18 Nov 2021

COP26 is over. My reflections on its outcomes, the future of leadership and how PIDG plays its part

Marco Serena, Head of Sustainable Development Impact at PIDG, talks about the next months rather than years, as the sense of urgency that Glasgow instilled in the UN COP process is unprecedented.


COP26 closed on Saturday after negotiations went well into extra time. Only the next few months will say how far Glasgow has gone in tackling the climate crisis because the measure of its success will be whether decisive action is taken following the announcements of the past two weeks.

I talk about the next months rather than years, as the sense of urgency that Glasgow instilled in the UN COP process is unprecedented.

COP26 Outcomes

You can now read the full text of the “Glasgow Climate Pact” here.  In terms of overall assessment, I broadly share the views of COP business champions Nigel Topping and Gonzalo Munoz that:

  • Glasgow has not guaranteed 1.5°C, but it has kept the prospect of achieving it alive by calling on governments to come back next year with Paris-aligned near-term targets.
  • Glasgow has created unprecedented convergence between investors, businesses, cities and subnational regions that can drive real economy transformation – now all actors must deliver.
  • Glasgow will accelerate the move away from coal and fossil fuels and elevate the importance of addressing loss and damage. But much more to be done on these issues, and to place resilience at the heart of climate action in solidarity with vulnerable communities.

Before COP, UN and scientists warned us that the world was on track for a highly damaging 2.7 degree temperature increase on pre-industrial levels, well above the 1.5 degree target that scientists say is needed to avoid the worst climate change impacts. Even with the climate pledges announced at COP26, the world is still on a 2.4 degree increase trajectory, which is simply not good enough. But the emphasis has shifted from long term goals (by when countries will be net zero) to an agreement that countries must come back within one year with more ambitious short-term plans.

A historic commitment to phase out coal and subsidies to fossil fuels was watered down at the last hurdle. In negotiating terms, this point was closely linked to the request by the G77 – the group of least developed countries – to establish a fund to award loss and damage (read: compensation) to the countries that did not cause the climate crisis but are suffering the consequences. A deal seemed in sight when G77 countries, US, EU, UK and others agreed to include text accepting the principle to establish the mechanism to award loss and damage – rather than specifying details of the mechanism in Glasgow.

On Saturday India – with support from China and others – decided to continue to drive the position that emerging economies can decide their own timing to reduce emissions. The text was changed from “phase out” to “phase down” coal, with emotions running high as evidenced by COP President Alok Sharma who was struggling to hold back tears. Put simply, science tells us that we need to cut emissions by 45% by 2030. Yes, the responsibility of the climate crisis is with the countries that have now passed peak coal, and therefore agreement on loss and damage is crucial. But unless the fast-growing emerging economies act decisively now as well, the worst climate crisis can just not be averted. Coal and fossil fuel subsidies are in a COP declaration for the first time. On this point Glasgow marked progress but not go far enough in the eyes of many.

On another note, the convergence was palpable in Glasgow between investors, businesses, cities and – I would add – civil society, around the urgency to significantly transform economies so that they better deliver for people and planet. The fact that civil society and the public at large was so tuned in on Glasgow keeps the pressure high on everyone to deliver. The challenge is that so many initiatives were launched at COP26 that it can become difficult to distinguish between game changers, wishful promises and green washing. Ultimately all efforts will be judged by whether we collectively slow down the pace at which the planet is warming. While I will go back to some of the initiatives launched in Glasgow, I first want to turn to what COP26 means for PIDG.


PIDG participation in Glasgow

 We worked hard to make the most of this historic event happening in the UK to learn, position the Group and progress the great work that our teams are doing. We were in Glasgow to champion the communities in which we invest, those communities which cannot do without a step change in private investment in sustainable infrastructure not just to embark on a climate aligned trajectory but to address basic socio-economic needs and desperately needed progress on all the Sustainable Development Goals. We brought to Glasgow the beacons of hope created by so many PIDG investments – from renewables, to electric mobility and green bonds, that are already creating a better future for people and planet. And we asked the world to scale up what we see is working.

