Postponed in November 2020 due to COVID-19, COP26, the United Nations’ next ‘annual’ conference, will now take place in Glasgow, Scotland, in November 2021. The event is already being described as a ‘watershed moment’ for the recovery of the planet: to ‘lock in ambitious low-carbon transition policy goals across the world’.
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Global head of sustainable finance for the HSBC in the UK, Daniel Klier, writes of five trends that are dominating the run-up to this event.
The first is that the US, the European Union and China are now united by a desire to take firm action on climate change. Klier suggests that with former US Secretary of State John Kerry as special climate envoy, improvements to the 2015 Paris Agreement; greater international collaboration on technical development and investment; and action on specific economic sectors and industries has become more likely.
He adds that China is now committed to net-zero emissions by 2060, the EU by 2050 and the UK has renewed its Paris Agreement pledges, which include a 68% reduction in UK emissions by 2030.
The second trend cited by Klier is the accelerating transition to low carbon technologies ‘particularly in industries where emissions are high and hard to abate’. He cites an 81% year-to-date rise in electric vehicle (EV) sales, and that more than 350 different EV models are due for launch across the world next year.
In addition, the EU is to renovate 35-million energy-inefficient buildings by 2030. “Buildings account for 40% of energy consumed and 36% of energy-related greenhouse gas emissions in Europe,” says Klier, adding that there is also increasing awareness of the need for sustainable infrastructure in the fast-growing Asian economies.
The role of climate finance is Kleir’s third trend. In an extremely bumpy year for equities, he points out that climate stocks such as renewable energy, energy storage, agriculture and transport efficiencies made 37% gains, against 11% for the overall market. In addition, US$64.9-billion of green bonds were issued in the third quarter of 2020 – the highest volume in any third quarter period since the market’s inception – and total green bond issuance is now at almost US$1-trillion.
Number four is the protection of specific natural environments and ecosystems such as mangroves, seagrass and tidal marshes through blue bond investments, which are reserved for marine conservation capable of taking up carbon dioxide from the atmosphere several times more quickly than forests on dry land. In 2018, the Seychelles became the first country in the world to issue a blue bond, and in 2019, HSBC was the lead manager on the World Bank’s €200-million blue bond, a financial tool helping to protect Australia’s Great Barrier Reef and many other ecosystems around the world.
With recovery from COVID-19 an ongoing concern, Kleir’s fifth trend is the potential to use COP26 as a catalyst for tackling climate change and for rebuilding the global economy on a more resilient, prosperous footing. “COP26 must be a key moment in securing a just transition, one that protects jobs, strengthens local communities and helps out vulnerable economies. It isn’t enough merely to lower emissions. Doing so while damaging prosperity across the world would be no kind of victory,” he says.
He warns that the stakes are very high. Despite the 2015 attempt in Paris to secure an agreement to limit the global temperature rise to 1.5 °C, “we are currently on track for a catastrophic 3.0 °C increase by 2100”.
“Making progress through 2021 on the five trends outlined above – more effective climate diplomacy, faster transition, better climate-finance returns, more nature-based solutions, and prioritising a just transition – would help build momentum for a successful summit,” he argues.
This is, no doubt, an argument from a developed-world perspective but Africa and South Africa have much to gain from a successful transition to a less carbon intensive economy. We already know that South Africa’s ailing coal-based grid can’t cope; that renewable solutions are now cost competitive and that the African continent is primed for industrial and economic growth should energy constraints be overcome.
We have a young population hungry to adopt new ways of doing things, particularly when it comes to new technologies. Most of Africa can leapfrog the developed world with respect to carbon-free power infrastructure; and a strong entrepreneurial spirit has emerged for finding ways of transforming environmentally friendly product and solution ideas into successful, job creating businesses.
Let’s stop looking at the climate crisis as someone else’s fault for which we bear no responsibility. It is an opportunity. To live in a more sustainable, healthier and more equitable world.
