Commentary

ICYMI, We’ve all Been Talking up the Numbers

Desire for a successful outcome has seen some stretch a point in Glasgow.

You’re unlikely to have missed much climate news this week, given the blanket coverage of COP26 across the world’s press. Even the environment correspondent from climate-sceptic UK broadsheet The Daily Telegraph was here, researching a story about whether Europe’s ski resorts could survive by switching from snow to grass (we kid you not).

But it’s been easy to miss some of the nuance behind the headline claims. As one observer noted earlier this week, “There is a definite effort to talk up the numbers.” Such is the UK government’s desperation to declare the Glasgow summit a success that on Thursday morning they pushed claims of a 190-strong coalition committing to phasing out coal. Later, the headline figure was 23, the  number of countries signing up to ending all investment in new coal power generation domestically and internationally.

For the record, this didn’t include China, Australia, India or even the US, while Indonesia got an opt-out for some of the agreement’s more important clauses. Another number that made the headlines was US$130 trillion, the amount of private capital now committed to aligning with the Paris Agreement. Or, to put it another way, the AUM of the finance sector firms signed up to one of the net zero alliances under Mark Carney’s GFANZ umbrella.

All of this is good news of course. But it seems worthwhile to scrutinise every step so we know how far is left to travel. Should we be pleased with Monday’s announcement that India has now joined the net zero club or disappointed that it has only committed to achieving carbon neutrality by 2070, 20 years after most other G20 countries?

The positive announcements have flowed all week, from a deal on deforestation to a pledge to cut methane emissions, from the UK initiative to mandate transition plans from corporates and financial institutions to a global consolidation of sustainability reporting standards. The International Energy Agency calculated that we’re now on track for global warming of 1.8 degrees Celsius before the end of the first week of COP. But the outlook for these pledges being fulfilled is far from certain.

Every COP has its own personality. To the uninitiated (this is ESG Investor’s first), it has the look and feel of a large finance sector shindig, but with added security and social distancing, which often means watching from afar, making it harder to get a sense of whether progress is being made.

At one socially distanced event yesterday, development agencies and asset owners wrestled with the challenge of keeping firms honest over the course of their net-zero transitions. Speaking via Zoom, the incoming chief executive of the Global Reporting Initiative said financing should depend on detailed self-reporting, including the establishment of verification processes.

At a time when we’re all tempted to talk up the numbers, the verification industry looks set to boom. In finance, numbers are often a guide, secondary to gut instinct, rather than having the primacy they enjoy in science. In politics, they’re a means to an end, which is one of the reasons why the clash of these three worlds in Glasgow is so fascinating.

A particular reason for optimism is the number of deals in which developed countries’ plans and efforts are tied to the support of transition and adaption of less-developed nations, partly in lieu of reaching the US$100 billion per annum climate finance pledge. But a key measure of this collaborative spirit will be the extent of agreement on carbon pricing mechanisms next week.

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