As the global climate summit approaches, we thought we’d take a look at what is going to be potentially expected of businesses moving forward from this historic event.
The UK is preparing to welcome delegates to Glasgow later this month for the world’s biggest meeting on climate change. Taking place between 31st October and 12th November, 125 world leaders are so far confirmed to attend.
COP: A (very) brief history
COP26 is the UN’s 2021 climate change conference. COP stands for Conference of the Parties and this year’s meeting is the 26th one to take place. It was supposed to happen last November but was delayed in light of, you’ve guessed it, the pandemic. The summit has been running for almost three decades.
COP21 took place in the French capital in 2015 and gave us the Paris Agreement. It was the first time that all the attending countries agreed to a tangible reduction in climate emissions; to keep global warming well below a 2°C rise, aiming for a 1.5°C increase at the most.
Countries agreed to report back in five years’ time with their plans, called nationally determined contributions (NDCs), on how to cut emissions. This year’s summit in Glasgow is the moment where leaders will be updating the world on those plans.
What is climate finance?
You may have heard of the term climate finance; it’s the commitment from developed countries to provide $100 billion each year to developing nations to assist in the mitigation, adaptation and to provide support to communities taking action on climate change.
This will be financed with both public investments to build green infrastructure and private investments to fund technology and innovation.
So, how will businesses be involved?
COP26 will be a defining moment that determines how Governments, as single nations and collectively, tackle the climate crisis. The Chancellor recently stated that some large UK enterprises may have to start reporting their environmental impact under new sustainability disclosure requirements (SDR).
These requirements will also be applied to investment products and pension schemes, something which could help investors make the right choices when looking for truly sustainable activities to fund. Green financing is expected to be a hot topic at COP26 and it’s been reported that green bonds are prominent in the market currently, with issuances passing $1 trillion at the end of last year.
Private finance will play a big role in the transition to net zero (part of the Government’s Build Back Greener strategy), so we can expect to see a boost in green investment over the coming years. And with SDR and carbon disclosure becoming increasingly important for transparency, it is possible that standardisation of the way investments are categorised as ‘sustainable’, as well as further reporting regulations, may come into effect.