This COP was different


Steve Waygood

COP26 was billed as ‘the most important meeting in history. Chief Responsible Investment Officer at Aviva Investors, Steve Waygood had a front row seat and shares his thoughts on the climate conference.

As I boarded the train home from Glasgow, exhausted from the frenetic lead-up and then the exhilarating reality of being part of a once-in-a-generation – no, once-in-a-lifetime – opportunity to change the course of civilisation’s future, so many thoughts were spinning through my head.

It was – and still is – impossible to know if I and my equally committed Aviva colleagues achieved what we set out to from COP26. More importantly, it is also impossible to know if the whole conference will be judged a success. It is unlikely anyone will know for years yet, until clear signs of talk becoming action start to emerge.

The cynics and critics liken COP to Davos. They bemoan the great and the good turning up in jets to fuel their egos and self-importance. They worry that bluster and hot air will win out over concrete progress and action.

They are right to worry. Progress at previous meetings has been far short of what is required, which has increased the burden of the job at hand today. Precious time and moments have been lost. It is now over six years since the Paris Agreement, and everyone agrees there is a yawning gap between the ambition we set then and the action required to get there.

This COP was different

But, despite what many of those dissenting voices say, this COP was different for several reasons. Firstly, it was the first time the whole world has been watching with genuine interest. Climate change is no longer seen as a niche, environmental issue pushed by green parties and activists; it is now viewed as the biggest global threat that everybody is aware of. The impact of the public will and mood cannot be understated. Politicians and leaders serve us, not the other way around.

Secondly, COP26 was different for the dramatic increase in representation from both business and finance – particularly the latter. The public will should not be understated here, either. When people vote with their wallets and their investments, making their ethics and morals well and truly known, capital will have to flow accordingly. The ballot box isn’t the only place to vocalise beliefs.

Armed with this intent and passion of the majority, the system can be changed. We can redraw the blueprint of capitalism to ensure market failures get corrected, so that polluters and free riders pay their share and do not put profits over people and the planet.

COP highlights

With all that in mind, I try to recall some highlights of my time in Glasgow.

I mentally thumb through all the main achievements of the first week (NB. I returned on the middle Sunday): the 100 world leaders promising to end and reverse deforestation by 2030; India’s 2070 net-zero commitment; Saudi Arabia’s 2060 equivalent; and the EU Commission chief Ursula von der Leyen and US President Joe Biden announcing a partnership to cut emissions of methane by 2030.

The second week saw the US and China declare they would put the climate before their geopolitical differences, but ended disappointingly with India and China intervening at the last minute to soften language around coal (pledging to phase it ‘down’, not ‘out’ by 2030).

My most spine-tingling moment came in the MP finance action zone when Al Gore, Mark Carney and David Blood assembled. It was here that Nigel Topping, the UK’s High-Level Climate Action Champion, stated that the $130 trillion firepower of the Glasgow Financial Alliance for Net Zero (GFANZ) and mandatory corporate transition plans were “not only the mic drop moments of the morning, but will likely be seen as among the most historic achievements of COP26”.

It is almost surreal. We have been seeking a net-zero financial alliance and mandatory transitions plans for so long. I am extremely proud to have been part of a team, an organisation, and many formal and informal coalitions pushing these ideas forward. Some of this progress and detail may seem arcane and few outside the world of policy and finance world will appreciate just how massive they are – but, believe me, these milestones are huge.

Equally inspiring was hearing Ashley Alder, the International Organization of Securities Commission (IOSCO) head, say: “Jurisdictions are going to need standards that can be independently audited so strengthening the assurance framework is critical. The IOSCO endorsement is the catalyst for getting this done and getting it done quickly. I am confident that we are going to get this done quickly.” I paraphrased a little here from memory, but he went on to welcome the formation of the International Accounting Standards Board sustainability sub-committee. Again, this was music to our ears.

I should also mention the book, music symphony, two documentaries and a film that we contributed to COP26 – all fizzing with emotion-stirring and thought-provoking content.

Why trust finance?

Answer: Macro stewardship.

Sceptics will argue the financial system is not fit for purpose. Look what happened in the lead up to and aftermath of the global financial crisis of 2007-09, they might say. They have a point, and their caution is understandable. What they may not have noticed though is just how much the sector is trying to reform itself; to identify the weak spots and seek to work with governments, regulators and, in extreme cases like climate change, multilateral institutions to structure markets differently to create the right behavioural incentives and curb risky and harmful practices.

A delicate balance between public and private capital must be struck. Neither will work without the other – and we know the unfettered extremities of both are not the answer. Ultimately, money needs to flow in two main directions: to solution providers (technology and innovation) who can help mitigate the effects of climate change and to the investments that will help us adapt. There will be opportunities as well as risks and, as those looking to accumulate wealth or draw down from it, investment returns matter from a social perspective – to pay the pensions of today and tomorrow.

There is no escaping the fact we need more effective regulation to ensure as just a transition as is humanly possible. This will involve compassion, as well as a seat at the table and development assistance, for developing nations – those most at risk from the ravages of global warming.

But how do you create systemic change? Or, put another way, how do you fix a system that isn’t working? Macro stewardship is a form of engagement that recognises the system is broken in places and therefore company-level engagement, however targeted and well-meaning, has certain limitations. It involves pulling on the levers of change – like litigation, regulation, standards, fiscal and public awareness – to create system-wide reform. It involves finding the change-making nodes of industry and policy and collaborating with them to design better outcomes. When married with the more established and accepted parts of sustainable investing, there is reason to trust that the industry can live up to its fiduciary duties.

Moving beyond borders

So, as I reached Kings Cross and readied myself to disembark, I thought back on the journey and my own branching trains of thought. There was a moment on the trip that stands out for its emotional richness and clarity. Staring out of the window as we travelled across the Scottish Borders, it was hard not to be awed by the unspoilt landscape (depending on your baseline starting point, that is). Regardless, it is breathtakingly beautiful. But it was not its beauty that captivated this time.

The borders and edges of places, spaces and ideas represent areas in life where anything seems possible. Just because somebody drew a boundary line there one day does not mean that is where it will be tomorrow. This is a great metaphor for capitalism. The climate crisis knows no borders. Odourless greenhouse gases float through the air without recourse to custom checks and security guards. It used to take imagination to see their silent and destructive force. That, unfortunately, is no longer the case. Its poisonous fingerprints are everywhere.

Sir David Attenborough clearly invoked the required sense of possibility, imagination and hope in his address to COP delegates. As he put it: “If working apart, we are a force powerful enough to destabilise our planet, surely working together we are powerful enough to save it.”

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