The Sustainability Standards Battle
The absence of a clear, generally agreed framework for reporting the climate impact of corporate activity has been a major impediment to greening the business sector. But two initiatives that emerged at the recent COP26 climate-change conference could give bankers the tools to help their clients fund and manage the green transition.
EDINBURGH – The recent United Nations Climate Change Conference (COP26) in Glasgow was, it seems, a historic success. We have this on no lesser authority than that of UK Prime Minister Boris Johnson, who happened to be the meeting’s host. COP26 President Alok Sharma also was upbeat afterward regarding the 2015 Paris climate agreement’s target of limiting global warming to 1.5º Celsius above pre-industrial levels. “We set out by saying we wanted to keep 1.5ºC within reach,” Sharma said. “We did do that.” And Johnson claimed that there was little difference between the proposed COP26 agreement to “phase out” coal usage and the final text, which pledged only to “phase down” coal.
Others took a different view. Perhaps predictably, the teenage Swedish climate activist Greta Thunberg described the conference categorically as “a failure.” Climate Action Tracker projects that even if all the COP26 pledges stretching into the future are met, the planet is on track to warm by at least 2.1ºC. And India is phasing out in the particular sense of phasing in, with coal-powered electricity generation expected to increase by almost 5% per year this decade. The Financial Times’s Martin Wolf hedged his bets. For him, COP26 “was both triumph and disaster.”
But for the private business sector, and especially for banks and other financial firms, the conference on the chilly banks of Glasgow’s River Clyde may well prove to have been a watershed moment. Although the cloud of coal dust obscured other issues, the gathering made some significant progress.