There has been a flurry of discussion on the 2021 United Nations Climate Change Conference (COP26), held in Glasgow from 31 October – 12 November. Kelly Hagg, Global Head of Product Strategy and ESG, explains why this year’s conference (out of the past three decades of annual COPs) has been given such high attention from the media and our clients. He also details which countries plan to be at COP26 and why that matters.
While there have a number of efforts focused on climate change and reducing carbon emissions, each of these historically has been siloed to either public or private arenas and broken down by country and/or regional aspirations. With the COVID-19 pandemic highlighting the value of global collaboration and what is truly required to achieve a common goal, many are looking to COP26 as the place where world leaders can come together, make collaborative decisions, and utilize both private and public resources to attack one of the largest challenges facing human civilization.
However, with major carbon emitters like China missing from the conversation and Pacific Islander nations/states greatly affected by climate change underrepresented at the conference, it could prove challenging for leaders to commit to decisions that can have a true global impact.
Why This Year is BIG:
- Under the Paris Agreement, every country agreed to update their NDCs* every five years, with each plan more ambitious than the last and reflecting their “highest possible ambition.”
- COP26, which was due to take place in 2020, is the first test of this “ratchet mechanism.” Since it was postponed to 2021, this is the BIG year.
This Year’s Agenda
UK prime minister Boris Johnson has summarized the host nation’s agenda for the conference as: “Coal, Cash, Cars and Trees.”
- Coal: As host nation, the UK aims to “consign coal to history” with COP26. This goal follows unsuccessful attempts to eliminate the fossil fuel completely, including an agreement by the G7 in May that agreed to end new direct government support for unabated coal power by the end of this year, but did not set an end date for the burning of coal. Italy has urged the G20 to commit to a similar pledge, but progress has been thwarted by resistance from China, Russia and India.
- Cash: Achieving net zero emissions globally will clearly require an enormous financial commitment. In 2009, developed countries pledged $100 billion a year to finance efforts related to addressing climate change in developing nations; recent estimates show they are roughly $20 billion short. Negotiations will soon commence to determine the collective finance goals for beyond 2025, with various initiatives currently underway to shift private sector cash into supporting the ambitious goal of achieving net zero by 2050.
- Cars: In an effort to accelerate the transition to electric vehicles, the UK has proposed a 2040 deadline for selling the last gasoline powered cars (or internal combustion engine vehicles) and established a Zero Emission Vehicle Transition Council that includes other political leaders and representatives from most major car markets (with China being notably absent from the list).
- Trees: The fourth major focus of COP26 is deforestation. To that end, the UK joined forces with the U.S. and Norway to launch the Leaf Coalition, which aims to commit $1 billion of public and private funding in 2021 to reduce emissions from deforestation and forest degradation.
High-Risk Nations Not Attending:
- A third of Pacific small island states and territories do not plan to send any government figures to the COP26 summit in Glasgow due to COVID-19 travel restrictions.
- The lack of high-level representation of Pacific nations at the meeting has led to fears that the concerns of these countries, which are among those most at risk due to the climate crisis, will not be appropriately represented at the summit.
Major Emitters Not Attending:
- China: The leader of the world's most populous country, China's Xi Jinping, will reportedly not be there in person. He has not left China since the COVID-19 pandemic began. He is likely to make an appearance by video. China's special climate envoy, Xie Zhenhua, said he would travel to the conference.
- India: Prime Minister Narendra Modi has yet to decide whether he will attend, a foreign ministry source told Reuters. Between them, India and China make up about a third of the world's population.
- Russia: The Kremlin has said Russian President Vladimir Putin will not travel to Glasgow.
- Brazil: Brazilian President Jair Bolsonaro and Vice President Hamilton Mourao, sometimes the point man for environment, are not attending.
- Japan: New Japanese Prime Minister Fumio Kishida has said he is considering how he will participate, possibly taking part online.
- U.S. President Joe Biden, along with climate envoy John Kerry and domestic climate adviser and former EPA Administrator Gina McCarthy. The White House says 10 other Cabinet officials will also be present.
- Queen Elizabeth, Prince Charles and Prince William along with Camilla, Duchess of Cornwall, and Kate, Duchess of Cambridge.
- The 27-country European Union's representatives will include European Commission President Ursula von der Leyen, EU climate policy chief Frans Timmermans, and the bloc's energy and financial services policy heads.
- Israeli Prime Minister Naftali Bennett.
- Australian Prime Minister Scott Morrison confirmed on Friday he will go. While many global nations have pledged to achieve net zero emissions by 2050, Australia has refused to strengthen its targets.
- President Tayyip Erdogan will attend after Turkey's parliament ratified the Paris climate agreement last month.
- French President Emmanuel Macron.
- Canadian Prime Minister Justin Trudeau is expected to announce that he will attend closer to the start date, according to a government source.
- Italian Prime Minister Mario Draghi.
- Colombian President Ivan Duque.
Why It Matters
Investors are watching closely for developments at COP26 as world leaders come together to make decisions on future regulation and industry focus – decisions that could have vast implications for investment portfolios. Areas such as deforestation have already made headlines, with more than 30 financial institutions with more than $8.7 trillion in assets under management saying they would make "best efforts" to eliminate deforestation related to cattle, palm oil, soy and pulp production by 2025. We expect to see a number of asset managers reevaluate their investment policies and exclusion policies in controversial areas, including those related to deforestation, in the coming years.
The Group of Seven (G7) is an inter-governmental political forum consisting of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.
The Group of Ten (G10) is a group of 11 industrialized nations that have similar economic interests. The G10 was formed when the wealthiest members of the International Monetary Fund (IMF) agreed to be part of the General Agreements to Borrow (GAB), so as to provide more funding for the IMF's usage.
*A key responsibility of the COP26 presidency is to mobilize greater ambition from other nations. This is primarily measured against the temperature goals of the Paris Agreement. In 2015, in Paris, 197 countries agreed to collectively cut emissions to limit global temperature rise “well below 2C” and strive for 1.5C. To meet this goal, every country was asked to contribute emissions reductions and set out targets for doing so by 2025 or 2030. These plans are known as nationally determined contributions or NDCs.