COP-26 — The Raise Green Perspective
Franz Hochstrasser and Matt Moroney attended COP-26 in Glasgow, here are their thoughts.
TLDR: COP-26 was the clearest signal yet that humanity is serious about tackling the climate crisis, but intention needs to be followed by real action, and so far implementation has not been fast enough or as meaningful as it needs to be. Raise Green is the climate action investment platform for everyone, and we’re ready to help.
COP-26: What’s At Stake
The 26th Conference of the Parties (COP-26) to the United Nations Framework Convention on Climate Change (UNFCCC) has wrapped up after world leaders from nearly every country showed up to call for enhanced and more ambitious climate targets. COP-26 was widely recognized to be the most important COP since 2015’s COP-21, at which the Paris Agreement was adopted. Humanity’s intensifying rate of emissions, which reached 42 gigatons of carbon pollution this year (UN), has left us little time to act on the climate crisis. If we continue to emit at this rate, we will exhaust the 1.5˚C global carbon budget by the end of the decade. This COP was the place where countries were supposed to come forward with enhanced and more ambitious climate targets, finalize the Paris Agreement rulebook, and collaborate with the private sector and civil society to finally implement those goals.
The Immediate Need for Green Finance
Since the adoption and entry into force of the Paris Agreement, and the subsequent finalization of most of the Paris Agreement Rulebook in Katowice at COP-24 in 2018, the international climate regime has been largely characterized by a heavy emphasis on implementation, and the role of subnational and non-state actors has only grown in importance. This emphasis is punctuated with the We Are Still In coalition which Raise Green helped support from its earliest days. Now known as the America is All In coalition, it is an enormous coalition of more than 1800 civic, government, business and religious leaders pushing for a whole-of-society mobilization toward more climate action. Bookended with the failure of the COP process to produce a result on the Markets provision of the Paris Agreement rulebook governing Internationally Transferable Mitigation Outcomes at COP-24 and COP-25, urgent implementation is needed now more than ever. The Markets framework concluded with a compromise that minimizes the use of voluntary offset markets (which have been heavily criticized as greenwashing) and going forth will be the basis for building a cross border trading arrangement that countries, subnational actors, and companies can engage in honestly. In addition, negotiators wrapped up the enhanced transparency regime that governs legally binding reporting against the Paris Agreement. This lays the groundwork for mutual accountability, salutary pressure, and ratcheting ambition on common timeframes that exist at the core of the Paris Agreement. Finalizing this rulebook at COP-26 was a key step forward toward greater certainty.
Countries are mandated to revise and resubmit their Nationally Determined Contributions under the Paris Agreement, and while there was some discussion of whether that should happen more frequently, most major emitters have already submitted targets, though some of the largest emitters (like India and China) have not significantly revised their submissions. COP-26 was acknowledged as the ‘last best hope’ to get the world on track to a 1.5 degree C track, and the High Level Champions for Climate Action which have the role of driving subnational and non-state action from civil society on climate are pushing a full-scale mobilization through very public “Race to Zero” and “Race to Resilience” civil society campaigns. This effort aims to drive non-state actors to make renewed net-zero pledges that align with science-based targets calibrated off of their corporate footprints.
After key analysis shared at COP, including that from the UNFCCC Synthesis Report, the International Energy Agency, and the Climate Action Tracker, there is some consensus that if we consider all of the announcements and commitments from countries that we may have a chance to hit a 1.8C warming scenario, but more likely (if countries deliver their NDCs) we are closer to a 2.1C to 2.4C warming scenario which is dramatically off target. This all, of course, assumes that from top to bottom that we actually execute the societal and economic transformation needed to hit those targets, which is far from a given, since based on current trajectories we are still actually increasing emissions at a rate of ~13.7% per year according to the UNFCCC. On this crucial topic of ambition, COP-26 was again, a step in the right direction, but not a big enough step. In fairness, the Paris Agreement was always meant to ratchet up ambition over time, and in that sense it is working as planned.
