Energy was high and the spirit proactive at COP26 in Glasgow, Scotland, according to Nordea climate specialist Stefan Henningsson who recently returned from the UN climate change summit.
“There’s lots of work left to be done, but very important progress was made, and it was inspiring to be there, not least for the financial sector,” said Henningsson.
Henningsson has attended his fair share of COPs in the past, having previously worked for the World Wide Fund for Nature (WWF), an official observer to the COP process. This year, he attended on behalf of Nordea in connection with landmark announcements from the financial sector and the Glasgow Financial Alliance for Net Zero by 2050.
The Net-Zero COP
Security was exceptionally tight this year, according to Henningsson, with streets closed down, a heavy police presence and daily health checks required to enter the conference centre. He was also struck by the number of organisations and stakeholders that came ready to make announcements and declarations on their net zero initiatives.
“One thing COP president Alok Sharma succeeded in doing was making COP26 the net-zero COP,” he said. “Public and private alliances committed to net zero by 2050 came much more prepared this year.”
That strong uptake of net-zero pledges stood in contrast to the progress on countries’ nationally determined contributions (NDCs), he noted:
“The gavel is still up on whether COP26 will keep 1.5 degrees C alive. It’s certainly keeping net zero by 2050 alive, but will it also keep 1.5 degrees alive? That depends on countries’ ability to strengthen their targets.”
The outcome of the formal negotiations – the Glasgow Climate Pact – calls on countries to revisit and strengthen their 2030 targets by the end of 2022 to bring them in line with the Paris Agreement.
Public and private alliances committed to net zero by 2050 came much more prepared this year.
Action from the sidelines
While all eyes were on the main stage and formal negotiations, some of the most influential developments came out of the side pavilions and declarations, according to Henningsson.
For example, over 140 countries, representing over 90% of the world’s forests, pledged to end deforestation by 2030 in a Declaration on Forests and Land Use. There was also the Global Methane Pledge, led by the United States and the European Union, to reduce global methane emissions.
In addition, the Mark Carney-led Glasgow Financial Alliance for Net Zero by 2050 (GFANZ) announced over $130 trillion of private capital committed to reaching net zero as well as 24 other finance initiatives. Under that initiative, the newly launched Net-Zero Banking Alliance brings together banks worldwide to align their lending and investment portfolios with net-zero emissions by 2050. Nordea is a member of both alliances.
Henningsson also pointed to other important developments that didn’t make the top headlines:
- A coalition of 100 central banks that make up the Network for Greening the Financial System committed to strengthening their collective efforts on climate action.
- The International Financial Reporting Standards (IFRS) Foundation announced the formation of the International Sustainability Standards Board (ISSB) to set global ESG reporting standards.
- With the Declaration on accelerating the transition to 100% zero emission cars and vans, a coalition of governments, businesses and other organisations committed to work towards the goal of all sales of new cars and vans being zero emission globally by 2040.
- Seven countries, led by Denmark and Costa Rica, launched the Beyond Oil and Gas Alliance, committing to end new licensing for oil and gas extraction.
- The Science Based Targets Initiative (SBTi) launched its Net Zero Standard, a blueprint for companies to bring their net-zero plans in line with climate science.
Private finance in the spotlight
There continues to be a gap between commitments and action, and all eyes are on the role of private finance to fill that gap and enable implementation, according to Henningsson.
“The private sector role has become more important than ever,” he said, noting that this COP’s “Finance Day” was a first, dedicated to announcements from the financial sector.
Country plans need to move in the direction of being implementable, he added, for example, through issuance of sovereign bonds geared towards targets such as emissions reductions and renewable energy.
“We need to see more vehicles for linking public ambitions to private finance,” Henningsson said.
The private sector role has become more important than ever.
‘Beginning of the end for coal’
While the COP26 negotiations ended with a compromise to “phase down” instead of “phase out” coal, Henningsson still regarded it as significant that the technology made it into the text.
“Coal is the biggest greenhouse gas contributor over history. It’s very promising that it’s in there. This is the beginning of the end for thermal coal, and there’s clearly an understanding that we need to do the same for oil and gas fuels,” he said.
For Nordea, as a member of the Net Zero Banking Alliance, that means working on sector targets and transition plans for high-emitting industries in a way that’s comparable and being able to show progress.
“We are requesting a lot more information from our clients on their climate risk, and the data space is rapidly evolving, for example with the EU taxonomy,” said Henningsson.
When it comes to the transition, it’s crucial to also focus on the demand side and how energy is being used, he added. Improving energy efficiency, for example, in industry and transportation, helps reduce the demand for fossil fuels. In addition, it’s important to ensure other energy sources can replace oil and gas to meet the energy demand, he adds:
“We need to build up the other energy carriers in order to have a smooth rather than a very disruptive transition.”
Nordea is committed to driving progress both on the demand and supply sides by opening dialogues with and providing incentives to our clients.
Featured image: Photo by Jane Barlow/PA Images via Getty Images