COP26: between speech and action – 11/07/2021 – Latinoamerica21

The 26th COP, United Nations Conference on Climate Change, is seen as the last chance to avoid an environmental catastrophe. It really is, and the precedents are not flattering: the preparatory meeting that convened the G20 countries failed as the leaders could not reach an agreement on discontinuing the use of coal, nor on subsidies.

If the meeting fails and a roadmap is not established to avoid exceeding the 1.5°C threshold in relation to pre-industrial levels, in the medium and long term the planet will suffer a series of events with unknown consequences. But as necessary as taking action is securing the funds to be able to act.

As a result of the 2015 Paris Agreement, the 196 countries that committed to keeping average temperature increases under control agreed to outline a plan to reduce emissions. But the promises are far from reaching the targets, with projections of an average temperature increase of between 2.7°C and 3.1°C by the end of the century.

Financing is another key issue, particularly for developing countries. This was recognized in 2009 and developed countries pledged $100 billion a year to finance the transition. But these promises were not kept either: the promised funds never arrived.

What abounds are the costs associated with external loans whose disbursements end up affecting public budgets and the fight against climate change itself. There was no progress on proposals to decouple part of the financial resources committed to the payment of sovereign debt and allocate them to financing a large-scale transition program.

The financial architecture, in short, reflects a discourse that presents the climate problem as a business opportunity. Global banks, capital markets and rating agencies ultimately shape fiscal policy, climate change adaptation and mitigation programs.

Actions that don’t reflect choices

Although the blah blah blah is heard in all corners of the world, as Greta Thunberg points out, it is more contradictory when used by the main world leaders. Developed countries are unable to discontinue their subsidy policies. In the United States, with opposition from his own party, Joe Biden cannot pass on his green agenda, while the Social Democrats in Norway declare the continuation of oil exploration.

It does not matter the historical responsibility of the industrialized countries, nor the call of the International Energy Agency (EIA) to keep the “oil in the ground”. Developed countries equate financial commitment with a vague promise linked to new financialization instruments and avoid adapting technology transfer regulations such as investment treaties or intellectual property rules.

The same could be said of those from the private sector who make a commitment to the environment, but then prioritize short-term returns. This is evident in the behavior of large investment fund managers such as BlackRock. While in his 2018 annual letter to CEOs, his representative Larry Fink generated the enthusiasm of some investors, he also cemented the discredit of others. BlackRock is one of the main financial culprits of Amazon deforestation. Hypocrisy at its best.

BlackRock occupies a privileged position, not only for the funds it manages, but also for the operations it carries out. The company has become a consultant, an auditor, a risk assessor and a service provider in high demand by the State. The development of a taxonomy of finance aimed at meeting the government’s objectives in terms of environmental sustainability, social inclusion and transparency, allows it to play a role of “regulator” of the banking sector.

But the conflict of interest is enormous from any point of view, although many prefer to look the other way. BlackRock is also known for investing large funds in the oil industry, oil and gas reserves, but also coal. Even so-called “sustainable” funds contain investments in coal and oil.

Engagement with the fight against climate change must be measured not only by the objectives pursued by these organizations, but also by their actions, which must also be extended to traditional audit firms. This raises the need to analyze whether these companies have a zero carbon objective, auditing the compliance of the companies they invest in and advise.

On the other hand, there must be a differentiated commitment between those operating in the real sector, such as oil companies, and those operating in the financial sector. For the latter, the commitment must be reduced, thus avoiding the problem of “lock-in” or dependency. In order to avoid this situation, fund managers and the financial sector in general must be subject to an advance of zero carbon targets (until 2030?). Otherwise, they would be financing works whose useful life extends beyond 2050.

Finance must be understood as a means, an instrument that allows us to make the transition to a new economy. With this goal in mind, the United Nations and the United Kingdom –which is chairing COP26– launched the Glasgow Net Zero Financial Alliance (GFANZ), which involves pre-existing alliances. The aim of this system is to increase funding to accelerate the transition, with half of the emission reductions to be made by 2030.

To make this transition, strong civil society involvement is needed. Otherwise, the ad could end up as another blah blah blah.

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