What happened at COP26 and what’s next for business?

The COP26 climate conference in Glasgow kept the goal of 1.5 alive – but only just. What’s next for business, and what are the key takeaways for NEDs?

As the world digests the Glasgow Climate Pact and other outcomes of COP26, it is clear that the combined commitments of countries and sectoral coalitions represented a substantial step forward.

The agreement by governments to update national climate commitments in 2022 and to end inefficient fossil fuel subsidies were noteworthy, as were pledges to end deforestation and cut methane emissions. And the unresolved issue on international emissions trading in the Paris Rulebook, which provides details on how the 2015 Paris Agreement can be met, was finally agreed.

On the finance front, the Glasgow Financial Alliance for Net Zero’s commitment of up to $130tn of private capital by 2050 demonstrates how radically the global financial system is being transformed to finance the net zero transition.

But there were also disappointments. Watered-down wording on coal in the Glasgow Climate Pact, a lack of agreement on compensation for developing countries for climate-related loss and damage, and another missed deadline to deliver $1bn annual climate finance were met with anger from many.

In the words of COP President Alok Sharma, the goal of 1.5 was just about alive – but “its pulse is weak”. That said, consensus amongst 197 nations with different agendas was always going to be a challenge, and the major involvement of business and finance in Glasgow was a significant achievement.

And while global political progress on climate action proved challenging as ever, it is clear the global business landscape is shifting as organisations and coalitions increase both net-zero commitments and action on climate to prepare their businesses for a fast-approaching zero-carbon future.

Key takeaways for NEDs

Our partners at the Centre for Climate Engagement have summarised the key climate trends and announcements of most importance for non-executive directors and industry leaders from COP26.

The top takeaways for non-executive directors from this briefing are:

1. With increased focus on 2030 targets and accelerated action, now is the time to ensure your businesses move from ambition to action in their climate strategy and consider using an internal carbon price to drive that strategy. Civil society is increasingly conscious of greenwash, raising reputational risks if plans are not clear.
2. Encourage your businesses to embrace opportunities for collaboration and climate action through initiatives such as the Race to Zero and the Science Based Targets initiative (SBTi); and to harness global cooperation seen in announcements such as the US and China commitment to work together on climate action.
3. Ensure your businesses are properly reporting and accounting for climate change, not only to meet mandatory TCFD-aligned reporting requirements and new global standards, but also to attract investment from an increasingly climate-aligned financial sector, and to articulate a clear economic case for climate decisions that protect shareholder value.
4. Advise your businesses to understand potential impacts of the systemic change occurring within global financial systems which aims to unlock significant climate investment, as proposed by new initiatives such as the Glasgow Financial Alliance for Net Zero (GFANZ).
5. Advise your businesses to prepare for the cost implications of global climate policy trends including the removal of fossil fuel subsidies and expansion of carbon pricing mechanisms to ensure a planned transition to new business models where needed.

Read the whole briefing here.

Wider reading

• Carbon Brief provides an in-depth summary of all the key outcomes in Glasgow – both inside and outside the main negotiations.
• The Climate Change Committee has summarised the key outcomes and next steps for the UK.
• This ‘COP26 Debrief – The Business Implications’ podcast from the Institute of Directors explores the business implications that came out of COP26. Our board member Gillian Karran-Cumberlege took part in the discussion.
• Mckinsey offers insights into what’s next for business in COP26 made net zero a core principle for business. Here’s how leaders can act.

Notwithstanding any debate about whether COP26 was a success, the general direction for business has been established. Momentum has shifted toward net zero, providing businesses with a new organizing principle. The transition to net zero will be complicated. […] Courageous leadership will therefore help companies navigate the transition.

McKinsey: COP26 made net zero a core principle for business. Here’s how leaders can act