Big business greater than ever is under pressure to channel money into curbing climate change – and yet the possibilities of UN talks providing the obligatory spur have slimmed because the Ukraine war, high energy prices and geopolitical tensions take precedence.
In interviews, greater than a dozen U.S. and European finance leaders were pessimistic the climate conference in Sharm el-Sheikh in Egypt starting Nov. 6 could make clear progress.
What they need are signals on the pace of regulation that will allow company boards to plan their climate policy. But as governments have rarely been more distracted by world events, they fear countries will fail to offer any major recent commitments.
“Geopolitical relations going into COP27 are at one among the worst levels in recent history,” said Luke Sussams, Head of ESG and Sustainable Finance, EMEA at Jefferies.
“The age-old dilemma of climate finance, facilitated between the developed and the developing world, will after all be critical. We, I don’t think, are too optimistic that many resolutions can be met in that regard.”
A UN report published in October underlined the urgency of the climate problem and that emissions must drop 43 per cent by the tip of the last decade to stop the worst impacts of a warmer planet.
The countries most exposed to the results of temperatures that hit records this 12 months are sometimes the poorest they usually are likely at next week’s talks to demand that any recent guarantees they make to cut back their emissions are conditional on financial help from the wealthy world.
While they need to governments to offer additional cash, the private sector may also be needed to fund the majority of the renewable energy and other projects to chop emissions and offset the impact of climate change.
The perfect hope may very well be to stop the progress up to now being undone.
“Avoiding a rollback of existing pledges and commitments… could probably be considered successful,” Benedict Buckley, research analyst at ClearBridge Investments, said.
Many firms made pledges to chop emissions last 12 months, but like many governments, they’ve yet to work out how those can be implemented.
Greater than 550 financial firms are members of the Glasgow Financial Alliance for Net Zero, aiming to chop their emissions and push firms in the true economy that depend on their financing to do the identical, however the pace of motion has been slow.
“The toughest work remains to be to return. The fact is that not enough has been done within the last 12 months – some would argue we have now moved backwards,” said Hortense Bioy, Global Director of Sustainability Research at Morningstar.
Thomas Hohne-Sparborth, Head of Sustainability Research at asset manager Lombard Odier, said only a small portion of potential investments were credibly aligned towards net-zero.
“For the transition to succeed, that portion must drastically increase,” he said.
Marty Durbin, a senior vice chairman for the U.S. Chamber of Commerce, the most important U.S. business trade group, said current economic conditions had “reset the talk” over clean energy.
The most important disruption since last 12 months’s Glasgow climate talks has been the invasion of Ukraine by Russia, a serious oil and gas exporter.
Europe specifically has been forced to rethink its previous reliance on Russian gas and to hunt alternatives. Within the short term that features coal, undermining a deal the U.N. summit in Glasgow to phase out its use.
Long run, it might mean reliance on emissions-free nuclear power, which Durbin said was increasingly discussed as a climate solution as technology improves.
High fossil fuel prices logically should spur renewable investment.
“It’s basic economics. The upper it goes, the more investment will go into that area,” said Hubi Meinecke, climate and sustainability leader for Boston Consulting Group, which helps run the U.N. conference.
It might be less obvious for some shareholders, nonetheless, as this 12 months’s high oil and gas prices have rewarded those producing fossil fuels.
A resultant surge in inflation and every day living costs also risked making a hurdle in the shape of “a voter backlash to climate commitments” said Nazmeera Moola, Chief Sustainability Officer for Anglo-South African investment manager Ninety One.