- Sarah Reay, Climate Change Manager, ICAEW
- Shazre Quamber-Hill, Director, Strategy and Impact, Resilience First
- Nick Robins, Professor in Practice for Sustainable Finance, London School of Economics and Political Science
- Nina Pimblett, Sector Guidance Lead, Transition Plan Taskforce
Mark Rowland: Hello and welcome to the first of two very special ICAEW Insights podcasts coming to you from COP28 in Dubai. I’m Mark Rowland and I’ll be joined on both episodes by Sarah Reay, ICAEW’s Climate Change Manager. Later, we’ll be joined by Shazre Quamber-Hill, Director of Network Strategy and Insight for Resilience First.
So far at COP, we’ve seen the historic agreement for a loss-and-damage fund for nations most adversely affected by climate change, something that’s been more than 30 years in the making. The International Sustainability Standards board also announced that around 400 member organisations representing over 10,000 companies and investors have signed up to its climate-related reporting across the globe. We’ve also seen more than 110 nations commit to tripling renewable energy capacity by 2030 and $3bn, pledged by the US, for a green climate fund dedicated to supporting climate action in developing countries. Let’s start with what’s happened so far. Sarah Reay is with me. The scale is something else, isn’t it?
Sarah Reay: Yes, this year’s COP is on a scale like no other. We’ve seen over 70,000 people descending on Dubai, to take part in negotiations, hold important talks and demonstrations. And just being in around Expo, the size of the venue is just unmatched. So it’s a huge COP this year.
MR: So what’s ICAEW trying to achieve at COP this year?
SR: So ICAEW are here to participate, to learn, but also to bring together key stakeholders and members of the profession, the broader finance profession, to hold key round tables and workshops, all focused around just transition planning, and embedding nature into business decision-making. One of those sessions we already held on Monday – we held a high-level round table with A4S focused on how we accelerate action on transition plans. And what came out of that discussion was really clear that there has been little action so far. So we need to move from talking and making commitments to actually doing things now.
MR: We’ve seen some significant announcements so far, such as the loss and damage fund. So what’s the significance of that and what further progress is happening?
SR: That is significant in two ways. In previous COPs, we’ve never had such a major agreement made on day one. So that is a major progress and achievement in itself. However, of course, we do still need to see that ratified in the final text. But we’ve had nations already committing funding. So the UAE started with $100m, followed swiftly by Germany matching that, and the UK has committed $75m to that fund. But of course, more needs to be done. There’s still more funding to be committed and further action on broader issues, such as the net-zero transition and renewables and whatnot.
MR: So a significant milestone in the UK was the release of the Transition Plan Taskforce framework. So can you tell us a bit about what’s in there and why that matters to members?
SR: Yes, so the TPT framework was finalised in October. And just for a bit of background, the TPT was brought together at COP26. And in such a short space of time, they have developed this whole new framework to be the gold standard on transition plans. What that includes is looking at, of course, how we transition to net zero, but looks at bringing people, society along and including nature in that transition. What’s really significant about the TPT framework is that it also takes a whole economy approach to transition planning. So not just looking at the organisation’s own internal transition, but looking at the external community in which they work, looking at your industry and really taking a more holistic view to transition planning.
MR: Nick Robins, Professor in Practice for Sustainable Finance at the London School of Economics and Political Science, delivered a presentation to the first ministerial at COP on transition planning. He spoke to me about the role of policy, business and finance in facilitating and accelerating a just transition.
Nick Robins: So the just transition is part of the Paris agreement on climate change. The definition that’s given by the International Labour Organisation is to maximise the socioeconomic opportunities of the transition in terms of decent jobs, particularly for men and women, but also to manage the risks that the transition could place in terms of jobs, but also communities. And so essentially you’re saying bring everybody along in terms of, particularly, jobs, communities, social justice, but also leave no one behind. And a crucial part of the juxtaposition is not just those outcomes, but also how it is done. It’s a process. So it’s a process of social dialogue between businesses, workforce, but also wider stakeholder engagement, so that people don’t feel that the transition is sort of happening to them, but are at the table and involved in the process.