The UNFCCC designated Mark Carney (the former Governor of the Bank of England) as the UN Special Envoy for Climate Finance, and he highlighted the enormous need to rapidly scale climate finance to meet the moment. Carney capped off a year in this role by organizing the Glasgow Financial Alliance for Net Zero (GFANZ) – a group of more than 400 banks and financial institutions that represent more than $130T (yes, T, as in trillion) and are now in one way or another ‘committed’ to financing a net zero world. Despite this, JP Morgan shared at the Sustainable Innovation Forum that they will continue financing new fossil fuel assets, claiming that such a dramatic transition poses risks to the economy. Seemingly, they believe this outweighs the risks that climate impacts are already causing and will continue to increasingly cause as we hurtle toward blowing out the carbon budget. Naturally, we fervently disagree. Understandably, not only was virtually everyone we spoke with at COP skeptical of the $130T topline number, but there was also much haggling over the flow of public dollars between developed and developing countries. They are not alone, and it’s part of the reason that the GFANZ was immediately labeled greenwashing and criticized as not meeting the moment (https://www.environmental-finance.com/content/analysis/gfanz-fails-to-deliver-at-cop26.html). It’s not enough to just repackage existing publicly traded companies into ETFs and call them green, we actually need to deploy that capital into real new projects at the community scale.
Even with this lack of alignment, we were encouraged by the presence of senior level officials from financial institutions finally taking the issue seriously enough to show up and make initial commitments. One resounding theme from our conversations: there are not enough projects for this mass of capital to fund! Raise Green has long argued that we need more solar and climate solution developers creating more projects, and that’s exactly what we’ve built our business, and our IDC award-winning Originator Engine to do: empower more project developers with tools to get their project up, funded, and built.
Deploying Capital for Impact
Global climate finance flows are estimated by the Climate Policy Institute to be around $600B annually, falling far short of the needed $3.5T annually to deploy enough climate solutions to keep the carbon budget on track to avert catastrophic warming. While large banks,financial institutions, and investors are stepping up to allocate capital toward more Environmental, Social and Governance (ESG) oriented investments, there is warranted skepticism about whether those funds are genuinely impactful from a climate perspective, or just greenwashed baskets of the legacy companies that precipitated the climate crisis. Meanwhile, climate technology venture investing has exploded to $16B in the first half of 2021 alone, up 50% over the prior 12 months (“Climate tech $16b mid-year investment action report,” 2021). This sets a powerful stage for leadership from truly impactful and dedicated climate fintech companies like Raise Green, and the brand of ‘inclusive capitalism’ and ‘democratized finance’ that we espouse. This is especially true given the many hundreds of thousands of activists that marched at the Global Day of Action for Climate Justice on the weekend, passionately calling for fewer empty promises and dishonest commitments in lieu of developing more tangible, impactful projects that give communities hope.
We marched as well. We want that same thing.
Impact Investment and Capital Requirements
During COP-26, besides marching on the streets and in the halls of the Investment COP, Raise Green was featured at the Sustainable Innovation Forum for our IDC award winning software that makes it faster and easier to create and fund climate action projects. We focused on cementing current partnerships, seeking new climate project applications for the coming year, democratizing the financial services industry, driving a more equitable and robust clean energy economy, and increasing access to financing for resilient community-scale sustainable development projects for underserved and historically disadvantaged groups. We heard a lot of rhetoric about the importance of equity, climate justice, and project deployment, but now we need everyone to actually put their money where their mouths are.
At Raise Green, we believe that everyone has an important role to play in addressing the climate crisis and that we will need everyone involved if we’re going to solve this wicked problem in an equitable way. COP-26 made clear that Raise Green plays a unique position to interlink the efforts of activists and motivated individuals with that of climate-driven institutions, through democratized impact investing. At the same time, we give solar developers and climate action companies the tools to access financing to launch climate solutions more rapidly. This is part of what will make the difference between meeting climate targets, or falling short and passing on an uninhabitable planet to our children and future generations.
Now that all the talk has happened, it’s back to the hard work of implementing and scaling the most impactful projects, and that’s what we do best at Raise Green.
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