Two years after the day when the historic Paris Agreement on Climate Change was signed, the “One Planet Summit 2017” in Paris set out a number of wide-ranging commitments to launch a collective action on climate change. The world leaders gathered for turning climate talks to action, urged the global community to move away from using fossil fuels while adopting green practices.
The “One Planet Summit” brought together local, regional and national leaders, along with those working in public and private finance to discuss how they can contribute in and enhance global efforts to fight climate change. The summit’s agenda comprised of four key components; scaling-up finance for climate action, greening finance for sustainable business, accelerating local and regional climate action and strengthening policies for ecological and inclusive transition.
From the World Bank’s bar on oil and gas funding to insurance giant AXA’s divestment plans, the summit was marked with climate finance, risk management, and sustainable development issues. The attendees to the summit included Mexican President Enrique Pena Nieto, Prime Minister of United Kingdom Theresa May and the Secretary General of the United Nations, Antonio Guterres among the notable world leaders.
French President Emmanuel Macron remarked that the world is “losing the battle” against climate change. “We’re not moving quick enough, we all need to act.” he addressed his audience of world leaders, diplomats, business executives and high level financiers from around the globe. ‘Make Our Planet Great Again’ was the official tagline of the summit which gathered people from 50 countries while the US President Donald Trump who has called climate change a “hoax”, was not invited.
It was a mediation that sounded like another coordinate message for US President Donald Trump who ordered the official withdrawal of the US from the Paris Agreement in June 2017, after former President Barack Obama was obliged to use an executive order to join the deal in 2016 to bypass climate deniers in Congress. The US withdrew a $ 2bn pledge to the Green Climate Fund, one of the myriad pots set up for developing countries to receive aid money. In reality, despite being distinctly ruled out of the invited guests, Trump was an ever-present figure looming over the occasion.
Successive speakers made clear the US President’s stance is one of the main reasons the world is not moving fast enough on climate change, with key players blasting, deriding, and at times even mocking the US President’s decision of quitting the Paris Agreement. “Very bad news” and “aggressive”, was how Macron described the decision. Former US Secretary of State John Kerry termed it “self-destructive” and former UN secretary general Ban Ki-moon referred to Trump’s decision as “politically short-sighted”, “economically irresponsible”, “misguided”, and “scientifically wrong”.
Before the Summit even started, 225 investors including many of the world’s biggest asset managers launched a joint pledge to engage on climate risk with 100 companies estimated to be responsible for 85 percent of global greenhouse gas emissions. With those companies straddling some of the most carbon intensive industries – oil and gas, aviation, consumer products – exerting investor pressure to the tune of $26.3tr in assets under management on this small yet hugely important group has massive potential to transform corporate thinking and move markets on a global scale.
Investors will be pushing hard for their assets to enhance corporate disclosure in line with the final recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). This means the world’s biggest carbon emitting companies, heavily involved in fossil fuels will be continuously monitored to assess their business plans against a range of climate scenarios, including ‘well-below’ 2C trajectories, to improve investment decision making.
It is bound to take time, but it means that many of the world’s most carbon intensive firms will have their owners breathing down their necks, constantly asking to see a plan for how they will handle climate impacts and deep decarbonisation.
Mark Carney, Financial Stability Board chair and Governor Bank of England, announced during the summit that 237 companies with a total market capitalisation of $6.3tr have given their backing to the TCFD guidelines since they were published in the summer, and it seems many are viewing the so-called ‘tragedy on the horizon’ with increasing concern.
Even ExxonMobil, one of those companies targeted on the Climate Action 100+ list, has now bowed to shareholder pressure on this issue. It emerged yesterday that the oil giant will soon produce some sort of risk assessment regarding 2C climate change and low carbon transition.
The space is seemingly closing in on climate defaulters, with an abundance of announcements during the summit proving fewer and fewer investors are happy to put up with the companies they own. As Carney suggested, while climate risk disclosure may not yet be pervasive, it is now very much a mainstream concern. “You now have the mass of the financial sector saying ‘we want to distinguish between those who can see the opportunities, those who can manage the risk, and a group of companies that just don’t know the answer to these questions,'” he said. “It’s going to be more awkward to be in that last group.”
When it comes to climate issues, Trump’s brand appeared as toxic as they come. But while each wave of criticism garnered enthusiastic applause from the crowd, the more important question is what impact it has on the diplomatic approach of other nations.
Rumours are building that Trump’s administration is keen to press ahead with a ‘clean coal’ Alliance, which was first mooted at Bonn and would aim to encourage co-operation on the use of more efficient coal technologies. “The US is considering pulling together a group of countries that support using cleaner, more efficient fossil fuels,” a US administration official revealed. “There is an anti-fossil fuel movement being aggressively pursued by a number of countries and environmental activists,” he added.
Australia, Indonesia, China, India, Ukraine, Poland and Japan are all likely to be approached to join, and many of those countries kept a notably low profile at yesterday’s gathering in France. The Trump-bashing may mean countries are reluctant to hitch their wagons to a ‘clean coal’ alliance that will be associated with such a contentious and volatile president – or it may drive some ever faster into the White House’s open arms. Either way, One Planet Summit was a provocation to the notoriously thin-skinned President, and a counter attack seems not far on the horizon.
Climate risk disclosure is pushing its way into the mainstream policy making. The summit started with a solid stance on climate change, and the voices raised will no doubt continue to reverberate around the boardrooms of global corporations for some time to come.