MR: Obviously, that’s been a big buzz phrase for this year. And how is just transition reflected in policy at the moment in major economies?
NR: This year at COP, just transition is actually becoming one of the real hinge factors. And just maybe looking a little bit at the global agenda, big things at COP are about the energy transition, so focusing on the phase-out of fossil fuels and then the tripling of renewables, the doubling of energy efficiency. And, clearly, just transition is relevant for both of those. So if you’re thinking about phasing out fossil fuels, how do you assess the impacts on workers’ communities? How do you reinvest in skills, etc, and revitalise regions that are affected so that they’re obviously – if you’re tripling renewables – thinking about retrofitting every home in the UK, for example. Where are the skills and the workforce going to come from that? How do you involve communities and also, particularly on the housing side, actually how to involve households and so on. So that’s the big agenda here at COP.
So how it’s landing globally, it’s suggested about a third of countries have incorporated just transition into their national climate plans, which are called the NDCs. So some of those, I think European Union is well advanced, has a just transition mechanism; South Africa, probably ahead in terms of policy thinking that, in fact, for global partnerships between developed and developing countries, South Africa, Indonesia, Vietnam, Senegal, so it’s getting on the agenda, we’re seeing some leadership. The big thing here is how do we get that really embedded throughout the world? In the UK, the Scottish government is particularly active – they have a just transition commission, which I’m involved in, which is trying to bring together stakeholders. And then, I suppose broader UK, there have been efforts around a green jobs taskforce, really thinking about how we build the workforce for a net-zero future in terms of the sort of skills that people need in the right place at the right time, but also ensure that these have fair work conditions, so that actually these jobs are attractive for women and for men.
MR: It’s quite a new phrase for a lot of people, certainly in the business world. How should they be engaging with the idea of a just transition in the conversation at the moment?
NR: You’re quite right. So the phrase ‘just transition’ may be relatively new, comes out of the trade union movement, but perhaps has two entry points, which I think most businesses will understand. The first is the Sustainable Development Goals. So the ILO – the International Labour Organization – came out with its global just transition guidelines the same month as the Sustainable Development Goals came out. So if you think of the just transition as a bridge, it’s about transition, making it just. So it’s a bridge between different SDGs – the SDG13 on climate, the SDG8 on decent work, for example. And then if you use the language of ESG, clearly it’s saying you have a sort of environmental transformation, climate, this also applies to nature – let’s make sure there’s a bridge to the social dimension in terms of workforce standards, diversity, community relations, and so on. And it’s actually trying – I think it’s a very real live issue – you’re trying to break down those silos between the E and the S of ESG. So those are maybe two entry points. So you’ll find that actually, hopefully, there’s an ‘ah-ha’ factor, that this is maybe a new phrase, but it actually is about businesses, finances, governments being very intentional about taking the social dimension, workforce, community, consumer dimension very seriously in terms of climate action.
MR: Thinking about the finance sector, specifically, what role does finance and accounting play in facilitating and accelerating the just transition?
NR: Well, I think that question is really good because, in a sense, the finance is a service function. And it needs to be, in a sense, the servant of the transition in the real economy. At the LSE, we brought together a sort of loose coalition of groups, business, finance, investors, banks, trade unions, regional bodies, which we call FAJITA – the Finance and Just Transition Alliance. And that’s been really trying to take this sort of high-level imperative and turn it into things that investors can do and banks can do. So investors, what can they do? They need to develop their own transition plans, they need to make sure just transition is part of the ambition, that they have shareholder engagement plans. What are the expectations they have of the companies they invest in? Obviously, net-zero targets, capex and that sort of thing, but also how they’re managing the social dimension. And also investors would have, let’s say, policy dialogue, which, as investors can also ensure that governments have the policies we need for just transition, both in terms of responding to policy consultation, and so on, but also as owners of sovereign bonds, there is a bit more skin in the game to say: ‘We’d like to hold your sovereign bonds, we want them to be aligned with net zero, but also we want to see these underlying policies, which are going to make policy go quicker.’ On banks, very similar things. But perhaps let’s look at the housing markets, particularly in the UK. One of the stickier areas where we haven’t made as much progress is in terms of retrofitting and changing heating systems. There, I think the issue would be for banks, again, to incorporate social dimension into their mortgage, housing finance areas, thinking about people who may be in houses, which have value, but don’t actually have the access to affordable capital to upgrade, to renovate and so on.
