Ahead of COP27 beginning on the 6th November, Nicola Day, deputy head of Rathbone Greenbank Investments, comments on her wish list for this year’s conference:
“Last year’s COP26 saw some impressive commitments and pledges made from world leaders. However, the UN’s latest analysis of Nationally Determined Contributions (NDCs) paints a bleak picture of global climate action. The ambition gap between current pledges and the rate of decarbonisation needed to keep the Paris Agreement alive needs to narrow rapidly. While we are hopeful of increased commitments, the core focus of COP27 will be on the implementation of existing pledges, ensuring countries do not slide backwards but continue to focus on their long-term commitments.
“Investors need to see a clear, consistent and long-term policy framework in order to unlock climate investment at scale. While many are keen to make great strides, there is only so far we can move ahead of regulation and policy. To help make real change at scale, policy is key to unlocking private capital.”
- Don’t let short-term crises distract from solving an even bigger long-term challenge. The economic backdrop to COP27 is very different to what we saw at COP26, and policymakers are coming into the talks having grappled with rising geopolitical risk, energy supply challenges and rapid increases in the cost of living. Individuals around the world are facing increasing cost pressures and subsequently a perceived trade-off between decarbonisation and energy routes that appear cheaper in the short term. If we are to make headway on climate pledges, COP27 will need to focus on the longer term and how countries can make good on their promises and not slide backwards.
- Focus on climate action – the implementation and financing of pledges made at COP26. COP 26 called for countries to ratchet up their NDCs more ambitiously and submit a further revision by the end of 2022, in addition to the normal five-year review cycle. COP27 serves as an opportunity to develop collaborations between governments, financiers, and businesses to accelerate climate action on the ground and develop tangible pathways to support more ambitious NDCs. Progress on “The Breakthrough Agenda”, launched at COP26, will be interesting to follow with its action-orientated approach to catalyse innovation and drive transitions at scale in power, hydrogen, road transport, steel and agriculture sectors.
- Build a robust global market for carbon pricing. Carbon credits and ensuring companies are paying for the actual cost of carbon they create are essential elements of meeting credible net zero pathways. While there are some regional carbon trading systems in place, the lack of a global framework means companies can relocate operations to avoid paying a price for carbon rather than the desired outcome of them reducing emissions. COP27 is expected to build on the foundation agreed in Glasgow under the Article 6 rulebook to start to establish the groundwork for a wider emissions trading system, which could develop a global price on carbon.
- Place the Just Transition central to decarbonisation and climate finance plans. Developing nations are some of the most vulnerable and least resilient to the physical impacts of climate change, yet these same countries have contributed far less to the problem. With a focus this year on ‘loss and damage’, COP27 will need to carefully balance the needs and responsibilities of the various parties and ensure an equitable share of costs and benefits. Many countries are facing catastrophic impacts already and the question of who bears the cost for climate mitigation and adaptation cannot be kicked down the road again.
- Recognise the links between climate and biodiversity. With the COP15 UN Biodiversity Conference approaching in December, and data increasingly stressing the need for biodiversity protection, investment in nature restoration is needed. We expect to see a lot of overlap between each event on the progress on preserving biodiversity and the ability to achieve net zero targets. COP15 is hoping to develop a global biodiversity framework akin to the Paris Agreement for climate change, which will enable public and private actors to rally behind nature, and we anticipate agreements which impact climate and nature happening at both conferences with strong overlap in participation from both public and private actors.