18 November 2016

COP Blog: Cutting through the noise to make COP22 a success

After the historic progress of the signing of the Paris Agreement at COP21 last December, COP22 was never going to be an opportunity to view recent successes as a 'job done'.

Image: UNFCCC, CC2.0

With the agreement being ratified faster than expected, now is the time for action, a time when complacency could easily set in.
In fact, this stage was always going to involve challenges around getting to work on implementing the Agreement.

Whilst uncertainty over the US' commitment to the Agreement has overshadowed the first week of the conference, the priorities for UN Secretary-General designate Antonio Guterres remain the same. Now is a time for businesses to redouble their efforts, and the continuing affirmation of support from signatories from across the globe is heartening to hear.

It's important to remember that this conference also comes at a time of another leadership change and towards the end of Ban Ki-moon's tenure as UN Secretary General. Climate change has certainly been Mr. Ban's signature issue and, looking ahead, business leaders and governments are waiting with bated breath to understand in more detail UN Secretary-General designate Antonio Guterres' position and relative prioritisation of the climate change agenda.

Ahead of the start of Mr Guterres' term in January 2017, we should not be distracted by background noise, but focus on three key ideas.

1) The hard work has only just begun

The signing and ratifying of the Paris Agreement required a monumental effort and was a crucial step-forward, but for the many communities and businesses already feeling the effects of man-made climate change; they are but words on paper. Therefore, we should not pat ourselves on the back for a job well done before successfully implementing the agreement. Over the coming decades we need to achieve unprecedented reductions in greenhouse gas emissions and invest in efforts to build societies that can better resist the impacts of climate change.

Signatories should be discouraged from reneging on their commitments despite the other geopolitical agendas, challenges and threats which may arise in the coming years. Whilst the potential withdrawal of the US from the agreement is undoubtedly concerning, it's important to remember that government action is only part of the solution; proper implementation will require extensive collaboration with other stakeholders – notably business.

The potential effects are too devastating for all the hard work to unravel at this stage. Of course this is easier said than done and I suspect this one will be one of the true tests during Guterres' tenure and one which he will be judged on for years to come.

2) The effects of climate change are not isolated

Climate change is inherently interlinked to many of the other challenges facing communities, businesses and economies in the world today. And our response to it should be a reflection of that.

As such, the positive effects of maintaining the momentum on climate change will be felt far beyond the narrow confines of the sustainability agenda. This interconnectedness should come as no surprise: climate change reduces food security; increases disease, water scarcity and poverty; exacerbates and increases the frequency of natural events such as flooding and droughts, and worsens conflicts and their resulting impacts such as a rise in the displacement of people.

Clearly then, redoubling efforts to mitigate climate change will in turn help alleviate many other societal, economic and geopolitical risks. This will only be possible with leadership and ongoing prioritisation at the very top of the UN, but also integrated thinking across all the sustainable development goals (SDGs).

Large-scale reallocation of investment will be required to fund the UN's estimates of $5-7trillion needed to meet sustainable development goals, including the transition to a low-carbon and resilient world economy. This investment need will not be met by traditional sources alone – both the public and private sector need to rapidly scale-up current flows.

3) Striking a balance between mitigation and resilience

Ongoing pressure for proper implementation must be coupled with continuing support for adaptation and resilience – particularly in terms of investment. Indeed, the Paris Agreement places adaptation issues on par with mitigation.

Alongside the now familiar goal of limiting the rise of global temperatures to well below 2ºC is a goal for "enhancing adaptive capacity, strengthening resilience and reducing vulnerability to climate change." This is crucial as it not only connects the fact that if mitigation activities succeed, less adaptation will be needed, but crucially also highlights that adaptation and resilience planning is of paramount importance to economic and societal development.

Although the increased focus on adaptation is welcome, funding has historically lagged behind support for mitigation. As highlighted above, other interconnected issues such as food security are likely to be exacerbated unless successful adaptation is achieved.

With the US's announcement during COP21 that it would double its annual support for adaptation to $800 million now in question, there are questions over long-term financing. This, however, can be seen as an opportunity for the private sector. Financial services businesses, including insurers, should invest in climate resilience. Innovative funding solutions such as green bonds are growing in popularity and present an additional financing option for supranational bodies, countries and cities.

For investors, this responsible investment helps to support communities. Investors have a shared stake in reducing risk for everyone in the long-term.

At Zurich, for example, we currently hold investments in over 80 green bonds from over 60 different issuers, totalling $1.4 billion with an expectation to move towards our milestone of $2 billion.

Guterres would do well to ensure that the aim stated in the Paris Agreement "to achieve [a] balance between adaptation and mitigation" resources comes to fruition.

Climate change still remains the greatest environmental threat facing humanity – that fact has not changed. Ultimately, COP22's success (and in time, Guterres' too) will be judged not only on its ability to develop a structured and detailed plan of action to address climate change, but also on the success of its execution.

Cecilia Reyes is Chief Risk Officer and Member of the Executive Committee at Zurich Insurance