MR: So quite a major role then.
NR: As I say, I think the first role really is for governments to put in place the policy frameworks. I think business and their stakeholders, trade unions, workers within the company, communities outside and finance can actually have a supporting role. But also, what I think is interesting is finance can be quite catalytic. We’ve seen, actually, how shareholders putting questions on net-zero and just transition at shareholder meetings can catalyse companies to actually start putting in place just transition plans. So I think they can be catalytic. And then I think, on one project we’ve just launched, actually, the LSE with the climate bonds initiative, is to say: “We’ve got this very exciting green social, sustainable, sustainably linked bond market, how do we actually bring this just transition dimension into that?” So again, there could be particular issuances from a corporate from a country or sovereign like the UK, and from other bodies, which could be driving the green agenda and zero resilience, but also making sure that these considerations about risks and opportunities work as communities are incorporated. So I think that’s the area where, actually, then you really get people saying: “Now I understand, it actually is not just sort of in Planet COP, but it can be put into my portfolio and to the way I actually allocate capital.”
MR: How’s COP been for you so far? What are you getting out of it? What are you hoping to get out of it further?
NR: I mean, it’s really interesting. There have been some really positive moves: the agreement of the loss and damage fund, which is to essentially provide support for countries, particularly developing, who are already suffering from the harm caused – that was agreed in the early days. Very good. Lots of momentum around tripling renewables, doubling energy efficiency. Great there. I think the big sticking point is this question about phasing out fossil fuels. Obviously, many countries are dependent on that, not least the UAE, which is the host, and I think it’s important to see that this is a transition. But we really need to be calling time on the fossil fuel age and planning for that transition. So we’ve still got a few days to go. The negotiators are really focused on the text. But the big thing is that this is the moment where we take stock – a so-called global stocktake – how far we’ve come since Paris. Not good enough. The real message from COP is can governments agree that sort of signal, so when governments, business, civil society go back to their various countries on the Monday after COP they’ve got a clear work programme on what they’re going to do in 2024 and beyond.
MR: In the UK, the Transition Plan Task Force has released a framework to help ease the way for organisations to engage with the transition and factor into their own plans for net zero. I managed to have a quick chat at the conference with Nina Pimblett, their Sector Guidance Lead, who believes that the role of finance and accountants will become more and more crucial to transition planning.
Nina Pimblett: Historically, there has been a tendency for ESG and climate to sit within purely the remit of the chief sustainability officer and sustainability teams. What we are now seeing, and what is really brought out throughout the TPT disclosure framework is actually this is a big strategic change, resulting in disclosure at the end. Your finance department absolutely should be involved in your transition plan. They should be speaking with you to understand your plans, how it fits into the company’s strategy, what that’s going to do to the company, what’s the sort of financial planning element of this and then, you would assume, the finance function would then be involved in the disclosures that come at the end of that. But it really isn’t they step in at the last moment and help with the disclosures and the reporting. It really is a whole company approach to think about strategy and how you’re weaving the transition within that.
There are a number of transition plan-themed events happening this year. And if we compare that to even last year at COP27, where there were only a select number – and actually, quite often the TPT were involved in anyway – this year, there are almost too many events for us to appear at and it’s brilliant to see the momentum behind Transition Plans, not only within the UK where we have the TPT, but also internationally, and how much people are engaging with our work, interested in our work and being stopped all sorts of places by people recognising us from popping up at various things and asking about it. And that isn’t just confined within the UK. So really excited for COP, really excited to meet all sorts of people thinking about transition plans and all sorts of different ways how to prepare them, how to use them. It’s just really, really exciting to see their growth compared to COP27.
