Expectations are running high for the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change, hosted by the UK and now underway in Glasgow. COP26, labelled the "last, best hope", marks a historic moment in the battle against climate change, when targets and pledges must be updated and converted into coordinated action before it is too late.
The goals of COP26 are to:
- secure global net zero by 2050 and keep 1.5°C over pre-industrial temperature levels in reach;
- share plans to adapt and protect communities and natural habitats and mitigate the effects of a warming planet;
- mobilise finance flows in both the public and private sectors to meet these ambitions; and
- accelerate global collaboration and action.
Our insights around the daily Presidency programme
The formal negotiations at COP26 are focussing on finalising the outstanding aspects from Madrid's COP25 and the Paris Agreement, including setting the detailed rules that make it operational, the Paris Rulebook. Running alongside the formal negotiations is the Presidency programme. This enables discussions and events to take place to drive ambition and accelerate global action and is based around a number of different daily themes. For both weeks of the conference, members of our ESG Group are providing insights on topics from those daily themes, exploring how developments in relevant sectors are affecting our clients.
If you would like to discuss any of the issues raised in our insights with us further, please do get in touch with any of the relevant authors, the key contacts for our ESG group below or your usual Stephenson Harwood contact.
Presidency programme week 1
In this first week, immediately following the two days of the World Leaders Summit, the programme includes the themes of Finance, Energy, Youth and public empowerment and Nature.
Finance: Wednesday 3 November
Wednesday's events programme is focussed on climate finance and mobilising public and private finance flows. The UK in its presidency of COP26, has called upon every company, financial firm, bank, insurer and investor to change; highlighting the need for all private and public sector financial decisions to take climate into account. It also calls for companies to be transparent about the risks and opportunities that climate change and the transition to net zero poses to their businesses and for banks, insurers, investors and other financial firms to commit to ensuring their investments and lending are aligned with net zero.
The LMA's ESG-related lending principles
The UK's Loan Market Association has taken a leading role in developing frameworks to assist the UK finance industry in meeting this call for action. Archie Campbell and Charlotte Drake from our London finance practice, consider how further developments in the application of the LMA's green, sustainability-linked and social loan principles could help to drive additional positive changes in the UK lending industry and achieve the aims of COP26.
The philanthropic sector
Our global private wealth teams are seeing a growing demand for impact investing in the philanthropic sector, as wealthy family offices place greater value on sustainable and responsible investing. Kevin Lee and Tze-wei Ng, in our private wealth team in Hong Kong, consider how this sector of private finance can step up to the challenge of investing for climate change and what Hong Kong philanthropists and impact investors are already doing.
Elaine Beh, Suzanne Johnston and Yi Lee from our Stephenson Harwood (Singapore) Alliance private wealth team, highlight the push in Singapore in the impact investment space and the role it can play in the transition to a global net zero economy.
We are seeing the introduction of climate-related disclosure regulation in some jurisdictions but implementation varies and global standardisation discussions are still ongoing. In the Hong Kong investment management sector, Penelope Shen in our Hong Kong funds practice, discusses how the city's Securities and Futures Commission's proposals on the management and disclosure of climate-related risks will impact Hong Kong fund managers and push Hong Kong into the forefront of sustainable finance.
The UK has stated its ambition to become the first G20 country to mandate TCFD-aligned climate-related disclosures across its economy. Last Friday, it confirmed its latest step in that strategy, to legislate for the UK's largest companies and financial institutions to disclose on a mandatory basis from April 2022. This follows hot on the heels of the London Stock Exchange, which recently became the first international exchange to publish TCFD-compliant climate reporting guidance for listed issuers. For more information, please read our recent updates by David Dowding, a partner in our London capital markets team on our capital markets hub.
