Cicero/amo @ COP26: ‘Finance Day’ through the EU lens

By Daan Cortenbach, Senior Account Executive

For the EU, COP26 is a crucial tool for getting the rest of the world to match its bold climate ambitions, as well as ensuring a level playing field. With Cicero/amo being on the ground in Glasgow for the duration of COP26, our EU team will be providing tailored updates on the progress being made, and the potential impacts for businesses in the EU, and beyond.

Main outcomes on ‘Finance Day’

When it comes to public finance, world leaders from developed countries repeated their pledge to reach the $100 billion annual climate finance goal. Progress to date has however been slower than initially promised, with developed countries only expected to meet the goal by 2023 instead of 2020. The EU, the US, the UK, Germany, and France also announced a new Just Energy Transition Partnership under which it raises – via loans with investment institutions like the World Bank – $8.5 billion in funding to support the phase out of coal in South Africa, which relies on coal for 90% of its energy generation.

On private finance, the launch of the ambitious Glasgow Financial Alliance for Net Zero (GFANZ) brings together private financial institutions around the world to mobilise around $130 trillion in financial assets to make the energy transition a reality. Despite some scepticism from environmentalists, the closer cooperation of financial institutions and company executives in the fight against climate change is something that was far less developed several years ago. The new EU-Catalyst partnership between the European Commission, the European Investment Bank and Bill Gates’ Breakthrough Energy Catalyst, which seeks to mobilise $1 billion between 2022 and 2026 to speed up the development of innovative technologies, appears to further showcase and cement EU leadership.

Finally, Wednesday’s announcement of the International Sustainability Standards Board (ISSB) brings enhanced accountability through global sustainability reporting one step closer. UK Chancellor Rishi Sunak followed up by announcing the UK financial sector should present plans towards carbon neutrality with the goal “to rewire the entire global financial system for Net Zero”. These plans would be assessed with the aim of finding a sector-wide “gold standard”.

The EU’s take

European Commissioner for Financial Services Mairead McGuinness reacted positively to the progress made on Finance Day, emphasising that the EU seeks to use its leadership in sustainable finance and sustainability reporting aims to inspire global action in this space. McGuinness stressed that COP26 should be used to lay out a roadmap, with the period that follows being crucial to ensure delivery for partners around the world. McGuinness stated that “double materiality is the future” and a holistic approach is needed for companies to assess their impact on the environment and mitigate it.

The EU has already set out an ambitious sustainable finance framework, comprising both the EU Taxonomy, which includes definitions of sustainable investments and specifications of reporting obligations, and a proposal for European Green Bonds to put an end to a variety of different standards companies can pick from. When it comes to reporting, the EU’s proposal for a Corporate Sustainability Reporting Directive will oblige approximately 50,000 companies in the EU to report on their sustainability impacts, and a planned proposal for Sustainable Corporate Governance is going to further elaborate due diligence and corporate strategy requirements.

To inspire other countries around the world to adopt their own taxonomies, the EU published a guiding Common Ground Taxonomy on COP26, part of the EU’s global sustainable finance efforts as part of the International Platform on Sustainable Finance. Finally, the EU announced in October that it would present a standardised approach to certifying carbon neutrality in the second half of 2022. While this is a cross-sector endeavour, the financial sector should keep a close eye on possible overlaps and divergences with the UK’s announced “gold standard”, as companies operating on both sides of the channel might be faced with two different pathways to carbon neutrality.

Photo Credit: Dean Calma / IAEA. All rights reserved.

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Daan Cortenbach

Senior Account Executive

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Alex Nikolaidis

Senior Account Manager

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