The One Planet Summit 2017 grabbed both corporations and media attention. Every year, the UN organises a summit, hosted by a different country, focused on international collaborative action on climate change. Yet for all the fervour which greeted COP21 and the Paris Agreement two years ago and fortnight-long summit in Bonn, both carrying crucial importance, failed to generate that many headlines.
With the French President having only been elected less than a year ago, his summit was by necessity hastily organised, yet it was short, sharp, to the point and, in many respects, highly effective. From the outset, Macron had signalled that the focus of the single-day event would be on leveraging more finance and investor action on climate change, and with such a clear agenda set, that’s exactly what he got.
A plethora of potentially critical announcements from major investors, global corporate and organisations – be it on coal divestment, risk disclosure or the World Bank backing away from oil exploration – were fired out to tie-in with yesterday’s Summit, arguably generating more buzz than similar pledges made on the sidelines of the COP23 summit.
For if the UN summit in Bonn was about keeping the Paris Agreement on track after the US decided to back away, then Macron pulled off a major climate coup in generating massive headlines for low carbon transition. Marcon remained successful in bringing star power for instance Mike Bloomberg and Bill Gates were the big green business names, while Arnold Schwarzenegger and even Sean Penn made appearances, not to mention the Eiffel Tower.
The lesson here, as Macron surely himself knew beforehand, is that efficiently honing in on one area, in this case finance, may be an incredibly effective means of getting key investors, politicians, companies and the media outlets to properly recognise the importance of the green economy.
And with the UK Prime Minister Theresa May having announced plans to hold a Zero Emission Vehicle Summit next autumn, she may well have the same idea in mind. She would do well to examine how her French counterpart managed to ensure such successful event in Paris.
If she does replicate a similar strategy for her Zero Emissions Vehicles Summit, could autumn 2018 see London crowned the world’s EV capital, with the proposed event heralding wraps of national commitments to phase out fossil fuel cars, alongside unprecedented levels of investment in the electric vehicle sector? We shall have to wait and see.
No one is suggesting COP summits have run their course as they still have a critical role to play. But as the green economy grows and the urgent need to drive climate action intensifies, perhaps there is space in the calendar for a number of different and complementary events.
The big guns of global corporate landscape are backing away from the fossil fuels. It is an extraordinary sign of the times when investors line up to march away from easy asset accumulation en-masse. But that is literally what is happening to the coal industry, with yesterday seeing a major expansion in the membership of the UK and Canada’s Powering Past Coal Alliance. There are now over 50 countries, regions, and businesses who literally want nothing to do with unabated coal power, including some of the world’s best-known corporates.
Top investors have spotted which way the political and economic winds are blowing, with insurance giant AXA yesterday announcing the quadrupling of its green investment target to €12bn by 2020 and a fivefold increase in its coal divestment policy to €2.4bn, a promise that will see cash removed from firms which derive more than 30 percent of their revenues from coal, have a coal-based energy mix that exceeds 30 percent, actively build new coal plants, or produce more than 20 million tonnes of coal per year.
Dutch bank ING followed suit, promising not to back clients in the energy sector more than five percent reliant on coal. Lending to individual coal-fired power plants will also stop by 2025, it said.
It’s not just coal. The trends and institutions that have toxified coal for many investors are coming for gas too. Arguably the biggest news during the One Planet Summit came from the World Bank, which issued a surprise announcement declaring it will stop funding upstream oil and gas from 2019 except in the most exceptional circumstances. It was back in 2013 that the institution made a similar announcement regarding coal. It appears the pattern is starting to repeat itself with oil and gas.
All regular attendees of major climate conferences know that there are always calls for more progress on carbon pricing, and the summit was no exception. “The single biggest thing we need to do is price carbon, and we need to price carbon across the planet,” John Kerry suggested.
But rarely are these calls delivered alongside meaningful action. China diminished fears that its carbon trading programme has stalled by promising the first phase of its long-awaited scheme will launch in the next few days. The move will “steadily advance the building of a national carbon market”, said Ma Kai, vice-premier of the People’s Republic of China, adding that “through the building of such a carbon market we will mobilise businesses to reduce emissions”.
Meanwhile, a joint declaration from national and state leaders across North and Central America promised a significant expansion of carbon trading in the Americas. Canada, Colombia, Costa Rica, Chile and Mexico pledged to use carbon pricing to drive climate change action, and harness a common framework to deepen regional integration of carbon markets throughout the region. The declaration was also signed by the Governors of California, Washington and the Premiers of Alberta, British Columbia, Nova Scotia, Ontario and Quebec.
All of this comes on top of news from the EU last month that policymakers have finally agreed upon new reforms for the trading bloc’s emission strategy, designed to cut the number of surplus credits and push up prices and guard against any Brexit-related disruption. The World Bank also said for the first time yesterday that it will adopt a shadow carbon price in its economic analysis.
The One Planet Summit may not have delivered an immediate strategy for accelerating action on climate change, but it went a significant way to properly identify and then hopefully address the market failures that serve as the root of climate change.
One Planet Summit shed spotlight on the initiation of a new paradigm for corporations and investors, where hope is that climate threats are appropriately dealt with and 2°C decarbonisation strategies are implemented, although the summit featured more than 50 world leaders, but this was a summit about corporate world.
Engaging the corporate elite reflected that high carbon emitting products and practices will ultimately become part of history when the key recommendations will be fully adopted someday in future. And the message was clear that firms must have a practical strategy for the low-carbon transition. As the UN Secretary General António Guterres remarkably put “Those who fail to bet on a green economy will be living in a grey future.”