COP27 was mediocre. That was the worst possible outcome

It has become blindingly clear that politics and consumer behavior will not move quickly enough and at the systems level required to address the climate crisis and the whole global sustainability context (see our outline and a summary of the UN Goals in Exhibit 1). I wrote this as COP27, the latest UN climate summit, started in Egypt. For some time, I have been emphasizing how the evident failure of policy and the public gives businesses clarity that they hold the only levers left that can avoid the very worst scenarios associated with a 1.5 degree or more temperature rise (note how climate change to date means it is already too late for so many… and many now think 1.5 is very much NOT alive). I was hoping that COP27, in what would have been a complete accident or stroke of sheer brilliant genius, could have been a raving success by being a complete and utter disaster. But it was far worse. COP27 was mediocre, lackluster, barely covered, and filled with the same empty rhetoric we’ve seen before: perhaps most commonly “the time for talk is over—we must deliver…”.

I’ve covered a few positives and points of personal interest below. But the very public breakdown of the COP process could have served two purposes: first, the UNFCC, COP’s organizer, needs a clear new mandate by the UN, and second, any business leader who holds the slightest desire to do their bit for sustainability must now unapologetically do whatever they can to pull their organization and ecosystem into line with the global context—and pull policymaking and the public along with them. See our more detailed take.

Exhibit 1: The UN Sustainable Development Goals still encompass all the areas we need to address as a planet

Source: United Nations, 2022

Two things I’m taking away from COP27: transition planning and the private sector’s financial role

Most positive commentary has focused on the agreement on including “loss and damage”—broadly speaking, that rich countries will compensate poorer ones for the damage done through the former’s contribution to climate change—in the final COP resolution. But therein lies the issue: it was merely included in the text. The $100bn per year agreed in 2009 still hasn’t been reached 13 years later ($83bn is the recent record). Another reason the UNFCCC needs a new mandate… currently, it only organizes COPs, but many think it, or some other UN body, has enforcement power. More recent estimates on adaptation needs are much higher: $200bn per year is one; a UN one suggests $2.4 trillion. No formal plan or financial commitment exists.

Adaptation must come alongside mitigation (reducing emissions as a preventative measure to climate change, for example). Flood defenses, energy and utilites upgrades, heat protection, biodiversity restoration, and much more are desperately required to battle current events, let alone the chaos that will continue to unfold over the coming years… and the increasing number of tipping points throughout global planetary systems. Climate change and the global sustainability context means it is already too late for so many—and will get worse over the coming decades before anything resembling better emerges through mitigation.

Whatever COP agreements on funding emerge will likely not be met politically. More is needed from the private sector. Public finance must play a role in de-risking investment. And crucially, large financial services firms, alongside consulting, technology, and other services firms, can bring immense confidence to global systems in addressing sustainability. See our views on this crucial role for all services firms.

Another positive has been new clarity on the UK’s transition plan mandate coming in next year (see below and Exhibit 2). On first reading, the new Transition Plan Taskforce (TPT) guidance on how the UK will mandate transition plan disclosures for financial institutions and large firms is moving towards the level of road mapping we need to see. There does seem to be a lack of emphasis on the whole global sustainability context that needs to include biodiversity, water, human rights, risk and resilience, and much more beyond emissions. Time will tell how effectively the regulation is enforced and what approach the majority of the most influential firms will take. But these transition plans can hopefully start to influence entire systems: giving confidence to supply chains and all sorts of business partners to press ahead alongside the major firms at the center of those systems and be part of the coalitions that set the bars that global regulators and the public must come into alignment with. The TPT framework is open for consultation until February 2023.

Exhibit 2: The UK’s transition planning framework is a step towards the level of road mapping we need from financial institutions and large companies

Source: Transition Plan Taskforce, 2022

The Bottom Line: I’m running out of ways to describe how screwed we are colorfully. Businesses must translate that clarity and realize they are the last hope.

Perhaps my most promising takeaway from COP27 is the stories from friends and professional partners who were on the COP floor that on a personal and organizational level, there’s a healthy desire for collaboration, and businesses realize their opportunity and responsibility. With politics and the public beyond hope in solving sustainability, businesses can no longer pretend they can afford to wait for regulation or market demand.