Commentary

ICYMI, COP26 Laggards are Given a Final, Final Reminder

Pressure is mounting on remaining countries to deliver their nationally determined contributions.

What do you do when you set a deadline and almost half the world misses it? Set a new one, of course. There are limits to this approach in an existential crisis, but it’s the one forced on the UN Framework Convention on Climate Change (UNFCCC) by the tardiness of governments delivering updated nationally determined contributions (NDCs) ahead of COP26.

By the UNFCCC’s original 31 July deadline, 42% of the 191 parties to the Paris Agreement had failed to submit their plans. Yesterday, it confirmed publication on 27 September of a report based on the NDCs submitted by the 58%. And an extension of the deadline for the laggards to 12 October, followed by an updated report on 25 October, barely a week before COP26 officially starts.

There will be an opportunity for further chivvying and peer pressure during next week’s 76th session of the UN General Assembly. It’s possible China could use the platform to update its existing commitments, which have had limited impact on the real economy to date. COP26 President-Designate Alok Sharma came back from Tianjin in a positive mood, welcoming the “constructive discussions” with Chinese Special Representative for Climate Change Affairs Xie Zhenhua, but warning “the clock is running down fast”.

China might be Sharma’s biggest challenge, but it’s not his only one. Speaking at the High-Level Dialogue on Climate Action in the Americas, he stressed the importance of arriving in Glasgow with “firm commitments on the table”, encouraging all remaining countries to meet the 12 October deadline, and calling for more ambition, in particular from G20 members. His response to reports of the removal of climate-related conditions in a recent UK-Australian trade deal is not recorded.

The lack of coordination in UK climate policy is well documented (less so, the influence of lobbyists). Its imminent green gilt sensibly ringfences six areas for the use of its proceeds, but there’s only so much the UK government, or indeed any sovereign, can do to direct the investor’s attention away from its overall record. This will inevitably be compared with that of alternative issuers, such as the European Commission and Spain.

Many traditional staples of a balanced portfolio were under increased scrutiny this week. A survey of major European banks found they will not have the necessary client data to comply with central banks’ planned climate-based stress tests, while a separate study suggested their net-zero commitments were not yet supported by credible climate and biodiversity strategies.

With investors also being warned of the risks of continuing to hold oil and gas stocks – and the continued shortcomings of corporate climate reporting efforts – those with a long-term view and a strong commitment to stewardship may increasingly turn to alternatives with a future, no matter how unproven.

In his speech this week, Sharma also flagged the “enormous opportunities” for investors from clean economies, urging businesses and financial institutions to step up their commitments ahead of COP26. These are likely to be more forthcoming, perhaps, if politicians heed investors’ calls for clearer policy direction based more on positive realism than optimism.

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