Good COP bad COP

7 Dec

The Climate Conference is done and dusted. Leaders have returned to their offices, protesters have disappeared from the streets, and climate is no longer front page news. So now that the buzz of the moment has subsided, what still stands?

The UNFCCC Climate Conference has evolved into an enormous event. It is a giant melting pot of politicians, policy makers, bureaucrats, businesses, investors and activists from all around the world, all in one place. Each of these people come with their own perspectives of what success looks like, and since many are diametrically opposed, almost by its very nature, the COP will not please everyone.

Binary classifications are rarely helpful and can't really be applied to the conference where there is such a rich tapestry of global citizens deeply involved and affected by the outcomes. For some, the outcomes of the conference missed the mark by a wide margin, while for others many wins were achieved.

A point to remind ourselves is that events like this can feel like the weight of the world is on their shoulders, but the reality is that they are just a point in time. Many positive and necessary steps were made and the ambition of keeping global warming to 1.5°C hangs in a fragile balance.

Conference highs and lows

Progress

Countries should come together annually, instead of every five years to re-state targets. This is critical as national determined contributions to reducing warming still total to around 2.4°C.
There is recognition that warming of 1.5°C is the target, not 2°C, which demonstrates a significant uptick in ambition from the 2015 Paris agreement that stated “to limit global warming to well below 2°C, preferably to 1.5°C, compared to pre-industrial levels”.
There were strong commitments to reverse deforestation and reduce methane emissions and coal was specifically mentioned in the closing text for the first time.
The finance sector forming coalitions that collectively commit over $130tn to tackling climate change and decarbonising their portfolios.

Challenges that remain

The assessment of actions that countries are committing to still far exceed even the 2°C ambition from Paris. When words like “catastrophic” are being used by the scientific community and those in states most severely affected by climate change, it is not being used as a rhetorical tool. They are being used with a very specific meaning attached to them agreed by consensus. For them, the threats of the impacts are real.
Wealthy nations are not yet delivering the $100bn per year of financial assistance that was promised in 2009 to help vulnerable nations cut their emissions and cope with climate impacts.

There’s no doubt that some historical commitments were made in the final agreement. But perhaps a more immediate reason to be cautiously hopeful is some of the concrete announcements that were made around the same time as the conference. The announcements that follow are by no means fully holistic, but they are a positive continuation of what we called the “Impact Measurement Movement” in our last paper. They are likely to not be final announcements, so it is probable that over time more mutually reinforcing announcements will be made that will help to strengthen each other.

Mandatory reporting: Requiring more businesses to report emissions is a starting point, without it we put too much trust in the good-faith of businesses to do the right thing.

Consistency and comparability: Ensuring that what is reported is consistent and comparable is a necessary next step, without which mandatory reporting is pointless.

Independent external certification: Finally, independent verification is vital to close the loop and tackle the critical issue of green-washing.

We believe there is a real opportunity for the UK to lead the way in developing a center of excellence that capitalises on the proximity of world-leading impact management standard setters, the power of the financial market players in the City and some of the brightest minds in academia. If successful, a whole new service industry could be created to deliver impact measurement, reporting and management services through auditing, accounting, management consultancy, tech and education.

The following announcements have somewhat of a financial lens flavour to them. The finance sector is one of the biggest levers that can affect business behaviour, here is a summary of what has been said.

Mandatory reporting

UK to enshrine mandatory climate disclosures for largest companies in law

With so much emphasis on carbon reductions, and with massive commitments from investors, the Government is supporting these efforts to specifically require larger companies to disclose their emissions under TCFD recommendations.

When this comes into force it has the potential for significant downstream impacts on SMEs since the recommendations can require disclosure of emissions of a company's entire value chain.

This is a massive step forward and at the right time while businesses are setting emission reduction and net zero targets. This goes well beyond the existing comply or explain approach and could reach far into the economy by 2025.

We are glad to see such an announcement as we put forward similar proposals in our Helping purpose-driven business thrive paper earlier this year. Alongside such a mandate we recommended that there should also be better support for companies to report their impact, especially SMEs. This support is not just helpful, it is vital. SMEs make a huge contribution to the economy, labourforce and to large companies’ value chains.

The Treasury, Greening Finance: A Roadmap to Sustainable Investing

This announcement was made just ahead of COP with the Treasury saying that “the new sustainability disclosure requirements (SDR) mean an investment product will now have to set out the environmental impact of the activities it finances.” Some interesting points covering all sides of opinion in this BBC article.

Consistency and comparability

Impact Management Platform

All organisations have positive and negative impacts on people and the natural environment. Measuring, reporting and managing those impacts along with the financial performance of a company is a huge hurdle to cross.

The Impact Management Project has ended the initial project phase and launched the Impact Management Platform. This tool is aimed at business leaders and investors to help guide them towards the most appropriate impact management standards for their needs.

Contributing to the effort to mainstream the practice of impact management, the platform brings together the leading international providers of sustainability standards.

International Sustainability Standards Board

Aimed at supporting investors' need for consistency and comparability when making assessments of where to invest our money, the IFRS foundation announced during the Climate Conference the launch of the International Sustainability Standards Board. This is a huge initiative announcement that will be fundamental to helping the flow of capital investments towards businesses that are actively solving society's problems.

Now that the rubber is hitting the tarmac and there is a palpable sense of momentum, we refer to one of the recommendations made in our last paper which would be an excellent next step that would help to create growth in the impact measurement, reporting and management marketplace and could lead to a whole new service sector that would drive innovation and job creation.

“Create a policy goal to make the UK a global centre of excellence for impact measurement and reporting, leveraging the current strong UK presence of global financial institutions, accounting and measurement bodies, software providers and academic research focused on purpose and impact. This policy would be directly supportive of the Green Industrial Revolution and Tech Superpower policy agendas.”

There is an urgent need to improve the consistency and comparability in corporate sustainability reporting. It is the key to unlocking vast amounts of investment capital. Thankfully, as you see with the Impact Management Platform announcement, huge amounts of effort has been made in recent years to bring greater convergence between the world’s largest standard setters. It really is an exciting time to be working in that field.

Independent external certification

SBTi launches world-first net-zero corporate standard

Obtaining external, independent certification is a powerful tool to signal to customers and investors that commitments made towards reducing emissions to net zero are credible. The Science Based Targets initiative (SBTi) has launched a standard that does just that. Certifications like this are instrumental in efforts to combat and tackle green-washing, which risks betraying confidence and people losing trust in business.

Alberto Carrillo Pineda, Co-Founder and Managing Director of the SBTi, said: “Companies are currently self-defining net-zero targets without credible and independent assessment of their ambition and integrity.”

What next?

It’s already less than 12 months until COP27 in Egypt and we’ll be keeping our ear to the ground to seek out what progress is being made and how this fits with the purpose-driven business agenda. We will also be looking to see what lessons can be learned from the massive focused effort on climate change, and to see what could be adapted to help tackle other issues such as those in the social space.

Harry Brown