The UN COP26 Climate Summit in the UK Will help build momentum but it will disappoint many
Over the last few years, actions to mitigate climate change have been gaining momentum. But the debate has not converted to the policy changes and investment necessary to reduce climate impacts, while developing robust resiliency strategies. Furthermore, climate continues to be a polarizing topic.
Climate change-induced disasters (which are costing the US for instance about at least 1% of its annual GDP in damage and losses) are pushing governments, the private sector, and the capital market towards impact investment, climate finance under the umbrella of Environmental, Social and Governance (ESG).
Yet, while there have been strides and bold commitment towards net zero emission by 2050, the results to date are not slowing down global warming. This challenge is compounded by the current high-cost oil and gas (in the EU natural gas prices have quadrupled in 2021), which is forcing countries to switch to more polluting energy sources to power their economies.
Having said that, there are indications that there is a greater impetus to address climate change via carbon mitigation and broader resiliency enhancement. In the U.S., President Biden’s administration began with a return to the Paris Agreement as he won the elections. This has been followed with the Biden 3.5 trillion Infrastructure Plan, which if approved, will see the nation transition towards becoming cleaner, greener, and more resilient. Here are some of the details of the Biden Plans which aims to change the investment narrative toward build back better and smarter.
In line with the commitment to achieve net-zero emissions by 2050, other nations are also accelerating their efforts to address climate change and some making bold commitment such as completely phasing out thermal-coal generated electricity. But more importantly, there is increased policy and investment coordination on a global scale. This is also converging towards stronger standards for ESG investing, including standardized disclosure, data sharing and benchmarking.
As we leave the unconclusive G20 meeting that took place in Rome, Italy on October 30th and 31st, over 100 world leaders excluding key BRICS countries such as Brazil, Russia, China and South Africa (some of the top polluters in the World), top financial institutions, climate organizations, and other leading stakeholders are about to end the UN COP26 Climate Summit in Glasgow, U.K.
The primary objective of the summit was to accelerate efforts towards achieving the Paris Agreement and the U.N. Framework Convention on Climate Change. As expected, there is much fanfare and expectation on the summit, even though the G20 in Rome has not managed to achieve any of its climate objectives, namely commitment to phasing out coal generated electricity, commitment to executing on the 100 billion $ yearly investment in climate finance, and agreeing to cut methane emission immediately. The COP26 aims to champion immediate and drastic action, as the last chances to address climate risk before it becomes more intractable. And in fairness, it just maybe. As discussed in the article on climate tipping points, scientists have identified 9 climate tipping points that have been destabilized. They range from the Amazon rainforest, the Coral Reef, to the Greenland ice sheet. Each is experiencing extreme mutations and may have already passed the “tipping point” which will inevitably result in more extreme and costly disaster events. Even more concerning, these climate systems are all interlinked, and as one deteriorates, it will compound the risk of others falling apart.
However, a pertinent question remains. Will the objectives of the UN COP26 be achieved?
What’s the main goal of the Conference?
To help address the unequivocal acceleration of global warming and to streamline decarbonization efforts (known as climate mitigation), the summit will focus on operationalizing the objectives outlined in the Paris Agreement in 2015. Key among them is the reduction of global warming to between 1.5℃ and 2℃ by 2050.
For this goal to be realized, countries must commit and implement net-zero targets’ emissions as soon as possible. Over the first day of the summit, over 100 heads of state have convened to affirm their commitment and showcase their plans to achieve this. After their sessions, delegations from various countries will discuss, negotiate, pledge, and take up positions in this fight for the global climate. Also in attendance will be influential NGOs, business leaders and financial institutions committed to ESG and the broader climate finance.
At the end of the 2 weeks conference, there will be an outcome text indicating what the nations agree to. Rest assured, having attended 2 of the COP Conferences, one in Paris, France (in 2015), and one in Marrakech, Morocco (in 2016), these conferences are rich in bold statements and poor in follow-up actions. Simply put, these politicians committing to these targets, will have to take these decision to their homes and convince their constituencies to pay for the climate mitigation and resiliency bills. This is easier said than done.
Concerns Over Achieving the Target
While there’s great optimism as to what the summit will achieve, there’s also great concern about what it won’t. Prior to the summit, politicians and experts from the U.N., the U.K., Italy (the host of the G20 on October 30–31), the US, have all expressed concerns that the pledges from major economies are not at the required levelto halve emissions this decade. If so, the goal of limiting global warming to 1.5℃ will not be achieved.
The legitimacy of the Concerns
Although there’s much expectation about the UNCOP26, it’s not the first of its kind summit. The first time many nations came together to agree on the need to control greenhouse emissions was in 1992 during the Rio Summit. This resulted in the United Nations Framework Convention on Climate Change (UNFCCC), the first strong platform to build a coalition for sustainable development.
Over the years, there have been updates to the treaty, with the 2015 Paris Agreement being the most notable, robust and “binding”. Among such conferences between the 196 nations that ratified the UNFCCC treaty, COP26 is the 26th. As with UNCOP26, each conference elicited much expectation coming up with a robust and ambitious Roadmap. However, not much was achieved after their conclusion as different presidents, Trump being one of the most notorious, disregarded these agreements. Alarmingly, the problem has not been a lack of clear objectives but a commitment to them. This is why the uncertainty towards the success of UNCOP26 is justified.
What the Summit Will Achieve
As things stand, it is improbable that the UNCOP26 will facilitate the journey towards the zero net carbon as agreed in Paris in 2015. In September 2021, the United Nations warned that revised targets by nations are too weak and inconsistent with previous pledges.
Without further significant adjustments, the end-of-century warming will be roughly 2.7℃, which will be well off the mark resulting in more catastrophic climate events costing the global economy between 10–15 % of GDP as assessed by Swiss Re, the Swiss Insurance Giant.
Another major concern is the recent setbacks on the Biden Infrastructure Plan. With leaders such as Sen. Joe Manchin opposing the clean electricity plan or other suitable alternatives, it’s now in jeopardy. As a result, the Senate recently passed a $1 trillion infrastructure bill.
While it’s a good step forward, most climate related investment in the Biden Plan have been downscaled. Moreover, considering that this happened at the eve of the COP26 Summit, it will reduce President Biden’s capacity to leverage his national policies success to persuade other nations to follow suit. This is particularly troublesome as we see other large global emitters such as China, Russia, Australia, and Brazil either not attending the summit or not pushing their net zero deadline to 2060 or 2070. As a reference point, only 12 countries of the G20 confirmed their commitment to net zero by 2050, and at least 5 of the most polluting did not show up in Rome for the first in person summit since Covid starter.
This is not to say the UN COP26 summit won’t bring progress, as I am convinced there will be considerable positive progress out of the summit. For instance, there will be good momentum towards greater international activism around climate finance, mitigation, and resiliency. And the private sector together investment firms will play a larger role via ESG, to ensure that they are part of the solution.
Regrettably, the goal of reaching net-zero emissions will remain elusive, particularly because economies are still struggling to recover from the Covid shock and are fronting a heavy energy bill to keep their economies alive. Overall, the COP26 will underdeliver, but will set the stage for more viable expectations to build climate resiliency going forward.