Themes of the Year: Breakthrough on climate yet to come

Most of our readers will be familiar with the saying, ‘bringing a knife to a gun fight’. And while we don’t want to appear overly pessimistic, we also find it hard to see the glass as half full when looking back at the limited progress we’ve made in fighting climate change.

As 2021 draws to a close – a year that was deemed crucial in this context, as was COP26, since countries would be providing updated nationally determined contributions for the first time since the Paris Agreement in 2015 – it’s clear that, as things stand, we are nowhere close to limiting global warming to within 1.5C by the end of the century.

“’Is 1.5 alive?’ is the question,” said Claire O’Neill, managing director of the World Business Council for Sustainable Development, during a speech at an ESG conference hosted by Sustainable Fitch this month.

O’Neill, who until 2020 was a government official, serving in ministerial positions in the UK and as president-designate of COP26, added: “In order to get to a 1.5 outcome by 2050, science tells us we need to cut emissions by around 40 percent by 2030. All the current plans presented suggest that emissions will go up by about 10 percent.”

Speaking of emissions, methane and the need to significantly reduce its presence in the atmosphere was addressed for the first time this year, within the context of COP. More than 100 countries have joined the Global Methane Pledge “to take voluntary actions to contribute to a collective effort to reduce global methane emissions by at least 30 percent from 2020 levels by 2030,” according to a statement.

Although this is certainly a positive development – according to the UN Environment Programme, at least 30 percent of global warming that has occurred since the Industrial Revolution is due to methane emissions – it is nonetheless just another pledge (or the ‘knife’ in the proverbial gun fight). And as O’Neill pointed out in her speech: “Nothing that is said or written down at COP has any legal status whatsoever. There is no mechanism for ensuring that countries deliver on what they say. And I know it might come as a surprise to some of you, but just occasionally politicians don’t keep their promises.”

A recent example is US President Joe Biden, who made climate change a central part of his agenda and vowed during COP26 that his country would “lead by example”. Just days later, his administration announced the auctioning of more than 80 million acres for oil and gas drilling leases in the Gulf of Mexico.

The business community is also no stranger to broken promises. A recent example is the Glasgow Financial Alliance for Net Zero, which was launched in April. Major banks such as Citigroup, Bank of America and Deutsche Bank were among its founding members. But according to Bloomberg, these and other major lenders organised “$459 billion of bonds and loans for the oil, gas and coal sectors” in 2021 alone. They also arranged $463 billion worth of green bonds and loans, “with fees more or less evenly split”.

What’s more, since the Paris Agreement, banks have facilitated nearly $4 trillion of fossil fuel financing, generating more than $17 billion in fees.

As we wrote back in November 2020, what the world needs from businesses, investors, fund managers and any other groups forming such alliances “is a clear roadmap to action”. A little over a year later, and with several extreme weather events and natural disasters behind us, we need more than just a roadmap. We need action.

The infrastructure investment community is in prime position to initiate that action. As owners and managers of assets that account for 62 percent of greenhouse gas emissions, it’s easy to understand why they should; the risk climate change poses for these assets makes it easy to understand why they’d want to.

These two sets of factors are what prompted us to dedicate our entire December/January issue to climate change. It is a theme that we expect will continue to dominate political and business agendas in 2022 and will feature prominently in our own coverage, hopefully to give the planet a fighting chance.