Energy: Thursday 4 November
On Thursday, events focus on the theme of energy and accelerating a just and inclusive transition to clean energy. The International Energy Agency in its Net Zero by 2050: A roadmap for the global energy system notes that to have a fighting chance of reaching net zero by 2050 and limit rising temperatures to 1.5°C "requires nothing short of a total transformation of the energy systems that underpin our economies". This will require the rapid acceleration of advancements and investment in clean energy innovation.
Alternative energy sources
The UK government recently published its strategy to deliver on its pledge to hit net zero by 2050, in Net Zero Strategy: Build Back Greener. The development and use of alternative energy sources will be critical to the UK achieving its net zero ambitions. Focusing on this issue in particular, Cathal Leigh-Doyle and Andy Ross in our energy practice and trainee Isabelle Wenger, explore how COP26 could help the UK to develop and regulate its alternative energy sources, particularly with nuclear fusion and direct air capture.
In a further article, Cathal and Isabelle also put the spotlight on carbon pricing, addressing steps taken to date by countries all over the world and ask whether the UK can use COP26 to motivate countries to take further steps to reduce their carbon emissions through the introduction or modification of carbon pricing models.
Youth and public empowerment: Friday 5 November
Friday focusses on how to elevate the voice of young people and demonstrate the critical role of public empowerment and education in climate action. There has been a growing participation of youth movements in climate activism and policy discussions. From the school strikes of the Fridays for Future movement to the representation of youth organisations as a key civil society community at COP. At the recent Youth4Climate: Driving Ambition Pre-COP26 summit in Milan, young climate leaders negotiated a collective declaration to be taken to Pre-COP and delivered at COP26, to ensure their views and ideas are taken into account in the negotiations.
Elevating the voice of our young and aspiring solicitors
A recent study of 10,000 young people in 10 countries found that climate change is causing distress, anger, fear and anxiety, with 45% of respondents saying their feelings about climate change negatively affected their daily life. We wanted to understand how the climate emergency impacts our young and aspiring solicitors at Stephenson Harwood and asked for their views on a number of climate change questions, including how young people are affected; why unwillingness to address climate change still persists; what they would do first if in Government; what they hope for from COP26; and their tips on things we can all do to help. This video features contributions from solicitor apprentice Martyna Mazur, future trainees Genevieve Dipper and Jonathan Simpson and trainees Amarveer Randhawa and Ray Chan in London and Hong Kong.
Presidency programme week 2
In this second week, the Presidency programme includes the themes of Adaptation, loss and damage; Gender; Science and innovation; Transport; and Cities, regions and built environment.
Adaption, loss and damage: Monday 8 November
On Monday, events are focussed around the practical solutions needed to adapt to the impacts of climate change and address loss and damage, now that some of the destructive impacts of climate change are inevitable. Loss and damage has been a contentious part of previous COP negotiations, with the most vulnerable nations calling for more action and increased finance to address them, while developed nations try to avoid calls for compensation or the formation of a basis of liability.
The momentum and appetite for environmental and climate change claims is building globally with both states and companies facing judicial scrutiny and courts mandating parties to do their share to prevent climate change. In July 2021, the London School of Economics reported that the cumulative number of climate change-related cases globally has more than doubled since 2015. Sue Millar, Alina Neal and Emily Rivett, from our corporate and commercial disputes team, consider whether ESG litigation is experiencing a tipping point, highlight the ground-breaking cases and consider the future of ESG litigation in England and Wales.
Science and innovation: Tuesday 9 November
Science and innovation is the second of two themes on the programme for Tuesday, focussing on how science and innovation can deliver climate solutions to meet and accelerate increased ambition. In the lead up to COP26, the UK government published Net Zero Strategy: Build Back Greener, setting out how the UK will decarbonise and meet its net zero target by 2050. A noticeable feature of that strategy is its reliance on research and innovation, including the development of new technologies.
Intellectual property and climate innovations
The development of new and renewable energy technologies, like any technology, raises important questions related to Intellectual Property. Any development will be done against the background of existing laws relating to IP and requires careful consideration of how existing and arising IP is properly protected and exploited. Rob Jacob and Josh Cunnington, from our intellectual property department, provide their insight on how IP protection can benefit climate innovation, the issues around ownership of IP rights in collaborative projects and the risk and serious consequences of third party right infringements.
