a critical oversight: policymakers haven’t adequately addressed the social dimensions of transition.

“There’s a real need for equitable frameworks that consider communities dependent on traditional industries.”

Corporate strategies shift amid uncertainty

Policy turbulence has forced corporations to reconsider their climate commitments. A prime example is energy giant bp, which recently revised its ambitious climate targets established in 2020.

This strategic recalibration illustrates how companies are navigating uncertainty by adopting more cautious approaches amid shifting regulatory sands.

Is policy action inevitable? Read more in Navigating climate strategy amid regulatory turbulence

The concept of an “inevitable policy response” suggests that societies will eventually implement robust climate policies when confronted by severe impacts, but Oshadee cautions that this inevitability depends heavily on public awareness and political will.

“The likelihood of a disorderly transition is rising due to escalating physical impacts and persistent policy uncertainty,” he says.

“If societies delay action until impacts become undeniable, we risk reaching critical tipping points.”

Balancing ambition with realism

Corporate climate commitments often reflect complex strategic calculations. Companies frequently set ambitious targets to differentiate themselves, even when technological solutions remain uncertain or political readiness is limited.

Oshadee explains this dynamic: “Companies set ambitious targets partly to differentiate themselves from peers. Once one company commits publicly, others feel pressure to follow suit – even if technological readiness lags behind.”

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This creates an industry-wide balancing act between differentiation (standing out through bold commitments) and conformity (aligning with industry norms).

“Companies calculate that risks associated with unmet commitments apply universally across their industry,” he adds.

Navigating an uncertain future

Looking ahead, Oshadee sees challenges looming on the horizon.

Escalating physical impacts from climate change – such as floods occurring far more frequently – are compressing risk timelines into shorter periods than previously anticipated.

“The physical impacts of climate change are unfolding faster than anticipated,” he emphasises.

“We’re now seeing events once labelled ‘once-in-a-century’ happening every few decades or even more frequently.”

He also argues that policymakers must recognise these shortened timeframes and adapt accordingly, noting that “we need inclusive policies that address socio-economic impacts on communities undergoing substantial transformations.”

A call for nuanced action

Ultimately, Oshadee stresses that effective climate strategies must acknowledge complex economic realities and societal dynamics.

“Climate change doesn’t care about political ideology or economic convenience – it’s agnostic.

“The challenge lies in navigating these complex interactions between environmental imperatives, economic pressures, and societal dynamics.”

The path forward demands clear-eyed recognition of these complexities – and decisive yet equitable action – to avoid the most severe impacts of climate change.