As COP26 approaches, we are starting to see the outlines of potential agreements and disagreements.
The US has announced it will double its climate finance for developing countries, and China said it will stop funding overseas coal-fired power stations. Even a year ago, such announcements would have been seen as exceptionally unlikely, so both should bring some real momentum to the summit. Beijing funds more than half the coal projects outside China and India, so this really could be the beginning of the end for coal-fired power.
A drive by the EU, the US and the UK to cut methane leaks could lead to one of the most significant outcomes from the Glasgow summit – it is relatively uncontroversial and could gain support from natural gas producing countries because of the gains from efficiencies. And, it can have a big impact because methane is a much more powerful greenhouse gas than CO2, although it stays in the atmosphere for less time. Already Argentina, Indonesia, Italy and Mexico have signed up, and Iraq is among those that have signalled interest.
No time to lose
Significant as these moves are, companies are not waiting on government action to make their own plans. Indeed, they are more likely to be pressing governments to take stronger action. More than 600 companies have signed an open letter to G20 countries calling for them to introduce specific commitments on climate action, including:
- coal-fired power generation to be phased out by 2030 in advanced economies (and 2040 for other countries);
- fossil fuel subsidies to be removed, ideally by 2025; and
- mandatory climate-related financial disclosure of risks, opportunities and impacts for corporations.
Meanwhile, the Mission Possible Partnership, which focuses on decarbonising the world’s highest emitting industries, is releasing guidelines on how companies in the steel, chemicals, aviation and shipping sectors can unlock investment and scale up innovative solutions to cut their emissions.
And a $10tn group of investors
has made clear how they expect companies to deal with the physical risks and opportunities of climate change. On top of that, they have highlighted 50 companies they say are highly exposed to physical risks, from Delta Airlines to Nestlé to Campbell Soup to Swatch.
The same group has set out
a standard for how oil and gas companies can align their business strategies with net zero targets, including by winding down assets, diversifying their energy offerings and using their value chains to reshape demand.
Climate policy group the Inevitable Policy Response forecasts
that COP26 will produce higher policy ambition in carbon taxes, emissions trading systems and carbon border tariffs such as the EU’s carbon border adjustment mechanism, through the 2020s.
Such tools can help to combat the lack of confidence that companies, investors and governments have in climate and other sustainability information.
In a survey
by corporate governance advocacy non-profit OCEG, more than half of 530 corporate executives had little or no confidence in the reliability and maturity of their ESG programmes.