“Six years ago Paris set the ambition, today in Glasgow we are providing the investment we need to deliver that ambition.” Rishi Sunak, COP26, 3 Nov 21
On Finance Day at COP26, it was the UK that got the ball rolling when UK Chancellor Rishi Sunak unveiled a plan to "direct the world's wealth to protect our planet".
There are three main strands to Sunak’s approach:
1. Public investment
Recognising that developing countries have been devastated by the "double tragedies of coronavirus and climate change", Sunak announced the G20’s intention to step up and finally provide the $100bn / year of climate finance - that was first promised to developing nations in 2009 and re-affirmed at the 2015 Paris conference - by 2023. Further commitments will be made over the next five years to deliver $500bn of investment to countries that need it most, as well as a UK commitment of £100m to a taskforce helping countries to access finance.
2. Private investment
Sunak highlighted that COP26 has seen private institutions with assets worth $130tn create a "wall of capital for the net-zero transition around the world” and called for, action to invest this in a low carbon future and for, confidence and clarity in the climate impact of the investments.
3. Greener financial system
Sunak went on to say that the entire global finance system will need to be rewired for net zero, using "better and more consistent climate data, sovereign green bonds, mandatory sustainability disclosures, proper climate risk surveillance and proper global reporting standards." Ambition for the UK to become the first ever net-zero aligned financial centre was laid out, with the announcement that it will become mandatory for firms to publicly set out how they plan to decarbonise and transition to net zero with an independent taskforce to monitor this.
Separately, new Treasury rules proposed yesterday set out how firms will be mandated to disclose how they will hit climate change targets. As reported on the BBC “by 2023, [companies] will have to set out detailed public plans for how they will move to a low-carbon future - in line with the UK's 2050 net-zero target.”
In simple terms there are two ways that corporates can achieve net zero carbon emissions. The first is to reduce actual carbon emissions. The second is for any remaining emissions - that cannot be eliminated - requiring corporates to purchase and then retire voluntary carbon credits. This announcement therefore may act to increase demand for such credits. Foresight Sustainable Forestry company, which in October issued its prospectus and launched an IPO offer, intends to create over 4 million voluntary carbon credits from the IPO proceeds.
Elsewhere US Treasury Secretary Janet Yellen echoed Sunak’s thoughts, calling for a "wholesale transformation" of our carbon intensive economies, at a cost of between $100tn and $150tn in the coming decades. Reiterating that the gap between what governments have in funding and what is still required "is large", Yellen announced that the US will commit international climate finance of more than $11bn by 2024 and look to support capital markets mechanisms that bring together private finance and investment for clean technology.
However, not everyone is convinced. Back in the House of Commons, where UK Prime Minister Boris Johnson gave a statement on COP26 and the G20 summit, Labour's deputy leader Angela Rayner suggested that the next 9 days of the conference need "to move beyond pre-packed announcements". Rayner went on the attack when she juxtaposed the UK’s climate ambition with the government "refusing to make its mind up" about a controversial coal mine planned in Cumbria and reducing development aid for key climate projects.
Meanwhile, the crisp autumnal weather in Glasgow couldn’t dispel the ever-present context of the underlying science and the general feeling that climate change has moved from being a risk for the future to something the world is experiencing now. The Economist described the cause of this in stark terms this week: “For most of history the composition of Earth’s atmosphere has been as unchanging a backdrop to the human drama as the arrangement of its continents, or the face of its Moon. In the middle of the 19th century that changed. Very quickly by historical standards, and instantaneously by geological ones, the CO2 level began to rise. Having stayed between 275ppm and 285ppm for millennia, by the 1910s it had reached 300ppm. By 2020 it was 412ppm”.
Civilisation was enabled by an unnaturally stable period of climate in the previous ten thousand years or so; now it is the task of this, and future generations, to stabilise it once again. But adversity brings out the best in us and defiance, and tenacity, is what we do when we are motivated.
Tenacity is obviously something that is often seen in sports people and the voice of finance was not the only one heard at COP26 yesterday. Double Olympic sailing gold medallist Hannah Mills knows how hugely influential sport is in the UK, and around the world, and questioned if its influence could be used to inspire immediate and radical action on climate change.
The words of UK Prime Minister Boris Johnson come to mind - “I am cautiously optimistic… With talks with around 120 world leaders, we have pulled back a goal or perhaps even two".
What is not immediately clear, however, is how many goals we are already down….