A global change in the way we work: A series examining global perspectives of the opportunities, challenges and risks of the transforming workplace.
COP26 has now come to an end, and after the clock reached extra time over the weekend an agreement was finally reached on what will now be known as the “Glasgow Climate Pact”. The Pact’s significance is that it reinforces and elevates the world’s commitment to a 1.5 degree target, and recognises that there is a need to significantly scale up the funding for the developing countries to assist with the costs of both mitigation and adaptation. There is for the first time an explicit reference to the end of fossil fuel usage (which is a significant breakthrough), although the reference to coal was downgraded from a “phase-out” to a “phase-down” at the last minute request of India and China. There is also agreement to end “inefficient fossil fuel subsidies”, albeit there is no timeline for this. A standalone organization will be set up to funnel financial support and technical advice to developing countries looking to mitigate damage and loss which will not otherwise be avoided. The much publicised $100bn a year in climate finance was formally missed however, which the Pact noted with “deep regret”, but the goal was reaffirmed to reach and match that amount each year annually to 2025.
Our key takeaway from Glasgow, which was repeated by speakers at multiple events, is that there is sufficient capital and finance available for the net-zero transition. In particular, there are significant funds available for clean energy and carbon reducing projects, but just not enough suitable projects coming to market at the speed needed for those funds to be utilised. Public policy will therefore be required in many situations to de-risk markets and new technology types broadly, and individual projects more specifically, in order to meet and match the private investment on offer. The head of the CBI observed that there has now been a boardroom tipping point, but we now need a supply chain tipping point and a consumer tipping point to enable a whole-system transition.
Another takeaway is the commencement of a move towards a more open and quantifiable measure of emissions and environmental impact. The ISSB announcement, with its very granular reporting requirements, should be seen as a indication of what will likely be implemented at a national level in law, whereby ESG and climate reporting will be elevated to a similar position to financial reporting. This is likely to happen both from a formal regulatory/legal perspective (for example, the UK will require all financial services firms to publish their net-zero plans by 2023) but also when funding requests are being considered by bank credit committees (or any company when reviewing contractor options). Transparency is likely to be a key headline across both the private and public sector action, backed by litigation threats premised on the protection of “human rights” or the prevention of “greenwashing”.
A high level summary of the other achievements and announcements from the past two weeks include:
Norton Rose Fulbright partner Elisa de Wit, who heads our Australian climate change practice, said “It is fantastic that we now finally have the rules for the operation of carbon markets finalised under Article 6. Finalisation of these rules means that there can be a co-ordinated approach to the development of carbon abatement projects, and strong integrity as to how credits from these projects can be utilised to meet countries’ nationally determined contributions. It will allow private sector investment to mobilise to scale up the undertaking of nature based solutions, with the associated co-benefits that these types of projects can generate, including addressing bio-diversity loss, indigenous engagement and regional employment. After 10 years of experience assisting clients in Australia to undertake land-based carbon projects, we are really looking forward to working with our international clients to capitalise on these opportunities as they emerge in other jurisdictions across the coming decade”.
Our EMEA head of sustainability, Caroline May, said “The Glasgow Climate Pact marked the outcome of 2 weeks intensive activity, and whilst missing out on final pledges to achieve 1.5, it did lead to commitments to GFANZ, to the “phase down” of coal and fossil fuels, to reduce methane emissions and to arrest deforestation as well as commitments to meet adaptation costs in developing economies. It served as a consciousness raiser reminding us all that time is running out and further work, especially upon implementation, will be required before COP27 if the target of 1.5 is to remain alive”.
Philip Roche, co-head of our shipping practice, said “Although shipping, like aviation, lay outside the formal conference agenda, the number of side events and the number of attendees from the IMO, EU, and key stakeholders showed that the shipping community was determined to demonstrate that meaningful steps are being taken to allow shipping to play its part in global decarbonisation, however difficult and indistinct that path may be. There is real effort being made into working out how this journey may be travelled; whether that will be through improving the efficiency of the existing fleet through regulation, or by the production and supply of new fuels, or by measures such as the Clydebank declaration for green shipping corridors, or finally, the use of financial measures and instruments such as market based measures and/or a carbon levy on fuel. In the end, it will probably be a combination of these measures which allow global shipping to achieve the goals set by both the IMO, the EU and other parties, including users of shipping.”
Thomas Lord, regulatory and compliance project manager, said “There is a need to rationalize the objectives of, on one end of the scale, significant investors such as green funds with investments ranging up to billions of dollars and, on the other side of the scale, smaller nature based developers whose investments may be in the low millions of dollars. Both will require careful thought and the high volume lower value investments should not be forgotten about. The IFRS proposal to put ESG and carbon issues into financial, as opposed to ESG, reporting may be the most significant impact of COP 26 to many of our clients over the next five years.”
The theme for this Thursday was “Cities, Regions and the Built Environment - advancing action in the places we live, from communities, through to cities and regions”.
Wednesday was “transport day” at COP26. Transport accounts for a fifth of all global greenhouse gas emissions, and for many people the evolution from internal combustion to electric vehicles will be one of the most visible and easy to comprehend facets of the energy transition.
COP26, the 26th Conference of the Parties to the UNFCCC, took take place between 1 and 12 November 2021 in Glasgow.
Ten things to know about insurance regulation in 20 countries.
© Norton Rose Fulbright LLP 2021