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The United Kingdom, in November, will host the 26th edition of the United Nations Climate Change Conference of Parties (COP26) in Glasgow. The summit will help to gather campaigners, climate experts, and all 197 parties that make up the United Nations Framework Convention on Climate Change (UNFCC). This year’s edition of COP is described as the most notable since COP21, where the Paris Agreement, a legally binding international treaty on climate change, was adopted.
What is COP26 Glasgow?
This 26th COP edition poses additional challenges, unlike other years with the COVID-19 and the global recession recovery. Also, although CO2 went down by 7% in comparison to 2019, which was largely due to the national lockdowns, the atmospheric levels of CO2 are still at a whopping 48% which is higher than the time before the Industrial Revolution. However, there is a unique opportunity presented in this year’s COP26 meeting for world leaders to show their dedication towards achieving a net-zero economy and the urgency and importance of making a green recovery from the coronavirus.
ESG and COP26
COP26 president stated that “we need to work together to deliver a cleaner, greener world” therefore, for this net-zero objective to be achievable, there needs to be commitment and cooperation from corporations and the public in general. As these green, sustainable, and ethical parameters constitute the ESG increase in their prevalence, COP26 might probably be a likely push to help further the mainstreaming of business models that adhere to the initiative. This will result in a considerable increase in the number of ESG initiatives. Also, it will lead to an increase in the influence that ESG investments have, and there is no doubt that the net-zero transition will impact business models across the globe. There is already a visible increase in responsible investments with a four-fold increment of funds in 2020 compared to 2019. With this, it can be seen that the priorities of investors are changing, and they are leaning more towards these business models. Corporations are being encouraged to adopt sustainable and ethical business models as they prepare for the net-zero transition. The outcome of the COP26 might help place more emphasis on this shift.
One important question that faces debt capital markets is relating to if there should be an amendment, and if so, how the amendment would be done to the documentation, structure, regulation, and practice that are associated with the issuance of debt securities to combat change and to also tackle other ESG issues. This question relates to everyone involved in the debt capital markets, such as the advisors, issuers, trading venues, regulators, and investors. It is also relevant to every product such as MTN programs, equity-linked debt, high yield bonds, investment grade standalone Eurobonds, corporate hybrids and short-term debt, capital instruments, and commercial paper. As the dates tick down toward November for the COP26 conference in Glasgow, there will be an increase in focus on this question, particularly for UK issuers, the debut UK Green Gilt issuance that is slated for September will probably affect the labeled bond market.
Business leaders looking ahead to the COP26 may have concerns about the implications of this meeting because there will be new targets that will be set, legislation will be tabled following the summit, and there will be agreements made. So it is important now for business leaders to get in front now and start thinking and preparing for the changes that might come their way.
The UN president and COP26 Alok Sharma urges firms to sign up to the race to net-zero campaign and commit to reaching the objective by 2050. Companies such as Primark, Accenture, and Kingspan have signed up for the campaign.