Transport: Wednesday 10 November
Wednesday's programme focusses on driving the global transition to zero emission transport. The UK government's Ten Point Plan for a Green Industrial Revolution, included a number of plans in relation to the decarbonisation of the UK's transport sector. As well as ending the sale of new petrol and diesel cars in the UK by 2030, it aims to increase the use of public transport, including investments in the rail network and the electrification of more railway lines. The plan also included the government's intention to make the UK the home of "jet zero and green ships", while leading efforts to find solutions to global aviation and maritime emissions. The UK will be using its presidency of COP26 to develop sector-led goals in these areas.
On Wednesday, Haris Zografakis and Rod Johnson, from our maritime and international trade practice, will be speaking at the "Voyage to Carbon Zero Seminar" at the COP26 International Maritime Hub, exploring the challenges and opportunities of progressing to a carbon zero shipping industry by 2050. The event will be available to watch online shortly afterwards.
The International Maritime Hub is showcasing green technology, innovation and capabilities from across the UK maritime sector to the world and is the location for a number of different events throughout the duration of COP26, highlighting UK maritime expertise within areas such as technology, policy, regulation, education and training. Stephenson Harwood is a leader in maritime decarbonisation, as the only international firm partner of the Global Maritime Forum, since 2019. The firm is involved in several decarbonisation projects as part of its overall ESG practice.
Recently, Stephenson Harwood signed the 'Call to Action for Shipping Decarbonization', with over 200 signatories urging governments to take action in order to implement the full decarbonization of international shipping by 2050. On 1 November, 14 countries, including the UK, signed the Declaration on Zero Emission Shipping by 2050 at COP26, supporting the goal to reduce emissions.
For a further discussion of maritime decarbonisation, please read Haris' article which appeared in Lloyd's Register's Horizons magazine, where he discusses the contractual repercussions of decarbonisation on international maritime trade contracts.
The aviation industry is responsible for a significant, and growing, share of global carbon emissions but effective decarbonisation measures are well behind other parts of the transportation sector. James Collins and Charlotte McNeilly, from our international aviation finance practice, give some context to the challenges faced by the aviation industry and consider encouraging recent developments in the drive to reach Jet Zero.
Unlike shipping and aviation, rail transport is probably one of the simplest ways of delivering a lower carbon economy. The Williams-Shapps Plan for Rail, setting out a radical programme of rail industry reform, states that rail "is the only form of transport capable of moving both people and heavy goods in a zero carbon way". Tammy Samuel, Suzanne Tarplee, Darren Fodey and Caroline Hooton from our rail practice, discuss the opportunities rail decarbonisation offers on the road to net zero, progress on rail electrification, hydrogen power and its challenges and the possibility of utilising battery power as an interim solution.
Cities, regions & built environment: Thursday 11 November
On the last day of events, the Presidential programme turns its attention to the built environment. The building and construction sector accounts for nearly 40% of global energy related carbon emissions and in the UK, heating and powering buildings accounts for 40% of the UK's total energy usage. Therefore significant improvements in energy efficiency in the built environment have a critical role to play in reaching net zero ambitions. As well as facing the challenges of reducing energy consumption and emissions, buildings and cities will need to adapt, to offer resilience to the effects of our changing climate, including the threats from flooding and overheating.
Energy efficiency in buildings and MEES
As part of the UK government's plan to improve the energy efficiency of buildings, it is strengthening the Minimum Energy Efficiency Standards regime, better known by the acronym MEES. Landlords and tenants should start planning relevant improvement steps now. In this podcast James Styles, from our real estate team, discusses key commercial property environmental questions around MEES with trainee Matthew Angell, including proposed changes to the UK MEES regime, whether MEES actually secures environmental benefits and some alternative approaches.