2021 is hot, October is hotter

COP and FiCS, the two key conferences that are aiming to foster sustainable development, will be held on October

This year has been full of advancements and publications regarding climate change and green growth. This October is going to be the apex of the year with two global events: the second edition of Finance in Commons[1] and the twenty-sixth United Nations Climate Change Conference of the Parties (COP26)[2].

In the United States, President John Biden, since his first day in office, started a new plan focused on sustainable development and support to the Agenda 2030 and the Paris Agreement for its national and international agenda. At an event held in July[3], Janet Yellen, Secretary of Treasury, convened the heads of the key Multilateral Development Banks (MDB)[4], encouraging the MDBs to increase their focus on climate adaptation and to support developing countries in implementing ambitious emissions reduction measures and protecting critical ecosystems. Later in August, the Treasury issued a “Guidance on Fossil Fuel Energy at the Multilateral Development Bank.” [5] Chinese President Xi JinPing, speaking on behalf of the second-biggest economy, made a similar movement announcing that China will stop financing Fossil Fuel production abroad[6]. During the United Nations General Assembly[7], held in September, both Presidents reinforced the green agenda and were echoed by many other Heads of States, setting the tone for strong statements and pledges during the next COP 26.

Following the Treasury guidelines, the World Bank published its Climate Change Action Plan. 2021-2025. Supporting Green, Resilient, and Inclusive Development.[8] On the document, the World Bank commits itself to align its financing flows with the objectives of the Paris Agreement, with pathways toward low-carbon and climate-resilient development. All new operations from July 1, 2023, will follow this strategy. Moreover, the World Bank will publish a methodology for financial institutions funds and multilateral development banks (MDBs) to follow a similar approach.

Finance in Commons

On October 19 and 20, in Rome, Italy, the Italian Development Bank, Cassa Depositti e Prestitti, with the United Nations Fund for Agricultural Development (IFAD), will host the second edition of the Finance in Commons Meeting. The first edition, held in 2020, brought together more than 460 Development Financial Institutions, and in this year’s edition, more than 500 institutions are expected.

After the first edition, several working groups were created, most of them linking Sustainable Development Goals, sustainable investment, and the role of development institutions. The working groups work on gender investment, water investment, social investment, and subnational development banks’ role on investment, among others. This year’s event will bring the first outcomes of these working groups up, focus on rural and agricultural development, and produce joint declarations of development institutions to be presented on the COP26 related to climate change.

The MDBs and other development financial institutions are key change-makers and provide the expertise, know-how, and monetary support needed by countries and companies to make a transition to a more equal and sustainable future. In this way, the outcomes of this meeting will be crucial to the COP26 and the future of global growth, mainly for the key goals iii) mobilize finance; iv) work together to deliver, explained below.

COP 26

From October 31 until November 12, the city of Glasgow, Scotland, will host the 26^th Conferences of Parties, better known as COP 26, organized by the United Nations Climate Change Conference (UNFCCC). Since its adjournment in 2020, and the outcomes of COVID-19, the event will shed light on the next compromises of the countries around the world for a more sustainable world. The expected involvement is upwards of 30,000 people in the city, representing over 200 countries, businesses, NGOs, faith groups, and civil society.

This edition of COP comes with four climate change goals and will work towards i) secure global net-zero by mid-century and keep 1.5 degrees within reach; ii) adapt to protect communities and natural habitats; iii) mobilize finance; iv) work together to deliver.[9]

The first goal of COP26, focusing on a net-zero and guarantee that the world temperature will increase in 1.5 degrees celsius, will call for countries actions to abandon coal, stop deforestation, switch to electric vehicles, and encourage investment in renewable energy production systems. The other three goals are consequences of this first goal. The second goal calls for adaptation to the climate change effects, protecting and restoring ecosystems, and a building defense, warning, and resilient infrastructure to extreme climate change events. The third goal seeks to mobilize globally an amount of US$100 billion in climate financing per yearere is where international development agents, such as multilateral development banks and funds, play a key role in climate change action. The fourth goal looks for partnerships and cooperation to mobilize financial and governmental efforts towards climate preservation, but, also, to finalize the Paris Rulebook that details the Paris Agreement rules.

The goals of COP26 were established considering the Intergovernmental Panel on Climate Change’s (IPCC) Sixth Assessment Report (AR6)[10], released on August 7, 2021. The AR6 is a study of almost  4,000 pages assessing the physical science basis of climate change. The Assessment found out that human activity is “unequivocally” the main cause of climate change. Even with zero emissions, it is “very likely” that the world will rise by 1,5 degrees Celsius by 2050. Also, the Report brings scenarios of the effects of this temperature increase and scenarios for higher increases. In all the scenarios, the most frequent extreme weather disasters are expected with bigger economic and human impact, such as drought, heatwaves, storms, hurricanes, and ocean level rise.

The outcomes of the COP26 will have a huge impact on green and SDG’s bonds, on the new taxonomies of green investment, on stock markets’ regulations, and how we are doing business.[11] The advancements of this year’s event should be followed closely by economists, governmental authorities, public policy professionals, and lawyers. A whole new universe of regulations, lawsuits, and consultancies will be needed, and mainly lawyers must need to keep up to date with the advancements of climate change regulations. We will keep following up on the subject and publish the key findings of the COP26 on the Berkeley Global Society website.

[1] Available at: https://financeincommon.org/

[2] Available at: https://ukcop26.org/

[3] Available at: https://home.treasury.gov/news/press-releases/jy0289

[4] The banks in question where the ones that United States has majority voting power, i.e. African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank Group, and the World Bank Group.

[5] Available at: https://home.treasury.gov/system/files/136/Fossil-Fuel-Energy-Guidance-for-the-Multilateral-Development-Banks.pdf

[6] Available at: https://www.reuters.com/business/energy/chinas-overseas-coal-power-retreat-could-wipe-out-50-bln-investment-2021-09-22/

[7] Available at: https://www.un.org/en/ga/

[8] Available at: https://openknowledge.worldbank.org/handle/10986/35799

[9] https://ukcop26.org/cop26-goals/

[10]  Available at: https://www.ipcc.ch/report/ar6/wg1/

[11] More information on Beyond Green Growth: the ESG Investment Market and the Era of Responsible Investment. Available at: https://berkeleyglobalsociety.com/en/perspectives/beyond-green-growth-the-esg-investment-market-and-the-era-of-responsible-investment/