An interview with professor Amin Rajan about the upcoming COP26
1. While the COP26 is bringing a lot of focus and attention, there has been a marked increase in environmental commitments by many companies. What role can research and communications play for companies looking to make this a strategic focus?
I believe businesses can play three key roles:
The first is to highlight the key actions now being taken by high-profile emitters such as Glencore, Shell and BP, alongside a range of electricity utilities, to reduce their greenhouse gas emissions and the knock-on effect within their supply chains.
Then they can publicise the roles of institutional investors and their coalitions. For example, the Climate Action 100+ and Transitional Pathway Initiative are both playing important roles in forcing their high-profile investors to reduce their carbon footprints. The latest example of this was when they caused Exxon Mobil to appoint three directors to the main board, specifically to drive its de-carbonisation initiative, showing that investors are gradually becoming more demanding and less forgiving.
Additionally, research and communications professionals have an important role in tracking the concrete actions being taken by governments to advance their green agendas, including:
Carbon pricing
Regulations requiring banks, insurance companies and asset managers to declare their carbon footprint and work on steps to reduce it
Innovations in renewable energy and carbon capture systems
Mandatory reporting on the carbon footprint of listed corporate companies
2. Could you tell us a bit about the type of work that your company, CREATE-Research, is seeing in the lead up to the COP26?
At CREATE-Research we have seen a significant increase in the pace of activity ahead of the COP26.
Firstly, governments are updating their decarbonisation plans through a raft of policy initiatives which consider global warming in all aspects of their activities – in this regard, the U.S has been taking the lead.
Secondly, NGO’s (non-governmental organizations) are stepping up on their lobbying activities to ensure that governments make bolder and more binding commitments at the COP26.
Thirdly, large listed companies are getting on their front foot and stepping up to the plate by announcing ambitious “net-zero” decarbonisation goals by 2050, and credible milestones for 2030.
Lastly, large institutional investors are ramping up their coalition activities to engage the biggest carbon polluters in the world, presenting them with a clear and simple choice: If you do not adopt net-zero targets, we will remove your shares.
3. How is the COP26 likely to affect the ongoing focus on ESG by companies and investors? Do you see the trend of ESG investment continuing at the same pace in the next year?
The outcomes will accelerate progression towards a low-carbon future, with one key difference: Those individual nations which have committed to net-zero targets will be held more accountable for their progress.
The outdated approach of volunteering targets and milestones will be bolstered by a more muscular and diplomatic push from the U.S and Europe. Both may introduce a carbon border tax, which will hit their imports from high polluting laggards as a way of bringing them into line.
4. What have you been hearing from businesses and governments about the future of ESG and climate change? Has their urgency to make changes significantly shifted since last year?
Yes definitely.
The ongoing Covid-19 crisis is a devastating reminder of just how fragile our lives on earth are.
The pandemic has given investors a real taste of how physical shocks – unlike economic ones – can roil the markets and whipsaw pension portfolios at a speed that would have once been unimaginable. It has moved many of the old and outdated ‘unknown unknowns’ of climate change impacts into the tangible realm of experience.
Just two years ago, no major economy was committed to net-zero emissions. Now nine of the top 12 economic powers are: Canada, China, France, Germany, Italy, Japan, South Korea, the U.K and the U.S. The largest holdouts are Brazil, India and Russia.
It is now a generally accepted truth that ESG is the foundational trend in global investing, with every likelihood that it will supplant traditional forms of investing by 2030.
5. Do you have any advice on how companies can make the best use of their research?
I would firstly suggest that companies can use external research to benchmark all their carbon-emission activities so as to understand how corporates are seeking to achieve an orderly transition to a low-carbon future.
I would then suggest that companies can use the research as an external driver for internal change management that facilitates lower carbon footprints. For those that are listed on stock exchanges, they can learn via research what their shareholders expect in terms of actions, metrics and disclosures.
Lastly, research should serve as a regular reality check on what is being achieved by the company. It is vital for companies to have the best and the most credible sources of information to make big decisions.’
We would like to thank professor Rajan for sharing his time and insights with us.
It is safe to say in summary that COP26 is going to be an extraordinarily important event for businesses and communications professionals, as it will bring to the forefront the ongoing challenges that companies both small and large are facing from climate change. Though, as professor Rajan notes, companies changing their habits is not something that will happen overnight – it is still a work in progress. Nevertheless, the time to act is now, and the environmental discussions had during COP26 will be some of the most critical to date.
If you would like to learn more about how we can enhance the ESG elements of your research and communications strategies, please get in touch.