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Analysis: COP26 message to companies: clean up to make money

Delegates speak during the UN Climate Change Conference (COP26) in Glasgow, Scotland, UK, Nov. 13, 2021. REUTERS / Yves Herman / File Photo

  • New rules for the CO2 market are intended to stimulate investment
  • 1.5C target increases pressure on more net-zero plans
  • The fossil fuel review could shake the industry up

GLASGOW, Nov. 14 (Reuters) – The highly competitive Glasgow Climate Pact has sent a clear message to global companies and executives: Rethink business strategies and carbon footprints to get monetary rewards or avoid delays and risk losses.

The deal announced late Saturday, which ends two weeks of tense negotiations between nearly 200 nations, is pushing countries to do much more to curb climate-warming CO2 emissions. These pressures will increasingly be exerted on investment and industry to keep business-related emissions in check.

The Glaswegian Pact also brought about a breakthrough in the rules governing carbon markets, targeting subsidies for fossil fuels.

Beyond the political negotiations, the Glasgow meeting brought together many of the world’s top CEOs, mayors and executives from sectors such as finance, construction, automotive and aviation, agriculture, renewable energy and infrastructure.

“COP26 unleashed a wall of new money from the private sector,” said Gregory Barker, executive chairman of energy and aluminum company EN + Group, via email. “For companies everywhere, one thing is certain: big changes come and come quickly.”

Two separate investment conferences on the part of the UN climate summit promoted profits for those who meet environmental regulations for the money. Many deals have been announced, including plans for a standards body to review corporate climate disclosures that will challenge boardrooms. Continue reading

AIM OF 1.5 DEGREE

With the pact reaffirming the global commitment to contain global warming to 1.5 degrees Celsius (2.7 Fahrenheit) and “accelerated action in this critical decade,” board members in all sectors, particularly transport, energy and agriculture, expect stricter national environmental policies.

This will leave companies without a plan to ad -t to a low-carbon economy that looks exposed, said senior UN climate activist Nigel Topping.

“If you don’t have a net-zero goal now, you look like you’re not caring for the next generation and not paying attention to the regulations that are coming out of the pipe,” Topping said. “Your creditworthiness is at risk and your ability to attract and retain talent is at risk.”

To increase the pressure, financial services companies, valued at roughly $ 130 trillion, have committed to realign their businesses around the net-zero goal. They will increasingly rely on the boards of corporate climate stragglers.

CARBON MARKETS

The summit’s agreement to break the rules for global carbon trading was praised by business for its potential to free up trillions of dollars in funding to help countries and businesses tackle the energy transition.

Observers said the agreed rules addressed the greatest concerns and would likely prevent most of the abuses of the system.

The nonprofit We Mean Business coalition, which works with companies in the climate field, said the rules had “the potential to unleash huge investments.”

By creating the framework for a global trading system, the pact also brings the world closer to a global price for carbon – which investors and companies requested as a priority prior to the talks.

A global price would allow companies to better estimate the value of assets as well as costly externalities – which would lead to more climate-oriented decisions about building factories, buying businesses, or launching products.

Since carbon offsetting is tied to efforts to conserve nature, more than 100 world leaders committed during the conference to stop and reverse deforestation by 2030. Companies and investors also said they would step up forest conservation efforts.

FOSSIL FUELS

For the first time under the agreement, countries recognized that fossil fuels were the main cause of climate change and called for an end to “inefficient fossil fuel subsidies”. No mention was made of how to determine whether subsidies could be justified.

She highlighted coal, the most environmentally damaging of the fossil fuels, but changed after eleven o’clock from the demand for an “exit” in coal-fired power generation to an “exit”.

The change in wording following objections from India, China and other coal-dependent nations was seen by developing countries as an admission that the developed world is primarily responsible for the climate problem. However, many in affluent economies feared that as developing countries grew, this could mean more years of unbridled emissions.

Germany’s largest industrial association called the move “dangerous and harmful to the climate” and warned that it could hamper its industries as they are forced to do without the che – fossil fuels that international competitors can still use.

“This concentrates the emissions in countries with less strict climate measures and unilaterally burdens companies that already have to cope with large financial burdens,” said the Federation of German Industries on Sunday.

Still, the mere mention of coal and fossil fuels in the Glasgow Pact has been hailed as an advance in UN climate talks that have bypassed the issue for decades.

Saker Nusseibeh, CEO of the international business of asset manager Federated Hermes, said the outcome would put pressure on some oil companies who are “not as accommodating as others”.

He also said that “coal companies need to think very carefully about their future plans”.

Meanwhile, the world’s largest economies are driving change.

The two front-runners, the United States and China, announced plans to work together on climate protection, including reducing emissions of the potent greenhouse gas methane.

Elsewhere, six countries, including France, joined the Beyond Oil and Gas Alliance and committed to ceasing new oil and gas wells.

Twenty countries, including the United States and Canada, have pledged to stop public funding of fossil fuel projects abroad, and 23 nations have pledged to phase out coal-fired power plants.

A number of companies in sectors like transportation are already turning to electrification, including US automakers Ford (FN) and General Motors (GM.N), which say they will be phasing out fossil fuel vehicles by 2040. read more

The Glasgow talks “highlighted the great opportunities that arise from another form of development – stronger, cleaner, more efficient, more resilient and more inclusive,” said climate economist Nicholas Stern. The breakthroughs “aim to make clean and green production in all of these areas competitive by 2030”.

Reporting by Simon Jessop, Jake Spring, and Ross Kerber in Boston; Additional reporting from Victoria Waldersee in Berlin; Writing by Katy Daigle; Ad -tation by Barbara Lewis

Our Standards: The Thomson Reuters Trust Principles.

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