Reflections from a banking perspective on COP27

  • 12 December 2022
  • Blog | Green Finance | Blog

Written by Omar Shaikh, Managing Director of the Global Ethical Finance Initiative (GEFI).

Opening up COP27, the UN Secretary General Antonio Guterres laid out the stakes facing the world, stating that we are on a “highway to climate hell” with humanity losing the “fight of our lives” as we struggle to agree upon and implement a net zero transition.

Egypt’s High-Level Climate Action Champion Mahmoud Mohieldin translated what that means for the finance industry: “Every company, bank, insurer and investor will have to adjust their business models, develop credible plans for the transition and implement them.”

Being out at COP27 was a mix of emotions. On the one hand, an event like COP will always be tremendously inspiring, and I was able to speak at events hosted by CGI, IsDB and Columbia Business School. It is a powerful thing to have so many people gathered in one place united by a common purpose.

It is not just the same “male, pale, and stale” faces that are united, but the whole world. Walking around COP27, there were people of different backgrounds, about half of the attendees were women and, perhaps most notably, youth representation was strong not just in the attendees but the speakers too.

I was particularly struck by Xiye Bastida, a Mexican-American youth climate activist who spoke of the difficulty inheriting a troubled world and the optimism that must be maintained to fix it. You can learn more about our COP27 activities on the GEFI website or LinkedIn page.

But, on the other hand, it is clear we face a daunting task and unclear as of yet whether we are up to it. The debate on financing mostly centred on loss and damage, compensating countries for the impacts of climate change, rather than private financing of net zero.

In Glasgow last year, the wholehearted participation of the finance and business community was one of the core stories of the entire conference. This year, as expected, was a lower key affair than COP26 for private finance.  The hope is that this does not mean that finance is not serious about COP, but simply reflects the breadth and depth of its COP26 commitments.

Many financial institutions have argued it is too soon to be making new announcements and are keeping their powder dry ahead of COP28. At GEFI, we have started our Path to COP28 campaign for this reason: because we need a long run-in to take meaningful action in the UAE. What finance did at COP26 must become the norm, not the exception.

Despite it being a quieter year for finance at COP, it was by no means devoid of activity. Here is a selection of the announcements made:

Ultimately, COP27 will be judged on whether it can keep the hopes of Paris and Glasgow alive. We need to incorporate nature into climate solutions, and provide funding for loss and damage, adaptation and mitigation. Doing this is an enormous task that requires innovative structures (including blended finance), collaboration, political will and, of course, the full participation of the finance industry and the strengthening of GFANZ.

Banks across the world need to be able to look in the mirror and say they pass the ‘Carney test’, where every financial decision considers the environment. This is no mean feat and requires training of staff not just in sustainability departments, but throughout companies. GEFI’s report on education, training and qualifications available in the ESG space highlights some of the solutions to this problem, including those offered by the Chartered Banker Institute, such as the Certificate in Green and Sustainable Finance Qualification and the PRB Academy.

The world cannot solve climate change without uniting at COP.  As of now, we may be united in our understanding of the problem, but we are not yet sufficiently united in our understanding of the solution. There is reason to be concerned that we are not progressing fast enough. However, hope remains. By incorporating diverse voices, particularly those of the younger generation who stand to inherit the earth and have grown up understanding the challenges facing it, we may accelerate the pace of change and work together – finance included – to solve this problem.