We spoke mainly to private investors, businesses and the finance community at large and our messages resonated. PIDG speakers were able to present some of the pioneering work delivered across the Group in the most high-level private sector panels on COP26 finance day. We are proud that the UK Presidency included a PIDG package of climate aligned investments as part of its Clean Green Initiative, providing a platform to deliver and profile our work on electric vehicle manufacturing in India, green bonds in Vietnam, renewable energy in India, Pakistan, Nepal, Chad, Burkina Faso and Mozambique among others. We are proud that the UK Pavilion showcased images of pioneer projects developed in Africa and Asia.

The partnership with Helios Partners for the new Climate Energy Access and Resilience Fund (CLEAR) received significant attention, as well as the partnership with Meridian and Rockefeller Foundation for The Urban Resilience Fund (TURF).

Among announcements of $130tn of climate aligned finance and forthcoming regulation in the UK on disclosing alignment to net zero, the focus on finance day was on what mechanisms would unlock the $100bn a year promised in Paris in climate finance for low income and emerging markets.

There was consensus among private investors that the traditional aid architecture needs reforming and the need to focus on elements that are at the very essence of PIDG work: risk capital and project development, willingness to invest in frontier geographies, use of guarantees and building local capacities including through national level credit enhancement vehicles to unlock domestic investors.

I come back with a clear sense that what we do day in and day out matters enormously for the future of climate action, to shift the balance of climate diplomacy, and to avoid empty promises or re-inventing the wheel. In other words, it matters enormously for the future of the planet and for humanity.

In our recently published PIDG climate strategy we stated that in the low income and emerging markets of Africa and Asia – where greenfield infrastructure matters the most for socio-economic development and progress on SDGs – PIDG’s role is to demonstrate the technical and financial viability of innovative low carbon and climate resilient infrastructure. This felt spot on in Glasgow and I was enormously proud to note that while many organisations were talking about future plans, PIDG teams are already delivering on what is urgently needed.


‘So what?’ for PIDG

I believe that there are real implications from COP26 in Glasgow for us and our work.

First, climate finance and driving a just transition in our markets is the most important international agenda for our current Owners and the world at large. Demonstrating the technical and financial viability of innovative low carbon and climate resilient infrastructure is what makes us relevant and our track record is pretty unique. We should be very strategic about pushing the frontier of what is feasible and have an explicit learning agenda because – if we want to continue being pioneers – we need to keep running to stand still.

Second, partnerships are vital. With our profile and credibility growing and considering the scale and urgency of climate aligned infrastructure investment, a collection of projects is not enough to deliver on our ambition. We need to step up how we are working with others to make decisive progress at a much larger scale. Not all partnerships will be obvious; for example, keeping close to private innovators operating in developed economies could prove essential to accelerate technology transfer and leapfrogging on issues as diverse as energy and water efficiency, biodiversity, inclusion, and industrial infrastructure development.

Third, we succeed as a Group. With the plethora of new initiatives being launched and our world moving from niche to mainstream, the power of the Group is the only way to effectively interact with such a global agenda. Stepping up operating as PIDG, building on the specific solutions offered by the various teams but also consciously incentivising cross team working, should be a priority for us to continue to grow as a valuable international player, distinct from MDBs, IFIs and DFIs and able to operate effectively and add real value to private investors and entrepreneurs.

Fourth, we are building something special. Two years ago, we started talking about quantifying impact on people and planet and balancing those considerations with risk adjusted financial returns. The transformation of the economy that so many players in Glasgow pledged to work together on goes precisely in that direction. Now the challenge is to keep nimble and flexible enough to be able to work with private investors and helping them deliver on the emerging sentiment of their shareholders and stakeholders.


On people and the future of leadership

Being in Glasgow was a humbling experience. In the eyes and words of so many of those I met, particularly younger participants and representatives from developing nations, I felt a sense of urgency and gravity. People were in Glasgow to make their participation count, to play a part in history, to represent their people and the generations to come, to re-invent the way we deal with people, planet and the economy. Many delegates showed images of their children and grandchildren and referred to promises made to them.

One session organised by the New York Times gathered young climate activists – self-proclaimed climate avengers – to discuss the future of leadership for climate action. They exposed the systems and circles that place too much emphasis on single, iconic leaders, and not enough on the benefits of more diverse and well-distributed leadership models.

