COP26: ‘Government is not doing enough to help companies meet net-zero targets’
With COP26 entering its last few days, Business Leader looks into the impact the event has had on climate change goals and what it means for global economies.
Nearly half (44%) of middle market business leaders say the UK government isn’t doing enough to support companies in meeting net-zero targets by 2050, according to a survey by audit, tax and consulting firm RSM UK.
This view from ‘The Real Economy’ survey of 400 business leaders sits in contrast to Boris Johnson’s ambitious climate targets. But it also follows The Chancellor’s Budget which many say lacked climate measures necessary to help meet those goals, with minimal investment in heat pumps and insulation for homes, modest spending on public transport, and a surprising 50% reduction on taxes on domestic flights.
However, over a third (34%) of businesses don’t measure their own impact on the environment and nearly a quarter (24%) don’t have a formal environmental plan, suggesting businesses could also be doing more to strengthen their own commitments.
The largest cohort of survey respondents (66%) felt company employees would present the greatest increase in pressure to formalise an environmental plan or strategy.
Kevin O’Connor, Executive Chairman of RSM UK, comments: “As the world reaches this pivotal moment in the fight against climate change, more companies are now rightly looking to proactively manage climate risk. But is clear that business leaders don’t feel enough progress is being made at government level to incentivise greater action. Nonetheless, it goes both ways, and when the shoe’s on the other foot, it’s notable that a large number of businesses don’t appear to be making the progress necessary to strengthen their own commitments and credentials either.
“Companies whose products or services are part of our everyday lives, such as tech, healthcare and fashion, have a real opportunity to lead the climate change agenda and to advocate for greater action by government, as well as make stronger and clearer commitments themselves. This will in turn help build their reputation with consumers who demand it, and investors who need it. It will also help show the way for other industries to follow, and to recognise the major investment opportunities that exist in the global net-zero emissions transition.”
The survey was the fifth in The Real Economy series of topical quarterly surveys focusing on the middle market as the powerhouse of the UK economy. The Real Economy is the first authoritative source of economic data from this crucial area of the UK business market, sharing insight and perspective for the wider economy.
Will the goals set by COP26 cause problems for the world’s economies, now that energy supply concerns are multiplying?
Christopher Vecchio, Senior Strategist at DailyFX shared his thoughts with Business Leader about the impact COP26 will have on global economies in the face of growing energy concerns.
Against the backdrop of rising energy prices leading to economic fallout for economies in Asia, Europe, and North America, COP26, a two-week event, is set to begin on October 31 in Glasgow, Scotland. The United Nations Conference of Parties (COP) was first held in 1995, and COP26 gets its name for this year’s meeting being the 26th iteration of such an event.
From a trader’s perspective, the goals outlined at COP26 could prove to have a long-term impact on various markets, especially commodities and currencies. A reduction in oil production, for example, without available alternative energy sources, could provoke significantly higher energy prices in the short term as demand remains robust. Currencies whose economies are significant exporters of fossil fuels like the Australian Dollar, Canadian Dollar, and Norwegian Krone, could see increased speculation around the potential for gains before the longer-term narrative of transitioning away from fossil fuels weighs on price action. Opportunities may continue to grow for those market participants that appear to be providing a solution to the problem, such as electrical vehicle companies like Tesla.
Oil and energy sit at the crossroads of geopolitics, largely because there are choices that can be made that can improve or diminish the supply/demand equilibrium of many of these markets. And while the various decisions around those choices may seem clear to you or I, messiness is a feature of democracy, not a bug, and this can often lead to an imbalance in policy from administration to administration. Messiness can set off a whole host of changes in the geopolitical picture. This is very evident in oil production, which still succumbs to the supply constraints of major producers such as OPEC-plus, Russia, Canada and more recently, the United States. As oil prices ran high in 2007 and 2008, the drive for US energy independence was high, and this led to significant investment in shale extraction which was previously thought of as impossible and/or far too costly. Shale extraction added significant supply to US oil potential but it also came with uncertain environmental consequences.
The concern around those environmental consequences has had a profound impact, with support driven towards companies like Tesla that are working on a future with less reliance on fossil fuels. But in crude oil, the move that showed this year has the power to continue and with oil prices hitting a fresh seven-year-high, and while overbought on a shorter-term basis, there is little standing in the way of a run up to the 90-handle. The 100 level is a major psychological level and this is the point where the politics of oil might find its way back into the headlines as a major inflection point: Whether or not that’ll induce price action remains another matter entirely.
Global Resilience Index Initiative launched
The Global Resilience Index Initiative (GRII) multi-partner taskforce has announced its formal launch at COP26 Adaptation Day.
With partial funding and in-kind contributions from the insurance sector and partner institutions, the GRII will provide a globally consistent model for the assessment of resilience across all sectors and geographies. It will be a curated, open-source resource offering high level metrics across the built environment, infrastructure, agriculture and societal exposures with many potential applications in aggregated risk management worldwide.
Patrons of the GRII initiative are Mark Carney, UN Special Envoy on Climate Action and Finance; Mami Mizutori, Assistant Secretary-General and Special Representative of the Secretary-General for Disaster Risk Reduction in the United Nations Office for Disaster Risk Reduction (UNDRR); and Eric Andersen, President Aon Corporation, Member and Risk Modelling Champion IDF Steering Committee.
GRII partners and supporters are:
- Coalition for Disaster Resilient Infrastructure (CDRI)
- Coalition for Climate Resilient Investment (CCRI)
- GEM Foundation
- Insurance Development Forum (IDF)
- Oasis Loss Modelling Framework
- UK Centre for Greening Finance and Investment (CGFI)
- United Nations office for Disaster Risk Reduction (UNDRR)
- University of Oxford
- Willis Towers Watson
The GRII draws upon significant cross-sector risk modelling experience, including public-private partnerships between governments, academia, insurance and engineering.
The mission of the GRII is to address the data emergency that is contributing to the climate crisis by helping sectors across the global economy quantify the value of building climate resilience and the costs of doing nothing. It will enable asset owners to compare portfolio risks across geographies and hazards, as well as helping countries to prioritise national adaptation investments.
The coalition behind the GRII is seeking to achieve two initial goals:
- Offer global open reference risk data using metrics built on insurance risk modelling principles;
- Provide shared standards and facilities applicable to a wide range of uses, including corporate climate risk disclosure, national adaptation planning and reporting, and the planning of pre-arranged humanitarian finance.
Stuart Whitfield, CEO at Fathom said: “One of the greatest challenges in creating infrastructure, systems and processes resilient to climate change is a lack of easily accessible, scientifically robust data. The GRII will become a key tool in addressing this. This collaboration will provide access to the most advanced forecasting, resilience and risk data on major weather events, like floods. We’re proud to be a part of the coalition that’s brought this into being – the GRII will support governments, financial institutions, global enterprises, engineers and academics around the world as they seek to plan for and mitigate the impact of climate change.”