MR: Resilience First has been advocating for the business case for engaging in a transition to net zero. I’m joined by Shazre Quamber-Hill, Director of Network Strategy and Insight, Resilience First. Tell me a little bit about Resilience First. What do you do?
Shazre Quamber-Hill: So Resilience First is a global business-led network of over 600 organisations. And we’re very much focused on providing a platform where the business community can come together and really innovate and develop solutions that advance resilience in all aspects. Climate being such a major risk to business community at the moment, and looking increasingly so, plays a big part in a lot of the work that we do.
MR: So what are you trying to achieve at COP28 this week?
SQH: So the main focus for us – not just at this COP, but for several COPs really – has been to push the adaptation and resilience agenda to the same level of attention and focus that the mitigation conversation currently gets. And we think this is really important because, as we know, there are a lot of climate impacts that are already baked into the system. It’s super important that we continue to focus our mitigation efforts, but recognising that there are a lot of compounding risks already in the system we need to make sure that businesses and the global community is prepared to tackle those as they come, even as we’re reducing our climate impacts.
MR: How does the just transition support what you’re trying to do for business?
SQH: So I think when it comes to adaptation and resilience, the just transition provides a fantastic framing that helps to centre people at the heart of all of our activity. So businesses are usually approaching adaptation, resilience in terms of how do we make sure that businesses can survive and thrive climate events, right? But what the just transition does is give us a people focus narrative that forces businesses to take a whole system’s approach to thinking about their adaptation activity.
MR: Also, we’re trying to make the business case for why people should be engaging with this. So why should businesses be engaging with the conversation around just transition?
SQH: I think that businesses are recognising more and more that their resilience really depends on the resilience of the system as a whole. So there’s a really famous example of a factory that has been made super resilient. So you know, it can have power and it can function throughout a massive storm. But what good is that factory if the people who work there can’t get to it because the roads are flooded, right? So when we’re talking about building resilience, we need to look at the entire ecosystem within which the private sector, within which businesses operate. And that therefore, the just transition narrative around focusing people, making sure that we are bringing people along on this journey, that no one is left behind, provides a really good lens for that.
MR: What is Resilience First currently doing to drive activity in this area?
SQH: We’ve been working on a new initiative, which we’re calling the climate resilience pathways work. So we’ve been focused a lot this year on engaging key stakeholders, mostly businesses, but also stakeholders across the spectrum, so that’s policymakers, academics, NGOs, multilateral finance institutions. And what we’re really doing is putting together a core community of practice. So far, we’ve engaged four key organisations in a series of six in-person and virtual conversations, that’s really looking to develop a framework for how businesses can become more resilient.
MR: So how does that link in with the just transition?
SQH: What we’re trying to really do through this work is establish a new leadership role for businesses in spearheading the just and equitable transition to a lower carbon global economy. And in this way the just transition provides, as I said, a really good guiding light for us to centre this work on.
MR: We’ve got a few more days left in COP28. What are you looking forward to seeing? What are you doing the rest of the week?
SQH: So yes, we’re off to a good start. We’ve had some amazing conversations. It’s a fantastic opportunity for the leaders and thinkers to get together. And we’ve already seen that thing, for the first time, the adaptation and resilience of gender being discussed at the highest levels. As I said, that was one of our big goals. We’ve got a couple more meetings that we’re planning to have. And we’re really looking to engage more businesses, make sure this is one of the key priorities for the private sector as we head into the new year.
MR: Thanks so much for your time.
SQH: Thank you.
MR: That’s all for this episode. We’ll be back at COP next episode, where we’ll be looking at the business case for nature. More information on the topics we’ve discussed here can be found in the show notes and through Making COP Count, the content series on ICAEW’s website. Thanks for being with us today. And if you’re finding these podcasts useful, please do subscribe to the series on your app and never miss an episode.