Blah blah or breakthrough – was COP26 a success?
In our last post, we looked at the hype around COP26, the UN Climate Change Conference. After all that anticipation, did it live up to expectations?
As the summit got underway, some critics wrote it off as “blah, blah, blah”. Fast forward to the end, and its president, Alok Sharma, held back tears, apologising that the Glasgow Climate Pact had been watered down by last-minute changes.
But we shouldn’t lose sight of some of the major positives that emerged in those two weeks – and the part we as investors can play in them.
Positive No. 1: 1.8°C is better than 2.4°C
The big target at COP26 was getting everyone to agree to emission cuts that limit global temperature rises to no more than 1.5°C this century. In the end, they fell short. But we still saw real progress.
Before the conference, we were on course for a 2.4°C rise, which would have a devastating impact on the environment. To make sure this message hit home, we had a UN video with a velociraptor (voiced by Jack Black), pleading with humans not to make themselves extinct. Meanwhile, Tuvalu’s foreign minister Simon Kofe delivered a speech knee-deep in the ocean, highlighting the likelihood of rising sea levels caused by climate change.
But with the new and updated Nationally Determined Contributions (NDCs)[1] from individual countries, the world is now on course for a 1.8°C rise – a huge step forward. And the 1.5°C dream is still alive, nations have been urged to revise their NDCs again ahead of the next climate summit in Egypt.
Positive No. 2: Historic commitments
Another major success at COP26 was how all sides have, by and large, worked together, collaborating to come up with agreements in many different areas.
- Methane: More than 100 countries signed the Global Methane Pledge, aiming to cut emissions by 30% by 2030. Methane has more than 80 times the warming power of carbon dioxide in the short term.
- Coal: Even though the final climate pact watered down promises on cutting out coal completely, the Global Coal to Clean Power initiative could spell the end for the dirtiest of fossil fuels.
- Deforestation: Countries including Brazil have promised to end and reverse deforestation by 2030. In addition, there’s greater focus on sustainability from producer countries of forest-threatening products such as palm oil and cocoa.
- Sustainable buildings: The World Green Building Council’s Net Zero Carbon Buildings Commitment won support from businesses at COP26. This includes reducing operational emissions from new and existing buildings and advocating for wider reductions via business activities.
- Finance: Investment has been extremely high profile at the conference. The main talking point was the Glasgow Financial Alliance for Net Zero, which sees commitments from asset managers, banks, and insurers to spend around US$130 trillion to get to net zero by 2050.
Positive No. 3: Stamping out ‘greenwashing’
From an investor’s perspective, there was one really important piece of progress announced at the summit. The creation of a new board that makes it easier for investors to judge whether financial products are as sustainable as they claim to be.
As momentum builds in environmental, social and governance (ESG) investing, it’s more important than ever to know that the funds you invest in aren’t just simply ‘greenwashing’.
The new International Sustainability Standards Board, established by the International Financial Reporting Standards (IFRS) Foundation Trust, promotes greater transparency and consistent data reporting.
Yes, there’s still more to do – but we’re all on our way
One thing we need to remember is that that whether the COP26 goals are achieved or not goes well beyond those delegates who were part of the ‘Blue Zone’ (the UN-accredited hub where the important decisions were made in Glasgow). The summit gave a platform to the public, investors businesses, civil society, academia, business, youth groups and activists on how to make the world more sustainable.
And it’s already clear people are reassessing their lifestyles. Whether that’s cutting air miles, eating less meat, or buying more sustainable products. For example, there’s evidence that shoppers are increasingly shunning ‘fast fashion’ (quick to produce, low-cost clothing with a large carbon footprint) in favour of second-hand clothes.
Crucially, investors have a pivotal role in this next phase. Where they choose to put their money can influence company behaviour and policies in the future. Research from the Association of Investment Companies (AIC), found that more than half of the private investors they surveyed saw climate change as the highest-ranking ESG issue. Big institutional investors are also making the issue of climate a priority.
There’s still some way to go. But the overwhelming feeling for me from COP26 was that things are moving in the right direction. Of course, it’s easy to focus on where the summit has fallen short. But, for the first time, it feels like maybe everybody is on the same page.
[1] According to Climate Watch, 151 countries have submitted new or updated NDCs for COP26, 91 of those are with reduced total emissions.