Soon after the COP26 climate conference concluded, Greta Thunberg’s youth-led environmentalist group Fridays for Future released a statement calling the event “infuriating and disappointing”. Sentiments likely shared by COP26’s president, Alok Sharma, who held back tears, apologising to delegates for “the way this process has unfolded”.
But is this a true representation of what the summit managed to achieve? Mixed in with negative coverage are plenty of reports signalling that COP26 climate conference (we’ll abbreviate it to COP for the purposes of this article) was more effective than some would have us believe. Many are hopeful that there will be lasting repercussions that may just be enough to curb a catastrophic temperature rise above pre-industrial levels. And if this is indeed the case, how is it likely to affect private sector industries and investments in the near future?
How Likely Is Change?
One of the accusations levelled at the agreement is the wording used. Words like “urging”, “encouraging” and “inviting” hardly imply firm and direct action. However, as Guardian’s environment correspondent, Fiona Harvey, was keen to stress in an interview for The Science Weekly Podcast, these words have legal resonance within the context of the Paris Agreement, and in this context “‘urging’ is as strong as you can get.”
As well as ambitious commitments with regards to deforestation, methane and electric vehicles, another notable success of this COP is the rise in countries with long term net-zero targets. More than 137 of the 197 attending parties have made a net-zero pledge, among them, major polluters such as China, India, the US, Russia and Japan. These targets will affect material change over the coming years.
This year’s COP has also spurred momentum which will continue into next year’s COP and into 2023, a crucial year for the Paris Agreement when participating countries will be assessed in relation to the goals set in Paris.
If you’re still looking for further confirmation that this year’s UN Climate Summit will have any impact, you need to only look at the COP15 held in Copenhagen in 2009. COP15 generated many of the same criticisms, yet since then, progress has been made. Whereas previously we were on track for a 3°C rise above preindustrial temperatures, even the most reserved estimates show that this figure has lowered to 2.4°C. Still not enough, but it nonetheless marks a significant step forward and a positive reinforcer for governments, corporations, companies and individuals to continue in their efforts.
Continuing the momentum
COP26 has renewed the realisation in many that setting a way forward for a 1.5°C above preindustrial temperatures and staying on track will require a monumental collective effort from both private and public sectors.
Brought together for COP26, the Glasgow Financial Alliance for Net Zero (GFANZ) is a collective of 450 financial institutions with combined assets amounting to US$130 trillion. Over the past couple of years, we’ve already seen a promising surge in private investment supporting green technologies, services and products, particularly over the past two years.
This isn’t merely a collective of concerned environmentalists or financial leaders looking to boost their image. GFANZ signals ongoing and growing trends in the marketplace.
1. Lowering sustainability costs
Year on year, low emissions businesses are finding viability and yielding profits in competitive marketplaces. This is crucial, since, according to a recent PwC survey of 325 investors, 81% were reluctant to take any more than a 1% hit on their returns exceeding in the pursuit of ESG goals. So investing in low-to-no emissions alternatives is not just ecologically sound, but increasingly, it’s economically viable, too.
2. Carbon credit market
After six years of discussions, a framework is finally in place for a global carbon market as initially outlined in Article 6 of the Paris Agreement.
The decision to approve article 6 is set to create more demand for credits generated by carbon-capturing initiatives and projects.
There are still some loopholes that need addressing. Namely, the circulation of old credits dating back from 2013 that could depress prices by flooding the market with cheap units. However, it is likely to have a significant impact on companies looking to reduce emissions in the private sector.
3. Climate adaptation
Sadly, prevention is no longer the only aim. Such is the inertia of the earth’s systems that we now need to prepare for the now unavoidable impact of climate change. Though it still fell short of expectations, the Glasgow Climate Pact urges developed countries to double their contributions to developing nations for the purposes of adaptation by 2025, which amounts to around US$40 billion per year.
Critics will point to the fact that developed nations still regularly fall well short of their existing US$100 billion yearly commitment to developing nations as initially pledged in 2009. Perhaps the hope is that by raising the bar, we’ll see an increase in the amount of actual aid.
A recurrent theme amongst critics of COP26 is the issue of greenwashing. Accurate tracing and measurement is crucial to ensure the safety of investments, and it falls to investors need to protect their portfolio against companies making false claims around their ESG initiatives.
In a previous article we discussed the use of advanced Natural Language Processing (NLP) technology, such as we use here at Symanto, to parse sustainability and social responsibility claims from corporate communications as well as pertinent information from industry and news reports. This can be compared against data such as carbon emissions to identify incidences of greenwashing.
As US climate envoy, John Kerry, put it, the conference has opened a “new era of accountability” that will continue into future climate summits. As pressure mounts on governments and private sector finance to meet their goals and fulfil their pledges, the issue of greenwashing will also come under increased scrutiny.