The COP 26 and it's Ambitious Legal Targets
What is the COP 26?
The Conference of Parties (COP 26) was the 26th climate change conference that was hosted by the UK in partnership with Italy. The COP 26 was originally scheduled to take place in November, 2020 in Glasgow, UK, but was postponed for one year due to the COVID-19 pandemic. Ultimately, it took place between 31st October 2021 and 12th November 2021.
Given the increasing carbon level surrounding the planet, the COP 26 summit was considered critical for a joint global climate action. The intergovernmental Panel on Climate Change aims to limit global warming to 1.5 degrees per annum, which requires that global emissions must halve by 2030 and reach ‘net-zero’ by 2050”.
COP 26 is the first such global test of this highly ambitious aim. One of the main areas of success in Glasgow was that many governments submitted new Nationally Defined Contributions-agreements (NDCs) in an effort to achieve these long-term goals. When combined, these NDCs are ambitious enough to put the world on track for 2.0°C to 1.5°C per annum of global warming reduction.
New Commitments
As of 12th October 2021, 113 countries and 27 EU countries (a total of 140) had submitted new or updated versions of their respective NDCs to the United Nations Framework Convention on Climate Change (UNFCCC). A few countries , such as China and Japan have, in fact, pledged new 2030 targets but have yet to submit them formally. Some of the new NDCs are in the upper limits of what many had expected. The UK has pledged that there will be an overall reduction in carbon emissions of 68% by 2030 compared to 1990 and a reduction of 78% by 2035.
New Initiatives
The decisions made at the COP26 should be gradually translated into action, policies, and laws at both at the national and international level.
The outcomes at COP26 will likely include the following European and UK policies:
● Upcoming changes from the EU Green Deal (EU Green Deal focuses on the EU becoming the first climate neutral continent by 2050, resulting in a cleaner environment, more affordable energy, smarter transport, new jobs and an overall better quality of life)
● Soon to be released net-zero strategy for the UK government, and
● The UK government’s 10 point plan for a green industrial revolution (to create one million jobs in the UK to transform industry, energy, transport, agriculture and buildings, while restoring nature).
Impact of COP 26 on the Finance Industry
The newly announced ‘International Sustainability Standards Board’ (ISSB) will completely change reporting standards to include sustainability disclosure standards for financial markets i.e., disclosure requirements that address a company’s impact on environmental sustainability matters when a Company’s enterprise value is assessed by accounting and finance professionals.
The Glasgow Financial Alliance for Net Zero (GFANZ) announced commitments by the financial services sector to align their activities and deliver more than $100 trillion investments to achieve net zero by 2050. The GFANZ accounts for 40% of world’s total financial assets and they have understood that it is important to develop tools and methodologies so that climate change factors into every financial decision.
Physical impacts of climate change are a highly material and an immediate source of risks for many firms. For example, the European Central Bank’s recent analysis illustrated that Euro area banks face high losses if climate risks are not mitigated, due to disruptions, disasters and environmental degradation caused by climate change.
Both the Legal and Finance Industry must be aware of the latest developments on the COP 26 front. Given that Countries have Nationally Defined Contribution Agreements to achieve the goal of a reduction in Carbon emissions by a specified year, they must adapt their strategies to focus on climate change when advising clients and devising legal or business strategies.