If the first week was filled with pledges without details, and the weekend with disappointment-fueled protests, Tuesday witnessed optimism on the fringes of COP26. COPs comprise several related events, with discussions of details that are often absent on the main stage. Today, I was at one such event—the Bloomberg summit—at the train station in Glasgow.
The sessions and coffee breaks were filled with talks of how to achieve, and even surpass pledges of the previous week. The highlight of the day was listening to John Kerry, the US Presidential Envoy for Climate. The ex-Presidential candidate, Secretary of State, and long-time Senator was optimistic about this summit, noting that it was the ‘best COP ever’.
While acknowledging lost years when the US temporarily withdrew from the Paris accord, he did highlight the fact that, if all pledges from the previous week were met in their entirety, global warming would be limited to 1.8 degrees by 2100. At the same time, Kerry realistically pointed out that the pledges themselves should be viewed as ‘market indicators’, showing the direction of travel, thereby pulling private money towards the climate mission.
Kerry summed up the strategy as, “The only way we are going to win this battle is to bring the private sector to the table.”
Even the absence of China and Russia was not seen as a derailment by Kerry. He explained that this COP was ‘the checkpoint that Paris envisaged’ and that it was happening. Furthermore, he mentioned that both countries would ultimately be at the forefront of climate change.
Other conversations centered on cities that are in a transition phase towards a sustainable economy. In these cases, budgetary planning requires assurance from national governments and collective action across cities themselves. Funding for city projects is often through bond issuance rather than direct investment, and therefore, project de-risking becomes critical for success. De-risking rests on proper planning, and to cite a quote by Marvin Rees, Mayor of Bristol, “Get a plan, any plan, just get a bloody plan.”
Other points of discussion were:
- Energy transition and how it can be achieved through innovation, investment, and adaptation by energy firms themselves. The complexity of maintaining power generation, divesting from fossil fuel, and managing a mix of sources including nuclear and renewables presents as much opportunity as it does risk. This would succeed only if finance providers play their part.
- The built environment was discussed and the daunting scale of adapting existing stock was explained. Again, there was optimism that while sustainable new builds require expensive green materials (concrete, steel, etc.), adaptation effectively utilizes existing skills and materials in a way that applies well-understood renovation techniques.
- Supply chains were of particular concern across all industries. Scope 3 disclosures are mainly related to supply chains, and there was discussion around how these can be reduced through supplier vetting. Business practices from refilling (retail), packaging, and eco-sourcing were all covered.
All in all, a markedly upbeat tone, with solutions, rather than aspirations was the focus. If the market markers work, then, over the next decade, banks will be marshaling flows in multiple trillions into the new green economy.
Signing off for today, best regards from Glasgow…