By James Whitaker
Now that COP26 is behind us, what are the implications going forward?
The two-week long UN global climate summit – postponed by a year due to COVID – brought some 40,000 delegates, together with high expectations of a reboot of our approach to pressing climate challenges, to Glasgow, and certainly included plenty of drama.
Unfortunately, it’s difficult to characterize COP26 as a resounding success. Nor can we say the world is now on a path that will avoid climate disaster. But some positives did emerge.
Let’s take a closer look at some of the most significant:
On the flip side, COP26 resulted in several negatives as well.
Identifying the Risks
From business’ perspectives, as usual, the risks and exposures post-COP26 will be largely sector-specific. But a number of overarching issues emerged that are likely to impact industries across the board.
First, COP26 focused the world’s attention on the urgency of the climate emergency and the roles that private enterprise, as well as national governments, must play. As result, the pressure on corporations and financial institutions, in terms of their environmental practices, will be more acute than ever.
Second, the move toward carbon neutrality will be watched extremely closely, as will disclosures and statements made about performance. Investors, and fund and asset managers will look increasingly closely at green standards and credentials when allocating capital; this will affect the cost of funding and access to capital markets.
Third, the risks associated with potential stranded assets are likely to become even more acute as commitments to phasing down – and ultimately, hopefully, phasing out – coal and other fossil fuel sources expand.
Last but not least, the use of strategic litigation to encourage – or compel – behavioral change is expected to continue to grow.
Act Now to Limit Exposure
Proactive and positive engagement with stakeholders, including shareholders, investors, employees, suppliers, community members, NGOs and other interest groups, is more crucial than ever. Meanwhile, the increased focus and pressure to improve climate-impactful behavior and make bold commitments in that regard is welcome, but organizations need to take care to avoid misrepresentations that could expose them to regulatory or litigation risk.
The fact that COP26 accelerated the timeline for climate action, and most nations committed to arrive at COP27 in Egypt with revised NDCs, offers cause for optimism – even if it could be construed as simply “kicking the can down the road.” It’s clear that change needs to happen quickly, and we can expect pressure on national governments, corporations and financial institutions to increase rapidly. There is much unfinished business to address.
Watch Episode One of Legal Soundings to learn more about what you need to know after COP26.