As we all remember, COP 21 took place in 2015 in Paris and has led to a landmark agreement among 195 countries in the world : a global warming limitation target at below 2°C compared to pre-industrial levels. Even though the Agreement is not binding, this shared objective is a turning point in the global cooperation against climate change. Indeed, if the CO2 emissions were to keep on rising at the 2015 rate, the Intergovernmental Panel on Climate Change (IPCC) believes the Earth could have warmed up by 3.7° to 4.8°C by 2100, with the related consequences. However, two years after Paris Agreement, is the environmental outlook now brighter?
Two years after COP 21 : mixed results
According to the annual Emission Gap Report published in November 2017 by the United Nations, the gap between the reductions needed and the national commitments in Paris is still alarmingly high. The report calls for an urgent acceleration of short-term actions to prevent the current 3°C policy trajectory to happen. This observation is confirmed by the « Réseau Action Climat France ». The French association reports that of the 1089 worldwide companies that reported their emissions to the Carbon Disclosure Project (CDP) in 2016, only 1.4% set a target consistent with a 2°C trajectory.
This stagnation has been proved right by COP 23 in 2017 at Bonn during which no agreement on a global Rulebook had been reached– the Rulebook states how the targets agreed upon in Paris will be achieved. Only few structural decisions have been taken, such as the creation of a coalition Powering Past Coal, that gathers 20 countries* worldwide. This group, however, only represents a small part of the global coal production and consumption and, thus, has little impact on the coal future outlook. At the same time, little progress was made regarding the determination of funding dedicated to the 47 Least Developed Countries (LDCs).
In France, COP 21 has had a double impact : first, the acceleration of the reglementary agenda that led to the “loi de transition énergétique pour la croissance verte” and, secondly, the increase in concerns and expectations from civil society. Thus, the main French companies have implemented a more thorough climate reporting. However, only a few have contextualised their emission reduction targets to achieve the 2°C trajectory : 29 French companies have committed to establishing science based targets, and only 8 of them have already set targets** as of today.
One Planet Summit : a turning point in climate change management?
The One Planet Summit, held in Paris in December 2017, was the first international conference on Climate Change. Its objective was to ensure funding to meet the COP 21 target of limiting global warming below 2°C by 2100. Its impact was particularly acclaimed for the concrete decisions taken during the Summit.
Indeed, it led to 12 commitments, that can be summarised into two categories. Firstly, the prevention and adaptation to climate change. Secondly, the decarbonisation of the economy, mobilising local banks, central banks, development banks as well as sovereign and institutional funds. The commitments are promising because most of them enhance public and private collaboration, highly needed in the context of climate change, and because a majority of them have set quantitative targets.
At the national level, 91 French companies, representing 1500 billion euros in turnover, launched the French Business Climate Pledge. Together, they announced massive investments to move to a low-carbon society, mainly through R&D and projects financing.
The growing role of international finance: It’s all about money!
In this context, we can see a closer relationship emerging between shareholders and corporations, based on two pillars :
A growing shareholders’ activism related to climate risks
The establishment of the Climate100+ initiative, gathering today 279 global investors and representing 30 trillion dollars in assets (more than ten times France’s GDP), has put under surveillance the 100 global companies that are directly or indirectly responsible for 80% of the world’s CO2 emissions. The objective for the investors is to have a better vision of their climate risk exposure.
Climate reporting is becoming common practice
As of May 2018, over 250 organizations have committed to the recommendations of the Task Force on Climate Disclosure (TCFD) – the G20 Financial Stability Board’s working group – to provide climate reporting. This voluntary approach is awaited by many investors. In France, we are going even further : Article 173 of the “loi de transition énergétique pour la croissance verte” voted in 2015 requires France’s largest investors to establish a report on how they take climate risk into account in their investments.
In short, it is clear that the situation is critical. As reported by the International Energy Agency, carbon emissions have globally been on the rise in 2017, for the first time since 2014. The concerns raised by the stalling negotiations have led to an additional climate change conference planned for September 2018 in Bangkok and supposed to deliver a Rulebook for the coming COP 24 in December 2018. As materialised by the One Planet Summit, the involvement of international – private and public – finance will be a game changer to fight against climate change and reach the global goal of 2°C. Eventually, it’s all about Green Finance !
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*All the countries that have joined the coalition Powering Past Coal since its creation : Angola, Austria, Belgium, Canada, Costa Rica, Denmark, Fiji, Finland, France, Italy, Luxembourg, the Marshall Islands, Mexico, the Netherlands, Niue, New Zealand, Portugal, the United Kingdom, El Salvador, Switzerland, as well as the states of Washington, Alberta, Vancouver, British Columbia, Quebec, and Ontario.
**Atos SA, Capgemini Group, Danone, Gecina, Kering, L’Oréal, Sopra Steria Group, Suez.