My overall reflections and assessments

by Jimmy Jia

Summary: There were moments of optimism and frustration throughout the conference.

• Over 100 countries made deforestation commitments, including committing $14 billion in funds. BUT the 2014 commitment didn’t amount to very much.

• This COP had the largest delegation ever of private finance, who committed over $130 trillion to climate action. BUT more needs to be done to verify that sustainable investments are affecting the real economy.

• Center-left seems to focus on audacious goals while center-right focuses on accountable processes. We need both.

I was fortunate to attend the second week of COP26 in Glasgow. This was my first COP, the Conference of Parties convened by the United Nations Framework Convention on Climate Change (UNFCCC). It is essentially a forum for how member countries discuss climate change related topics and issues. This is the 26th year that these countries have convened together. Each COP is held in a different city. Some of the more well-known COPs include COP3 in Kyoto, where they negotiated the Kyoto Protocol and COP21 in Paris that created the Paris Agreement.

There was a lot more scrutiny at this COP than at some of the others. That is because the Paris Agreement required countries to publish their Nationally Determined Contributions (NDC) to their allocated carbon budget every five years. The first iteration of each country’s carbon budget was due this year.

As much as this has been a serious event with people talking about global issues, there also has been moments of levity. The blue zone is where the diplomats come to negotiate. The green zone is open to the public. It was held in the science museum with many exhibits on sustainability. Then there were lots of side events on the fringes around the entire city. In front of the blue zone entrance, there was a dancing and singing Darth Vader who recited poetry about climate change. As much as there was quite a bit of serious work that needed to be done, people were having fun as well.

There were moments of optimism and frustration about the conference. About 110 countries and about $14 billion of funds have been committed to stopping deforestation, which is fantastic. This is also the first time that the private sector has agreed to the commitment. But then, this is not the first time that countries have signed deforestation commitments. The 2014 commitment did not amount to much and there’s already signs of Indonesia having cold feet and positioning themselves to potentially withdrawing from this year’s commitment.

There’s other good news. This COP has included the biggest delegation from private finance. As COPs are primarily for countries to get together, the attendees typically are country ministers trying to create policies. However, in Glasgow, there was a massive corporate presence of companies coming together, making a commitment to take climate action. On day three of the conference, which was finance day, $130 trillion of private finance was committed to aligning investments to climate outcomes. That's quite a bit of jargon, but basically means that companies are starting to look at investing and operating to make sure they are not worsening, and hopefully making better, climate issues.

However, the big frustration is that no one really knows how to execute climate aligned actions. For sure, it’s easy to say ‘no’ to coal and ‘yes’ to renewables. But there’s a whole spectrum of actions in between those two book ends: energy efficiency, water efficiency, materials efficiency, embodied energy, operational energy, and so on. Firms make many more decision tradeoffs than simply between fossil fuels and non-fossil fuels.

I conduct research in sustainable finance at Oxford University and one of the biggest questions is how does the sustainable finance drive impact on the real economy. How do investments from pension funds, private equity firms, insurance companies, and so on, have a sustainable impact on the real economy. These investors are usually invested in other funds, or funds of funds. Eventually some entity will invest in a company that is manufacturing widgets or products that is generating a carbon footprint. Frequently, these inputs and outputs are far removed from each other. It’s promising that so many firms have made these commitments, but how are we going to hold $130 trillion of commitments accountable? That remains to be seen.

What’s promising is that the financial sector is trying to figure it out. The Singapore Stock Exchange is asking themselves how they improve climate outcomes. Credit rating companies and other financial services companies are starting to analyze their impacts on climate and carbon. Asking the deep questions is a promising beginning.

Prior to COP26, there was supposed to be another UN conference on nature. Perhaps it’s obvious that climate and nature are interrelated. But the intersection between nature and climate issues are sometimes not intuitively made. Nature and climate people often have a different language to describe what it is that they do. The Climate community has convened around holding global warming to 1.5oC as a unifying metric. This informs global carbon budgets, which informs national carbon budgets, which informs industrial sector carbon budgets, and so on. Within nature and biodiversity, there is a lack of a unifying metric. Because of COVID-19, the convention that was supposed to define “Nature Positive” has now been delayed.

This is another frustration: the UN process tends to take a long time. Until there is a globally unifying metric for nature, there’s going to be very little action even though there’s a lot of willingness. No one is going to spend money on it until they know that they're spending money on what will be recognized as ‘correct’. Thus, it’s good news that people are talking about nature and it’s frustrating that it’s not progressing faster.

I was asked to speak at a side event that was arranged by organizations who were responsible for convening the first Republican congressional delegation to attend a COP. They were here, not to question climate science, but to see how conservative principles can be applied to address climate challenges. What free market / free trade principles can be used to increase adoption of clean technologies? How can we increase choice and options to alleviate poverty? How do we ensure that our decisions aren’t pushing people into poverty due to price distortions or environmental constraints?

What was most compelling were the passionate pleas of young conservatives in the room. At the moment the Republican party is losing votes of 20-year-olds because of the lack of attention on climate-related issues. These young conservatives pointed out that climate is a top-three issue for young people and it is difficult to recruit conservatives at colleges due to a perceived lack of attention the party is paying to the issue. 

I have found, through my interactions at COP, that the center-left contingent seems to focus on bold, audacious goals of where we need to reach. The center-right, on the other hand, focuses on the processes, methodologies, and most importantly, accountability that investments actually reduce global carbon emissions. The two sides talk past each other, with the two sides trading accusations of being obstructionists from climate goals and wasteful investment with little accountability.

I am a businessperson. I focus on the practicalities of process, business models, and execution of how to get things done. What we need is both an audacious target and an accountable system. Businesses need clarity to reduce risk, yet they need to understand the goal of what’s being achieved. We need bold commitments – and Glasgow was full of them. At the same time, we need certainty that targets won’t change. Policy makers need to ensure that. We also need accountable processes, and there is not enough consensus on which ones to follow. COP26 is riding on a swell of climate awareness as a global issue.  However, the hard work of making meaningful societal progress is only just beginning.

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