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January 15, 2024

Editor’s note: rebuilding trust means engaging with inequality

Special police on guard during the 52nd annual meeting of the World Economic Forum in Davos, Switzerland, 2023 (Photo: GIAN EHRENZELLER/EPA-EFE/Shutterstock)
Special police on guard during the 52nd annual meeting of the World Economic Forum in Davos, Switzerland, 2023 (Photo: GIAN EHRENZELLER/EPA-EFE/Shutterstock)

The latest edition of our Sustainable Views newsletter

Dear reader,

“Rebuilding Trust” is the title of this year’s World Economic Forum meeting in Davos, which kicks off today. Business leaders and politicians, along with key figures from academia and the not-for-profit sector, will be in attendance to focus on the four themes of security and cooperation, jobs and growth, AI, and climate and nature.

There has rarely been a moment when the world has been in greater need for leaders to sit down and discuss – conflict is rife and the climate crisis continues unabated.

As Florence writes in Sustainable Views today, 2023 was officially the hottest year on record. Indeed, Berkeley Earth, a California-based non-profit, has suggested the world last year may have breached the 1.5C warming threshold set in the Paris Agreement, with the temperature, on average, 1.54C above pre-industrial levels. It was also the year where few, if any, people across the globe were spared the impacts of extreme weather – the US saw a record number of billion-dollar weather and climate disasters, reveals data published this month.

Many economists – from Nobel prize winner Esther Duflo to Thomas Piketty and Ann Pettifor, author of the Green New Deal – argue that the problems facing the world, including climate change, cannot be solved unless politicians act to reduce inequality.

“All three global systems – climate, economic and geopolitical – are fuelled by imbalances causing first, a dangerous rise in earth’s temperatures and seas; and second, deflationary pressures, high levels of inequality and then the emergence of far-right, anti-democratic and bellicose politicians,” wrote Pettifor in her System Change substack earlier this month.

Yet inequality is growing. Oxfam’s annual pre-Davos report shows the fortunes of the world’s five richest men has “shot up” by 114 per cent since 2020, and it predicts we will see the first-ever trillionaire in the next decade.

“A billionaire is running or is the principal shareholder of seven out of 10 of the world’s biggest corporations, while the 148 top corporations made $1.8trn in profits, 52 per cent up on a three-year average, and dished out huge payouts to rich shareholders while hundreds of millions faced cuts in real-term pay,” says Oxfam.

Some of those companies who made a tidy profit in 2023, after a bumper year in 2022, were oil and gas companies, whose actions contributed directly to the $400bn of climate disaster costs in the US over the past three years, and other significant economic and human losses globally.

Positive headlines about fossil fuel companies hide a more complicated reality, says Tom Sanzillo, director of financial analysis for the non-profit Institute for Energy Economics and Financial Analysis. Ratings agencies are “raising red flags” about them as “increasingly risky enterprises” that are largely “ill-prepared to meet future challenges”, and investors are starting to take note, he warns in a January 2024 briefing.

Nonetheless, fossil fuel companies continue to reward shareholders rather than being forced by policymakers to plough profits into the energy transition or into helping reduce customer bills – just 1 per cent of clean energy investment globally comes from oil and gas companies, shows data from the International Energy Agency.

The wealthy business and political leaders gathering in Switzerland will have to show they are capable of much more than well-meaning words if they seriously want to rebuild trust.

Until tomorrow,

Philippa.

Philippa Nuttall is the deputy editor of Sustainable Views 

A service from the Financial Times