Day Three: Re-valuing Finance

**Note: this is a blog post from my time at the COP26 climate conference in Glasgow in 2021. I am now rekindling this blog to track current issues in climate policy, with a particular focus on communication and political engagement. Please see the tabs at the top of the website for detail on my freelance consulting work. If anything catches the eye I would love to hear from you!**

Some interesting statistics emerged overnight. First, a major attribution study found that Europe’s record breaking hot summer could not have occurred in a world without climate change. Second, and crucially; crucially; a US model suggested that the commitments made over the first two days of the conference have taken the world from a 2.7°C warming track, to a 1.9°C one. Both of these figures have huge margins for error, but even so, this seems hardly believable given the criticism many pledges attracted. It’s hard to know how to react to news like this. It seems impossible that after so many have thrown mud at the brick wall of the international community for so long, we might actually have instigated such a reduction in two days. The first reaction is therefore slowly rising relief. For those who have worked in this space for even a few months, however, it is sharply followed by questions, and a quick return to the dull feeling of frustration as scepticism seeps in. The pledges still have to be met, and there is huge variance in outcomes, but we should all fight this and allow a bit of positivity.

Day three was all about finance. This post was primarily delayed by the impact of Glaswegian lager, but also by the complexity of the financial system. It might be a surprise to many, myself included, that the same financial world which caused so much suffering in 2008 would be given such a prominent role at this global conference on, effectively, global wellbeing.

I remember well our undergraduate finance lecturer asking us what finance meant to us at the start of the course. The answer was not positive.

I have to confess my view since then has shifted. Regardless of what many might argue, and many of us might at times of frustration feel, we will not find an alternative to capitalism in the time required to solve the climate crisis, and any attempt to do so could be disastrous. We absolutely can and must reconfigure the priorities of the system, but we will still have large proportions of global finance in the hands of private corporations.

I have increasingly seen how this is no bad thing. Innovation is, like it or not, key to solving climate change. In the last hour I’ve listened to pitches from a company looking to provide AI powered waste sorting, revolutionary seed techniques and game-changing accessible solar heating system. Each has the power to save thousands of tonnes of carbon dioxide and, crucially, will be financially logical. Once innovation creates solutions that can financially outcompete traditional methods, as solar is now doing, meaningful change will occur rapidly.

Pitch over. Much still has to be done to ensure that finance works in the right direction. In the words of Mark Carney the former governor of the Bank of England, it must be re-oriented it so that it considers human ‘values’ alongside, if not above, pure financial ‘value’. There is currently widespread ‘greenwashing’ (claiming false or exaggerated green credentials), and a major focus of COP26 is putting strong regulations in place, particularly on ‘disclosure’ (transparently reporting impacts and practices) to combat this.

I’ll add more detail about the various pledges made yesterday in future posts. The complexity of the financial system makes immediate conclusions very difficult to draw; for all but the experts, seeing figures of billions or trillions floating this way and that doesn’t translate into easily understandable outcomes. From what I can gather, Mark Carney launched an alliance, bizarrely termed ‘GFanz’ of major financial institutions pledging to align their portfolios with 1.5 degree commitments and accept rigorous stress testing against these claims.

Rishi Sunak then sold us the dream on London being the worlds first Net Zero financial hub. There are many questions over what this means and how it actually works, but Rishi seemed keen not to answer them, borderline jogging off the stage, dodging press and scooting straight back to London. His misalignment with Johnson on the importance of reaching Net Zero has been well publicised and was well evidenced through its total admission from last weeks budget. Watching a beaming Sunak thrust a lime green briefcase at the cameras yesterday thus left us somewhat unsure of how to feel.

It doesn’t seem like huge progress was made on the regulatory side of things yesterday, but statements of intent were made. Pledges of climate finance* were also offered, following from earlier in the week. Particularly notable was a partnership between the UK, EU, the US and South Africa to end the latter's dependence on coal, alongside the hint of a similar deal with Indonesia. These agreements are crucial as they form part of the movement for a ‘just transition’. For anyone who hasn’t heard the term, it’s a huge deal. It recognises the potential adverse impacts of a rapid economy wide low carbon transition, particularly on fossil fuel producing communities who may be left gutted like much of the North of England and Wales in the 1970s. Crucially, the term has seemingly crossed the political divide and is a widely accepted part of finance and policy alike. The US treasury secretary Janet Yellen talked extensively of it yesterday. This of course went down well, or at least better than her pronunciation of the welcoming host city. Alongside Biden (who will not remember the smoothest of weeks), they keep talking about ‘Glass-Cow’. The pubs are shaking.

A positive narrative

Speaking of pubs, it has been much more difficult than expected to track down conference attendees, but last night a semi-organised event was a reminder of why this sector is so good to be a part of. Within half an hour of being in the pub, I had been invited on a (deadly serious) arctic mission, chatted to an ex-landmine clearance officer with a vision to transform investment at the public-private interface, and heard tales from a bloke who had spent his whole life producing counter-terror communications in the developing world and was now turning his attention to climate change. A few hours later came a guy who had just arrived from a carbon free journey to Chile and back during which he curated stories and messages from South American children, which he presented to leaders this week. While incredibly cliched and a bit self-indulgent, I felt it important to mention this other side of the conference. There are good people everywhere. In the words of a surprisingly deep-thinking heckler in the centre of town today, ‘compassion is the highest form of wealth’. I thought this was one of the statements of the week, and I’ve thankfully seen plenty of it.

All photos are my own.

*‘Climate-aligned finance’ means financial portfolios in which the total impact of their assets under management is aligned with the goals of the Paris Agreement, while ‘climate finance’ means the specific flows of finance that fund mitigation or adaptation projects. Climate finance can thus be an important part of climate-aligned finance. Exciting stuff!