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COP26 puts spotlight on the private sector

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Hello from Glasgow, where I and other Financial Times reporters will be on the ground for the duration of COP26, keeping you apprised of discussions that may — or may not — prove highly consequential for the climate and the global economy.

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Today, Gillian and Andrew look at an uncomfortable theme: there seems to be a broad consensus in the business world that, with governments having failed to rise to the climate challenge, the private sector needs to pick up the slack. It’s hugely encouraging to see big business paying serious attention to climate issues. But is it healthy to see such a powerful role played by unelected business people, however constructive their motivations might be?

Here in Glasgow, that tension has taken on an awkward practical form. There’s a lot of talk in the city about how the huge influx of corporate types has pushed accommodation rates to stratospheric levels, forcing official delegates from various countries to stay an hour away in Edinburgh and beyond. The Conference of the Parties is of course a negotiation between government officials, and we’ll be working hard to keep you updated on the key movements there. But since this has also become a conclave for global business leaders, we’ll be tracking that conversation too.

Day 1 in brief

  • Train services were cancelled from London Euston to Glasgow due to storm damage as transport chaos overshadowed arrivals at the climate summit.

  • G20 leaders on Sunday agreed to end international financing of coal power. But in a nod to the further progress that’s needed at COP26, minutes before departing for Scotland, UK prime minister Boris Johnson said: “If Glasgow fails, then the whole thing fails.”

  • “Sunak may be optimistic. I, alas, am not,” writes the FT’s Martin Wolf, who argues that the UK economy will continue to be “mired in mediocre growth” if it fails to couple ambitious green transition goals with UK chancellor Rishi Sunak’s taxation and growth strategy.

For the rest of today’s news see our live blog.

Talking point

The COP summits are supposed to be a set of intergovernmental talks. That, after all, was how they were first framed. But this year, the real action will probably not be on the government side. The American delegation is coming to the party with precious little to offer, and China and Russia are notably MIA. “Before the meeting in Paris, there was a lot of behind the scenes diplomacy before which brought governments to the table, but that just hasn’t happened this time in the same way,” laments a long-time diplomat.

But what is striking about COP26 is that government inaction is going hand-in-hand with hyperactivity from the corporate and financial world. The big focus for this is the “business and finance” day on Wednesday. However, a spate of announcements could come before this, including most notably:

  1. Measures to harmonise green accounting standards via the International Financial Reporting Standards and others. Yes, we know that the alphabet soup around these standards sounds dull, but it matters.

     

  2. Calls for the multilateral development banks to get more creative in how they create blended finance tools to back green emerging markets projects. This also sounds dull to non-financiers but it matters deeply, if the goal is to enable private sector money to be deployed for green projects. The MDBs, however, may be wary. 

  3. Efforts to remove the risks around EM projects by, say the pooling of foreign exchange exposures and the creation of a green “kitemark” to designate which projects are compliant with the Paris goals. These steps could also be very important in terms of helping private sector money to flow into the developing world.

  4. Moves to make the carbon offset market appear more credible. This is controversial, since some activists think the entire carbon offset market is questionable; however, the corporate sector is keen to develop this.

  5. Calls for consistent carbon pricing. This is the elephant in the room, since the US government has hitherto resisted this (along with China). But expect to hear this issue raised repeatedly by businesses. 

(Gillian Tett)

Quote of the day

Barham Salih, president of Iraq, said climate change offered an ‘opportunity to diversify Iraq’s economy’ away from oil and gas © Reuters

Iraq is the fifth most vulnerable country in the world to changes in the climate, according to the UN Environment Programme. But Barham Salih, president of Iraq, said climate change also presented an “opportunity to diversify Iraq’s economy” away from oil and gas:

“One route is through an extensive national reforestation effort in the south and west of the country,” Salih said, writing in the FT. “Other ideas include the modernisation of water management and the increased use of solar energy.”

Beyond Glasgow: The worldview

COP26 is a gathering of government leaders, but that has not stopped the business community from getting in on the act. Scores of chief executives are flying into Glasgow this week, and leading business lobby groups from the US, Europe, Canada, Mexico and Australia have issued a “call to action”, urging the assembled politicos to get their act together on carbon pricing and other matters.

We have seen a surge of emissions-cutting announcements from companies ahead of COP26 (see our new Moral Money Forum report on how they’re navigating the bumpy road to net zero). And the Alliance of CEO Climate Leaders has told world leaders: “We can’t do it alone.”

But any chief executive thinking they have the moral high ground on climate issues should heed a new survey from Edelman, the international public relations firm.

Just 29 per cent of the 14,000 people it polled in 14 countries want business to take the lead in addressing climate change, compared with 46 per cent who see this as a task for national governments.

Perhaps worse, after all the environmentally friendly corporate pledges of recent years, just 46 per cent of those surveyed trust business to do the right thing to address climate change. That is less than the number who trust governments. It also jars with Edelman’s previous findings that business is more trusted in general than governments, non-governmental organisations or, dare we say it, media outlets.

That disconnect suggests a specific suspicion of companies’ responses to climate change, says Richard Edelman, chief executive of the eponymous consultancy. “CEO trust has been rising across a whole range of things but . . . CEOs are just not trusted on this,” he warns. “It’s clearly a vote of no confidence in business.” (Andrew Edgecliffe-Johnson)

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