ESG and Sustainability Insights

ESG for corporates:
political climate initiatives

10 minute read time

A Green Alliance survey about how members of the UK parliament understand and respond to climate change revealed there are practical, procedural and psychological difficulties in responding to climate change, as large-scale, long-term challenges do not fit well with the daily practice of politics.

Add to this the interdependencies of tackling climate change on a global scale in order to be impactful and the mammoth task to organise and programme-manage the 193 UN countries, it explains to some extent why it has taken decades for climate policy to take shape.

This feature outlines the key milestones of achieving a common, global climate change and sustainability approach, and it looks in more detail at climate action organisations and networks that offer support to the public and the private sector on their journey to becoming low-carbon enterprises.

Terminology

  • WMO: The World Meteorological Organization is the United Nations’ agency for meteorology (weather and climate), operational hydrology and related geophysical sciences.
  • UNEP: The United Nations Environment Programme is the eminent global environmental authority that sets the global environmental agenda and promotes the implementation of the environmental dimension of sustainable development within the UN.
  • IPCC: The Intergovernmental Panel on Climate Change is a committee of climatologists, meteorologists, geographers and other scientists, established in 1988 by the WMO and the United Nations Environment Programme (UNEP) to appraise the science related to climate change.
  • UNFCCC: The United Nations Framework Convention on Climate Change is an international environmental treaty arranged at the United Nations Conference on Environment and Development in 1992. Its objective is to "stabilize greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system."
  • COP: The Conference of the Parties is the decision-making body tasked with monitoring and reviewing the implementation of the UNFCC.
  • GCF: The Green Climate Fund, set-up by the UNFCCC in 2010, is the world’s largest fund specifically helping developing countries reduce their greenhouse gas emissions
  • NDCs: The Nationally Determined Contributions are at the heart of the Paris Agreement and represent how each country is contributing to reduce greenhouse gas (GHG) emissions.

Taking on climate change – a globally organised task

Despite scientists first discovering the climate-changing effect of human-produced GHGs in the 1860s it still took more than a century for scientific concerns to become loud enough for governments to take notice in the 1980s. A first step towards a concerted effort was when the WMO and the UNEP decided to set up the IPCC in 1988 to investigate scientific evidence on climate change and its impact, with a view to formulate realistic response strategies.

The first IPCC Assessment Report in 1990 accentuated the need for international cooperation to tackle climate change and its consequences and ultimately lead to the UNFCCC in 1992, the first key international treaty to reduce global warming.

To bolster the global response to the threat of climate change the UNFCCC included the commitment to facilitate between two to four intergovernmental climate change negotiations each year; the largest, with around 25,000 participants, and most important event is the Conference of the Parties (COP), held annually and hosted in different locations around the globe. Over the years, the COPs have gained global reputation due to the fact that they are the only climate forums in which the voices of the poorest countries carry equal weight to that of the wealthiest economies.

Five years later, the Kyoto Protocol was adopted as the first addition to the UNFCCC, committing most of the UNFCCC signatories to mandatory emission-reduction targets, which varied depending on the exceptional circumstances of each country. However, not all UNFCCC members were required to restrict their emission, which critics cited as one of the flaws of the protocol. They also were sceptical about the effect of those measures because China and the US, the world’s top two emitters of greenhouse gases, were not bound by the protocol – China because of its status as a developing country then and now, and the US because it didn’t ratify the protocol.

Acknowledging its limitations, delegates at the COP18 in Doha in 2012 agreed to not only extend the Kyoto Protocol until 2020 but, crucially, to create a new climate treaty by 2015.

2015: a year of progress for climate action

Indeed, 2015 saw a breakthrough in international policy building around sustainability and climate action. In Paris on 12 December, the 197 UNFCCC parties made a landmark deal with the Paris Agreement, designed “to combat climate change and accelerate and intensify the actions and investments needed for a sustainable low carbon future”, effectively replacing the Kyoto Protocol.

Two years before, the UNFCCC had already taken steps to enhance the ability of developing countries to adequately respond to climate change by setting up the Green Climate Fund (GCF), which channels climate finance to developing countries, and therefore putting poorer nations in a position to equally commit to the Paris Agreement as developed countries.

The Paris Agreement heralds the most comprehensive and binding initiative, instructing all signatories to put forward their best efforts – the so-called nationally determined contributions (NDCs) – to keep the global temperature rise this century well below 2°C above pre-industrial levels, and to pursue efforts to limit the temperature increase even further to 1.5°C. To reach the goals of the Paris Agreement, the UNFCCC supports a complex architecture of management and governing bodies.

The signatories of the Paris Agreement also committed in article 2.1°C to “making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development”, or, more simply, aligning finance in order to support climate action. It marked the first time that the UNFCCC set a goal reflecting the need for greener finance, sending a distinct message that all finance, public and private, has to be supportive of, and not undermine, the transition to a low-carbon society.

One year on, the Group of 20 (G20) launched a Green Finance Study Group (GFSG) to “identify institutional and market barriers to green finance, and based on country experiences, develop options on how to enhance the ability of the financial system to mobilise private capital for green investment.” The Group’s synthesis report suggests a number of measures – for voluntary adoption by the G20 countries – to enhance the capability of the financial system to mobilise private capital for green investment. These include among others:

  • Developing and implementing voluntary principles for sustainable banking, responsible investment and green finance.
  • Organising support for the expansion of platforms such as the Sustainable Banking Network (SBN), the UN-backed Principles for Responsible Investment (PRI), as well as other international and domestic green finance initiatives. These capacity-building platforms could be expanded to include more countries and financial institutions.
  • Supporting the development of local green bond markets and green bond guidelines and disclosure requirements with the aid of development banks, specialised market bodies and the private sector.
  • Promoting cross-border investment in green bonds, including through bilateral collaboration between various green bond markets.

In 2018, the Sustainable Finance Study Group (SFSG) replaced the GFSG, continuing the work of its predecessor but widening its remit to the broader concept of sustainable finance, which goes beyond financing and includes “related institutional and market arrangements that contribute to the achievement of strong, sustainable, balanced and inclusive growth, through supporting directly and indirectly the framework of the Sustainable Development Goals (SDGs).”

Assessing climate action progress

Without reliable and robust measurements, it would be impossible to judge the progress of all 194 Paris Agreement country signatories, and to take stock of the achievements across the 169 indicators for the 17 Sustainable Development Goals.

Governments therefore used the Paris Agreement to commit to outlining the steps they’re taking to limit global warming, known as the Nationally Determined Contributions (NDCs). At COP 24 in 2018 in Katowice, the governments also agreed on a framework for a frequent tracking progress. To maintain momentum and showcase progress in climate action despite the COVID-19 pandemic a series of virtual events about the NDGs were held at the beginning of June 2020.

Climate networks foster concerted action

Moving to a low-carbon society requires work and input on all levels; globally, as well as on national, regional and local levels. No country, city or business can ‘go it alone’. Also, with time running out, top-down and bottom-up processes must happen simultaneously: businesses need to share how their operations can be transformed into zero-emissions operations, and governments need to set policies, provide financial stimuli and other support to the public and private sector.

By NatWest Markets