Cleaning Up After COP: the emerging focus on inequality

By James Vaccaro, October 2021

Finally, it’s here. COP26 will take place in Glasgow next week. After two years of planning and the disruption of Covid, the delayed pinnacle of the 2020 ‘super year’ for climate has arrived. What should we expect in relation to climate-safe banking? A raft of announcements – most likely net zero targets and green finance commitments. Some more validation or submissions to the Science-Based Targets Initiative (like the targets announced by Banque Postale and Amalgamated Bank). There will be many occasions to celebrate progress and the huge momentum generated across the financial sector via GFANZ and the Race to Zero.  Expect a deluge of letters, calls to action, and demands from other stakeholders. And, very likely, some demonstrations aimed towards financial institutions in relation to the pace of change and the credibility of their actions in relation to stated ambitions.

It will no doubt take some time to digest and reflect on all that takes place in the next fortnight. 

One aspect that might get more attention after COP26 has finished is the social impacts of climate strategies. There has been some excellent work on financing the Just Transition led by Nick Robins at LSE incorporating many aspects of social justice. But perhaps the largest of these in the future may arise from the consequences of something being put forward as a solution – the role of future emissions drawdown (whether via carbon capture and storage or nature-based solutions) and inequality. 

Holistic Sustainability

It’s inevitable that we will need to draw down emissions – there’s not really a scenario that doesn’t include sequestration of one form or another although they vary hugely in terms of extent. And the restoration of natural systems is required for replenishing biodiversity upon which we all rely. But what should we read into the biggest investors in carbon capture and storage technology being oil and gas companies? They certainly seem to see opportunities in government subsidies but is this part of a benevolent strategy to pivot to climate solutions or a way to continue using their fuels? 

Likewise, what should we read into the largest banks funding deforestation also being prolific funders of nature? Is it a part of a bold transition plan or a contradiction? 

With both examples, there is a third possibility that requires greater examination. That it is in fact a potential new business model and one with significant negative consequences for social inequality. If fossil fuel companies dominate future markets in carbon capture and storage, there is a way to play the markets so that they maximise profits on their remaining high-carbon fuels whilst then holding the world to ransom with the high costs of capturing the carbon. Likewise, those who have deforested might be seeking to optimise the business opportunity to earn credits from reforestation. Both cases lead to a transfer of wealth from those who have to pay bills in their homes and business to the shareholders and financers of companies who turn externalities into future revenue exploitation. It’s fundamentally unfair but it’s not really far-fetched because it does happen – especially when finance sees itself as ‘neutral’. It would be like cigarette companies trying to make money out of lung cancer treatment. Given the scale of the potential future voluntary carbon market, it’s a risk that requires close attention. It requires a holistic framework that covers the multiple impacts of nature, social justice, health, and wellbeing in setting strategies.  

We will need plenty of investment in drawing down carbon emissions, not least in nature-based solutions and through regenerative agriculture. Let’s hope that a holistic approach to sustainability is designed into those strategies so it becomes something we can all celebrate. In 2022, the Climate Safe Lending Network will explore this issue further, building on some of the great conversations that have taken place about the just transition in our network convenings this year. 

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