I believe there is a lesson there for how we interpret the outcomes of COP26. The greatest mistake would be to blame the failure of leadership to solve all the issues, and to comfortably retreat in business as usual, because “world leaders” have not forced us to change yet. I argue that we need the opposite approach. This is a time for leaders to step up – wherever they operate. To take what was done in Glasgow and build on it in our everyday actions. The climate crisis impacts everyone. It was said before that avoiding its worst outcomes is a collective responsibility. I argue that it requires humility and individual leadership, especially if you work at PIDG.


Initiatives to watch

1. Carbon markets rules

Although not in the main text of the agreement, observers including the FT report that the rules for a new global carbon market were put into place in Glasgow after six years in the making, paving the way for a boom in the trading of emissions credits. The so-called Article 6 rules establish a framework for the trading of credits that represent a tonne of carbon that has been reduced or removed from the atmosphere. That is expected to channel a surge of funds into the schemes that generate credits — such as tree planting projects and mechanical carbon capture systems — which are bought by those looking to compensate for their emissions. The new framework will be comprised of two parts: a centralised system open to the public and private sectors, and a separate bilateral system that will allow countries to trade credits that they can use to help meet their decarbonisation targets. However, experts expressed concerns about a compromise in the rules that will allow millions of old credits into the new system.

2. Resilience roadmap and targets

The UN-backed Race to Resilience campaign launched a metrics framework that for the first time allows cities, regions, businesses and investors to measure the progress of their work in building resilience to climate change for the 4 billion people most at risk by 2030.

A new guide, Infrastructure Pathways, will help practitioners build infrastructure that is both developed in a way that adapts to the changing climate and can withstand climate change-related disruptions.

A Global Resilience Index went live this week, helping to improve the way insurers, financiers and investors measure the resilience of countries, companies and supply chains.

3. Deforestation deal

  • Over 130 world leaders signed the Glasgow Leaders’ Declaration on Forests and Land Use, committing to work collectively to halt and reverse forest loss and land degradation by 2030, in a move to reduce anthropogenic greenhouse gas emissions.

4. Moving past coal – including Indonesia

  • Coal combustion is the single largest cause of global temperature increase, accounting for around 40% of global CO2 emissions from energy use. There is an urgent need to scale up clean power solutions to accelerate the energy transition. At least 23 countries made commitments to phase out coal power, including 5 of the world’s top 20 coal power generating countries – South Korea (5th), Indonesia (7th), Vietnam (9th), Poland (13th) and Ukraine (19th). As part of its commitment to reach net zero by 2060, Indonesia will consider accelerating its coal phase out into the 2040s, conditional on additional international financial and technical assistance.

5. Just transition and businesses stepping up:

  • A Just Skills Hub was unveiled with a plan to leverage data analytics to help workers develop the specific skills needed for a zero-carbon and resilient economy, and guide policymakers and businesses to effectively support that transition.
  • 20 commercial-scale green steel facilities are now planned to be deployed by 2030, marking a steel sector breakthrough on the path to net zero emissions by 2050 – with two new additions at COP26. The private sector’s momentum encourages policymakers to follow through on the Glasgow Breakthrough on steel.
  • More than 15 corporations across the concrete value chain, including in engineering and construction, are preparing to launch the ConcreteZero buyers club, which will send a strong signal of demand for net-zero-emission concrete. The club will be modelled on SteelZero, in which members commit to making half the steel they buy net-zero by 2030.
  • 40 major cement and concrete producers pledged ahead of COP26 to commit to net zero concrete by 2050 and cut emissions by 25% by 2030, in line with limiting warming to 1.5°C.
  • Chemical industry representatives talked about their new platform to help accelerate the development of net-zero-emission chemical technologies by investing together and sharing early-stage risks. It was launched in October by 10 chemical companies and the World Economic Forum.

6. Future of electric mobility – 2040 car emissions deal

The COP26 declaration on zero emission cars and vans by 2030 (for advanced markets) and 2040 (for all other markets) was signed by hundreds of countries, city and regional authorities, automotive manufacturers, and business fleet operators. However, some notable big players were missing. China and the US, despite being the world’s first and second largest car markets respectively, did not sign the agreement. Additionally, four of the world’s largest automotive manufactures – Volkswagen, Toyota, the Renault-Nissan alliance, and Hyundai-Kai – failed to support the agreement. Given the fact that road transport accounts for 10% of global emissions, with its emissions rising faster than those of other sectors, the lack of support from big players is disappointing.


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