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COP26: a planet in the balance

COP26 has been widely billed as perhaps society’s biggest opportunity so far to slow climate change. Did it succeed and how should industry respond?

In November 2021, heads of state, climate policy experts, negotiators and observers, development finance institutions, humanitarian agencies, private sector and civil society convened in Glasgow for the United Nation’s 26th Conference of the Parties (COP).

As the UN’s flagship annual climate change forum where countries debate and agree efforts to mitigate climate change through the reduction of greenhouse gases, every COP matters. But this COP mattered more than many before it. Countries were scheduled to submit carbon reduction targets for 2030 - a key milestone on the pathway to Net Zero - while ahead of COP, scientists published a critical study which warned of the dramatic intensification of the effects of climate change between 1.5°C and 2°C.

In Glasgow, with the inspiration of its economic heritage, we declare a new financial order, one that builds upon the economic influence of this place and forges a new role for the "invisible hand" to guide our resilient and prosperous future."

John Haley
CEO, Willis Towers Watson

Going into COP26, the UK presidency hosts focused negotiations on coal, cars, cash and trees to “keep the 1.5°C temperature target alive”. After two weeks of negotiations which resulted in the Glasgow Climate Pact, the 1.5°C temperature target still hangs in the balance, and its survival depends on what happens next as the negotiators return home and start discussing how to turn pledges into policy.

Parties to the UN Framework on Climate Change Convention (UNFCCC) will be required to return to negotiations at COP27 in Egypt to increase Nationally Determined Contribution (NDC) ambitions to meet that 1.5°C target. In addition, the UN secretary general, Antonio Guterres, wants to shine the spotlight on private business with the launch of a high-level expert group to analyze private sector commitments to reach net-zero greenhouse gas emissions and establish more regular national stocktakes on carbon reductions from 2023.

Net Zero targets

Most big developed countries (except Australia) announced significant NDCs well before COP26, along with some middle sized and vulnerable countries. At the COP itself, there were big moves from India, Thailand and Vietnam. But some major economies made only tweaks to their 2030 targets (China, Russia); or did not improve them (Indonesia); or weakened them (Brazil and Mexico).

Estimates of the warming potential of these pledges put the world on track for temperature increases between 1.8°C and 2.4°C by 2100.

Glasgow also reflected the growing recognition that the 1.5°C temperature target can only be achieved with investment in net zero emissions technologies, plus natural carbon sequestration.

Adaptation

In 2015, developed countries committed $100bn in finance each year to help developing countries mitigate and adapt to climate change – that figure has fallen short in every year since that commitment was made.

Negotiators arrived in Glasgow following a summer of floods in New York and Germany, and forest fires in California that taught some of the richest countries in the world hard lessons about what happens in the absence of resilience. Despite the higher profile for adaptation and resilience this year, renewed commitments in addition to the missed targets for climate finance disappointed many in the developing world and campaigners for climate finance. However, developed nations committed to hit the $100bn target by 2023 and "at least double their collective provision of climate finance for adaptation" from 2019 levels by 2025 to around $40bn. A comprehensive two-year Glasgow-Sharm el-Sheikh work programme on the global goal on adaptation was also a commitment that made it into the final Glasgow agreement.

Alignment of capital

The Glasgow Financial Alliance for Net Zero led by Mark Carney, the UN Special Envoy for Climate Action and Finance and former governor of the Bank of England, announced $130tn assets under management that was now committed to Net Zero. Banks, insurers, pension funds, asset managers, export credit agencies, etc, will play a pivotal role in achieving ambitions to the 1.5˚C temperature rise target. Structural changes to the global financial system will continue to be driven by regulation to increase disclosure of climate-related risks, whether that’s from physical impacts to real assets, or market changes, so-called transition risks.

In these pages our climate and resilience experts and thought leaders will explore how these high-level commitments affect countries, communities and the businesses and industries that support them.

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