What we must realise is that the 2015 Paris Agreement set an ambitious goal – to limit global temperature rise to ‘well below’ 2 degrees Celsius above pre-industrial levels by the end of the century, with an optimistic target of 1.5 degrees. What I now fully appreciate is that the “pledge” nature of the commitment had no teeth of enforceability. We need laws that bite.

As the consequences of climate change become clearer by the day – look no further than the deadly floods which rocked Central Europe just last week – the urgency of decisive measures have never been clearer. Yet recent headlines are depressing – COP28 appears to have been a damp squib, and current data indicates that regrettably in early 2024 we have already surpassed the 1.5 degree target. Please do pause on this point and realise how shocking this reality is. Despite Paris promises in 2015; the first world has knowingly presided over failure to comply.

Despite this, going forward and of further concern is that private companies – key players in the race to reach net-zero, are drifting away from the very targets which they had adopted with much fanfare. Alphabet Inc., the parent company of Google, has abandoned it’s longstanding commitment to counterbalance it’s emissions in the face of the rapid expansion of its AI data centers.

In spite of these drawbacks, I still believe there is room for some cautious optimism. The upcoming COP29 summit in Baku, Azerbaijan seeks to reaffirm the international commitment to the 1.5 degree target – emphasising the need for investment as a vehicle for change. Ahead of the summit, many investors are rallying around the need for net zero. This year, could a meaningful and real commitment be on the horizon?

The $29 Trillion Coalition

This month, more than 530 financial institutions – managing $29 trillion in assets – signed a statement urging governments to enact policies to unlock capital for the net-zero transition. This includes calling for national policies which will accelerate the transition to a net-zero, climate-resilient economy – including mandatory climate-related reporting and decarbonisation strategies for high-emitting sectors.

These are all published in the 2024 Global Investor Statement to Governments on the Climate Crisis, outlining 5 critical policy areas:

1. Enact economy-wide public policies

This might include providing incentives such as grants and loan guarantees to accelerate the development, deployment and dissemination of technologies that enable the net zero transition. Likewise, that states should ensure that their targets for nationally determined contributions align with the 1.5 degree Celsius goal.

2. Implement sectoral transition strategies, especially in high-emitting sectors

For example, remove subsidies for fossil fuels and replace them with clean energy subsidies that boost clean energy deployment and bolster low-emission fuels. This statement comes at a time where fourteen of the worlds biggest banks and financial institutions are pledging to increase their support for nuclear energy; a low-carbon form of energy which could be crucial in the energy transition.

3. Address nature, water and biodiversity related challenges contributing to and stemming from the climate crisis

Why is this an issue? To tackle this, it suggests that governments establish and deliver commitments to address water scarcity and pollution, halt degradation of other national ecosystems, including halting and reversing deforestation.

4. Mandate climate-related disclosures across the financial system

The statement includes a radical proposal to institute mandatory climate risk disclosure in financial reporting, subject to external assurance, with reporting for all public and large private companies and financial institutions. In my view, this will require discovery powers for the external reviewer(s) with penal powers for wilful failures/breaches/cover-ups.

5. Mobilise further private investment into climate mitigation, resilience and adaptation activities in emerging markets and developing economies (EDMEs)

For developing countries, the energy transition needs to be balanced against other urgent priorities – health, poverty, and economic growth. Recognising the hurdles faced by EDMEs in achieving these goals, the statement emphasises the need for external assistance; such as scaling up technical assistance provided to EDME governments, or enhancing the use of collaborative platforms such as Just Energy Transition Partnerships to scale climate finance contributions and delivery in EDMEs.

©Lawrence Power 2024

Legal Climate Counsel