What can non-executive directors expect from COP26, and how can they progress their companies’ climate ambitions? Julia Hawkins, Chapter Zero Programme Director, summarises her main takeaways from a Chapter Zero event with HSBC Chair Mark Tucker and Nicola Brewer, non-executive director at Iberdrola SA.
The build-up to COP26 has seen a surge of net zero pledges from business, with some 4,470 companies now signed up to the Race to Zero. So it was fascinating to watch Emily Farnworth of the Centre for Climate Engagement in conversation with Mark Tucker and Nicola Brewer about their hopes for the climate conference. Emily also asked them how non-executives can drive the climate transition in their boardrooms.
Hopes for COP26
The event opened with the stark reminder that time is running out to limit warming to 1.5°C. As Nicola noted, existing climate commitments from governments mean we are on track to increase global emissions 16% by 2030, when we need a 45% decrease.
As well as hoping that COP will help ‘move the needle on carbon targets’, Mark expects to see announcements on coal, internal combustion engine phase-outs, carbon markets and deforestation – all of which will have a significant effect on business.
While previous COPs focused on governments meeting and setting targets, Mark also welcomed the fact that COP26 will see the public and private sectors come together for the first time to find solutions.
Nicola is keen to see the creation of specific targets for 2030, as well as the ambitious 2050 targets. She would also like to see real commitment, with deadlines, to provide significant financing for developing countries.
What does the private sector need from government?
The transition to net zero will be very complex and involve significant roles for both the private and public sectors. Businesses are responsible for making their own transitions, but there will also need to be collaboration. Every firm needs to have an ambitious transition plan aligned with a net zero future.
To help progress the transition, businesses will be looking for government action after COP26 to provide:
- A stable and predictable policy framework
- Smart regulation that aligns with carbon neutral goals
- Demand signals for new technologies and solutions
- Blended finance – using public funds on green infrastructure projects
- Sector by sector transition targets and plans
But as Nicola commented, businesses can also take action irrespective of the signals government is sending. In particular, there is a real need for companies to get their heads around scope 2 and 3 emissions, not just direct emissions.
Global carbon pricing
There is a desire to see more progress when it comes to global carbon pricing.
With huge variation in approaches and initiatives between different businesses, setting a global carbon price is extremely complex. Clear market signals from COP26 on this would be a great start to putting aside different interests and helping to make progress.
COP26 is an ideal opportunity for a breakthrough. It’s important that we don’t make the perfect the enemy of the good. We need to find a solution for this and then we can refine it over time.Mark Tucker, Chair of HSBC
Consideration of emerging markets
Mark noted that with 90% of emissions growth over the next three decades expected to come from emerging markets, ensuring their transition to net zero – and financing that – will be key to limiting warming to 1.5°C.
It is especially important that boards in emerging markets engage on climate, as those markets are facing a disproportionate impact from global warming. It’s important to recognise that different regions are starting from different positions and have varying levels of resource to mitigate the impacts of climate change, or to build carbon-neutral infrastructure.
Imagine a group of friends at a bar. The friends come from the G7 and have been drinking at the bar all day and into the evening. At the end of the night, a new friend from the G20 joins them for one final drink. Now who would think it fair to share the bar bill equally among everybody?Nicola Brewer, NED at Iberdrola SA
Advice for NEDs at the early stages of their climate journey
Mark and Nicola concluded with some recommendations for non-executive directors starting to work with their businesses on climate:
- Be curious. Be curious and learn about the trends and key climate issues businesses are facing. There are many ways we can all learn new things and expand our knowledge – it’s as important for NEDs to do this on climate as it is for other topics.
- Keep skills and expertise under constant review. Sustainability is an area of growing importance – do you have the expertise you need inside the executive team? This could look different for each board and may be headed up by a Chief Sustainability Officer.
- Measure what matters. Measure what matters to your business, because when you’ve measured it, you can manage it. This will help you implement your transition plan more quickly.
- Look for business opportunities, don’t just focus on the risks. For example, quantify climate-related opportunities, and view financial disclosures as new ways of looking at value and value creation.
- Engage with your workforce and other stakeholders. Encourage your businesses to engage and maintain a dialogue with its workforce, external shareholders and investors. They will increasingly hold you to account – climate issues impact everybody. Be ready for higher expectations.
- Always ask the question: what will keep our company in the vanguard for the transition? What more could we do?
If you would like more information on topics like the above, browse our knowledge hub.
We don’t need to be scientists, but we do need to be able to apply what the scientists and our own experts tell us about our own business, and therefore we’ve got to continue to learn and upskill.Mark Tucker, Chair of HSBC
Watch the recording of the eventWatch
Written by Julia Hawkins, Programme Director at Chapter Zero