On 12 December 2017, two years after the adoption of the COP21 Paris Agreement and one year after it came into force, world leaders came together again to reaffirm their common commitment to combating the effects of climate change.
The One Planet Summit in Paris, convened by French President Emmanuel Macron, UN Secretary-General António Guterres, and the President of the World Bank, Jim Yong Kim, was attended by more than 50 world leaders, as well as CEOs, celebrities, philanthropists, and investment fund managers. The aim of the Summit is to mobilise not only political leaders, but also public and private financing to fund the transition to a world where fossil fuels are on the decline.
Even though world leaders everywhere reiterated their commitment to the Paris Agreement after President Trump’s withdrawal announcement in June (see Hot Topic of 02 June 2017: “US President Trump withdraws from Paris Agreement: An opportunity for the rest of the world?”), ensuring adequate financing for climate-related projects remains a significant challenge.
Investors, bankers and infrastructure funds will play a key role in the fight against climate change. Over the past two years, the entire global financial system was urged to be quicker in switching its investments towards RES projects and companies that are reducing their greenhouse gas emissions.
Financial Sector Support
The financial sector seems to now also be joining the party by accepting the challenge to help in the race to curb the effects of climate change.
,The Climate Action 100+ launched an unprecedented initiative during the Summit. The group, consisting in 225 investment funds managing more than €22 trillion in assets, pledged to engage with 100 corporations estimated to be responsible for around 85% of total global greenhouse gas emissions, so as to step up their ambition on climate action.
Similarly, the World Bank made a Statement saying that it will stop financing upstream oil and gas projects from 2019 to help countries meet their Paris Agreement commitments. Meanwhile, AXA, the French insurance giant, declared it is strengthening its divestment from coal with a commitment to reach €12 billion in green investments by 2020. AXA also announced that it would cease to insure new coal construction projects, oil sands, and the associated pipeline businesses.
Norway’s largest private pension fund, Storebrand, also announced it is expanding its fossil-fuel-free funds with a new clean bond programme for €1,1 billion. Storebrand has no fossil-fuel investments and is an industry leader in the shift to clean energy. In addition, the Dutch banking group, ING, announced it will accelerate its withdrawal from financing companies in the coal sector. The group will refuse new clients if they rely on coal for 10% or more of their business, and by 2025 plans to cease financing clients in the utilities sector who rely for more than 5% on coal power.
These statements, that send a no-confidence vote out to the rest of the industry, are indicative that the backing that governments and energy groups needed to carry out their green initiatives is finally here.
The Summit also featured a range of non-financial sector announcements that will help sustain momentum and continue the fight against climate change.
More than 50 global companies signed a Business Declaration calling for more ambitious climate action as the basis for future economic success. Signed by Allianz, Michelin, UC Rusal, and Unilever, among others, the Declaration calls on the 20 most industrialised countries, representing 74% of global emissions, to devise concrete long-term measures to accelerate decarbonisation.
Microsoft’s founder, Bill Gates, also said his philanthropic foundation would pledge €250 million to help poor farmers in developing countries to protect themselves from the devastation expected from climate change over the next three years.
President Trump’s controversial decision to withdraw the US from the Paris Agreement, promoted a change of the climate guard from Washington to China, Europe and Canada. The new coalition is working to present a united voice on climate change. They will meet in June 2018 to discuss the differences between rich and poor countries in responsibilities for tackling climate change.
Although the US is no longer the leader in the fight against climate change and President Trump was not even invited to participate in the Summit, the US was nevertheless by former US Secretary of State John F. Kerry, who insisted that Americans remain “absolutely committed” to the Paris accord. Furthermore, many representatives of US States, cities and businesses partook in the Summit and reiterated their support for the common actions against changing climate.
The reiteration of the Paris Commitments by a large part of the world, while prominent, gave way as the main takeaway to the fact that world leaders have overcome the lack of support from the US administration in leading the common climate change mitigation efforts with more concrete measures. The political effort has also gained crucial support from key representatives of the financial and banking sector, who increasingly view RES investments that can lessen climate change effects as a serious economically sound contender instead of just wishful thinking.
Even though what happened last week in Paris is not providing guarantees that the world leaders will effectively take what is needed to face climate change, the events in Paris show the way to go. Let’s not forget, however, that to succeed, politicians supporting climate mitigation measures and the recently converted financial giants still need the support of ordinary citizens. Energy matters are complex, including from a technical point of view. It is great news to watch the major corporations, funds and financial institutions becoming major backers of the climate change actions. It is also urgent, to ensure larger citizens support, to invest time and effort to engage more with people across the globe through transparent initiatives and educational activities explaining why we all need to do something. Otherwise, political and corporate declarations could turn out to be insufficient.