COP26 AND BEYOND

The make-or-break decade for climate action

Global heads of state met in Glasgow on 31 October - 12 November 2021 at COP26, the United Nations climate summit, to discuss more ambitious action to tackle climate change. This decade is being heralded as the ‘make-or-break’ decade for climate action.

After two weeks of frantic negotiations and a tsunami of net zero announcements, COP26 has finally come to an end. So what does it mean in practice for business, in particular corporates and the financial sector.

Key issues for our clients

If we are to meet the goals of the Paris Agreement, we will need to reduce global greenhouse gas emissions by at least 50% by 2030 and reach net zero by 2050. The pressure is on for governments to set more ambitious climate targets and to clearly articulate how they intend to achieve them in detailed plans known as nationally determined contributions (NDCs). Companies have also developed their own transition plans, often at the behest of their investors.

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Commitment to net zero emissions by 2050 will only be achieved with significant new investment and a rapid change in the sourcing and use of some of our most fundamental commodities, energy and water. The technological revolution combined with ESG pressure is propelling the global economy towards the energy transition, decarbonisation and adaptation. The response to the climate emergency will be one of the most transformative business drivers of the next few decades.

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The net zero transition requires a massive reallocation of private and public capital towards greener, more sustainable activities. However, investors need data that is relevant, reliable and comparable to reorient capital flow. Companies and financial organisations are also having to combat greenwash allegations and manage litigation risks associated with their climate disclosures.

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Carbon pricing – be it a carbon tax, emissions trading scheme or the EU’s proposed CBAM – has the potential to incentivise the reduction of greenhouse gas emissions significantly. Some would argue that a global carbon price is key to unlocking the net zero transition. But what form should that take?

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