In November, the UK will host the 26th UN Climate Change Conference of the Parties (COP26). The summit will bring together climate experts, campaigners, and the 197 Parties who form the United Nations Framework Convention on Climate Change (UNFCC). The conference, which was postponed due to the COVID-19 pandemic, was to mark 5 years after the Paris Climate Agreement. It will be the first time that Parties are expected to commit to more ambitious targets since COP21 and is being described as the most noteworthy climate event since the 2015 Paris Agreement.
The previous conference, COP25, became the longest on record after more than two weeks of tense discussions. Despite lengthy negotiations, the conference ended with a sense of defeat and frustration in the air. Young people took to the streets to protest the lack of progress being made by world leaders and, despite an impelling speech from Greta Thunberg, many of the main issues were left unresolved. COP24 ended with a similar sense of disappointment with calls for more ambitions climate pledges to be made before COP26.
What can we expect from COP26?
Unlike former conferences, COP26 presents additional challenges in the form of COVID-19 and the recovery from a global recession. Moreover, despite a 7% fall in CO2 emissions compared to 2019, largely as a result of national lockdowns, atmospheric CO2 levels are a staggering 48% higher than before the Industrial Revolution. COP26 presents an opportunity for world leaders to demonstrate the urgency of achieving a net-zero economy and the importance of a green recovery from coronavirus. Political pledges, business targets and social pressure will be at the forefront of discussions as the global economy strives to reach net-zero and keep warming below 2 °C. If the world is to meet these targets, a successful summit this year is critical.
What does COP26 mean for ESG?
The journey towards net-zero will demand cooperation and committment from the public and corporations. With COP26 President Alok Sharma stating “we need to work together to deliver a cleaner, greener world”, there is no doubt that business models across the globe will be impacted by the transition to net- zero. So, what does this mean for ESG? As green, ethical and sustainable parameters become increasingly prevalent, COP26 will likely act as a further ‘push’ in the mainstreaming of such business models. The result of which will be a surge in the number of ESG initiatives and an increase in the influence of ESG investments. The rise in responsible investments can be seen already, with funds increasing four-fold in 2020 compared to 2019. This demonstrates a shift in the priorities of investors. The outcome of COP26 will likely emphasise this shift further as corporations are encouraged to adopt ethical and sustainable business models in preparation for the transition to net-zero.
Looking to the future
The prominence of ESG is becoming increasingly obvious with PwC consulting claiming that, by 2025, almost 60% of mutual fund assets in Europe will be ESG related. To all appearances, ESG is set to expand exponentially in the next few years, this is likely to be accelerated by the outcome of COP26 as the spotlight is put on net-zero economies and sustainable, ethical business.
Through working with the ESG Foundation I hope to increase awareness of ESG and emphasise its importance as we fight against climate change and environmental destruction.
“…we need to work together to deliver a cleaner, greener world…”
– Alok Sharma, COP26 President