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Inside COP26

What the UN climate talks mean for your business

COP26 livestream

The first of our new series of Big Conversations - Inside COP26: what the UN climate conference means for your business - coincided with world leaders meeting at the UN General Assembly. Just over a month out from COP26. the climate crisis was front of mind for those meeting in New York, where the US agreed to increase climate financing for developing countries and China made the surprise announcement that it would cease funding of overseas coal projects.

Around our virtual table we were delighted to be joined by Claire Perry O’Neill, managing director for climate and energy at the World Business Council for Sustainable Development; Lord Browne of Madingley, chairman of BeyondNetZero and former CEO of BP; Professor Tim Jackson, director of the Centre for the Understanding of Sustainable Prosperity, and Freshfields’ own Tim Wilkins, the firm’s Global Partner for Client Sustainability. Here are the highlights from their discussion.

 

Claire Perry O’Neill, a former UK minister for energy and clean growth who first led the UK’s bid to host COP26, cautioned that framing the summit’s success in the context of the core negotiations could lead to disappointment. In her view, diplomatic headwinds and problems with attendance due to Covid restrictions may hamper efforts to reach a significant agreement.

That said, a ‘religious revival’, as she put it, is already under way among business leaders, NGOs, municipal authorities and others who recognise the need to act and are setting targets accordingly. ​​For instance, more than 700 cities, 3,000 businesses and 170 major investors have committed to the Race to Zero campaign.

Tim Jackson was more optimistic, reminding us that COP conferences have the capacity to surprise. After all, the 1.5C goal – now a north star for climate action – would not exist without Paris in 2015. Nationally Determined Contributions (NDCs) and national net zero plans are slowly beginning to trickle in – and if President Xi or Narendra Modi were able to join the conference, even virtually, it would add significant momentum.

What should businesses be doing? Lord Browne revealed the astonishing statistic from one survey that just three per cent of board directors were able to explain what their company was doing to achieve carbon neutrality. That has to change. In his view, business making a meaningful contribution will require the widespread adoption of science-based targets and independent assessment of performance against those benchmarks.

There is no consensus on the cost of transitioning to a zero carbon economy, beyond the fact that it will run to trillions of dollars. In Lord Browne’s view, more money needs to shift from ‘greenwashed’ investments into early-stage climate-critical technologies such as carbon capture and storage. For that to happen, governments may need to step in to reduce risk.

Tim Wilkins commented that the recent Legal Framework for Impact report, authored by Freshfields, indicates the law in many jurisdictions generally requires institutional investors to actively try to drive higher sustainability performance from their investee companies if it helps them achieve their financial return goals. Jurisdictions whose legal frameworks are more favourable to this type of activity could find this a source of competitive advantage when it comes to attracting investment in the future.

Politicians are beginning to realise that the energy transition (or, more accurately, transformation), is not necessarily a win-win. David Claydon, economist and former advisor to the UK Foreign Secretary, gave a warning that may prove prescient: ‘there are very clear distributional consequences for accelerated decarbonisation. As that begins to unfold, I think the politics will begin to get bumpy.’

In Claire’s view, on the short road to COP politicians need to be braver and more honest. ‘If we had treated the COVID crisis in the way we’re treating climate change, we’d still be still be arguing about which country got the first batch of test vaccine,’ she said. Lord Browne stressed that we need goals for five years’ time as well as 50.

While a 1.5C world looks increasingly unlikely, we cannot afford to concede defeat, said Tim Jackson. That said, we have to be prepared and willing to adapt to 3C. In his view, anything less – from politicians and business leaders – would be a dereliction of duty.