It was a bad week for diplomacy, but deliverance lies in the data.
This week we got something of a reality check on the road to November’s COP26 summit. If the lack of significant new commitments following last weekend’s G7 leader summit was disappointing, the news was hardly more encouraging from the virtual pre-meetings held over the past three weeks to lay the groundwork for Glasgow.
After a baffling Saturday night barbeque marred by Anglo-French rows about sausages, the end-of-summit communique laid bare the absence of meaningful progress with its reheated pledges – although the separate declaration on the G7 2030 Nature Compact did at least highlight the need for “bold action” on biodiversity challenges on land and sea at October’s UN Convention on Biological Diversity in Kunming.
Beamed from cyberspace, the UN’s summary of pre-COP26 discussions by subsidiary bodies was diplomatic, but direct. Patricia Espinosa, Executive Secretary of UN Climate Change, gave a “positive” overall assessment, but the statement admitted to divergence and discord on issues from carbon markets to communication of climate actions to support for developing countries.
Slow progress and muddied thinking was evident elsewhere, from the UK-Australia trade deal, to the tendency of insurers to underwrite businesses they will no longer invest in. Continued differences of perspective on the role of carbon capture technologies in the transition plans of energy utilities underlined the complex realities of adapting to climate change, with stark differences evident across and within sectors.
We’re still in the discovery phase, in terms of understanding the scale and nature of the task ahead, but the architecture needed to mobilise finance is falling into place. The Task Force on Climate-related Financial Disclosures is consulting on Scope 3 emissions and forward-looking metrics, plans for European Sustainability Reporting Standards are proceeding apace, and asset owners are increasingly willing to demand detailed climate accounting.
The outcome of US plans to enhance climate reporting is still anyone’s guess, but the search for meaningful data is a common theme across ESG factors, with UK pension schemes launching an initiative this week to identify the social factors of most importance to investors and the ability of large corporates to deliver them.
This should help pension schemes adapt to expected new rules for integrating material social factors into their investment activities, following a UK government consultation. But it may also add to existing calls for a mindset shift among leading corporates, on the basis that greater board-level diversity might be the catalyst for more comprehensive and credible transition plans.
There is no doubt ESG investing has become mainstream. Further confirmation can be found almost daily: from the Principles for Responsible Investment announcing its 4,000th signatory to PwC planning a monumental recruitment spree to capture the ESG opportunity. Almost as ubiquitous is evidence that climate is changing faster than expected and current preparations for adaption are inadequate. The information may sometimes be alarming, but greater transparency may be the most powerful agent for change.