If there is one element as constant as the annual Conferences of the Parties (COPs) since COP1 was held in Berlin in 1995, it is the criticism of the results obtained. This year, following COP27 in Sharm El-Sheikh, has been no exception. Although expectations for this meeting were not very high, the lack of commitment to advance mitigation measures, the unwillingness to stop promoting and financing the use of fossil fuels, and the skepticism regarding some voluntary public commitments made by only a few companies, overshadow the positive aspects that also emerged from this year’s COP.
In a way, there was a kind of consensus that had resignedly accepted this COP as a transitional one, and the only hope was that it would have a bias in favor of developing countries, thus being a COP focused on financing climate change adaptation. Although this debate has extended to proposing a reform of the international financial system, the outcome has not been as appealing because by focusing the debate on creating a financial fund aimed at covering risks and losses generated by physical damages instead of facilitating mitigation or adaptation, we move further away from the root of the problem.
COP27 has also served to highlight and prolong the shadow of greenwashing, based on the argument that despite multiple and varied climate commitments, greenhouse gas emissions continue to increase at twice the target set by science and accepted by almost all countries worldwide since the Paris Agreement was approved in 2015. This debate, instead of fostering alignment, best practices, and capitalizing on the advances occurring in the financial industry, was decided to be addressed through a more demanding regulatory framework and principles promoted by the United Nations Expert Group which, while very reasonable, may constrain companies’ willingness by either curbing their ambition or limiting their public exposure.
However, beyond the expectations created, the agreements reached, and the scrutiny of climate commitments, what lies behind each meeting are two elements that, by being taken for granted, are underestimated despite their relevance in curbing the adverse effects of climate change. The first is that, whether expectations are met or not, whether progress is made with more or less ambition, year after year there is a consensual advance among a multitude of countries and companies from which there is no turning back. This is positive because in a world that still has a certain dependence on the use of fossil fuels, the important thing is to work to avoid the worst climate scenarios, which is reaffirmed by maintaining the ambition to limit the global temperature increase to 1.5ºC before the end of the century. The second characteristic is the strength of public-private collaboration and the conviction that we must all face this problem together, no matter how much the financial sector is singled out as the lever on which the transition to a decarbonized economy must turn.
In this regard, a symbol reflecting the collaborative spirit has been the joint work of three countries—the Netherlands, Spain, and Germany—convinced of the importance of strengthening climate commitments. Their main banks, for their part, signed these commitments under the umbrella of the Principles for Responsible Banking and the Net-Zero Banking Alliance, as a demonstration of visibility and credibility. These commitments also facilitate the exchange of best practices and create a space for dialogue to discuss the degree of ambition and the challenges we still need to address to advance at the required speed. These commitments have served to propose a conference led by the Embassy of the Netherlands, and coordinated between the Spanish and Dutch banking associations, with the collaboration of UNEP-FI, aiming to highlight the importance of climate agreements as a sign of conviction and willingness from the financial sector.
It is true that the model proposed by the Netherlands, driven by society and with constant government support for financial institutions to focus on their appropriate role in financing this transformation, contrasts with the Spanish approach. In Spain, the financial sector stands out as the protagonist of this transformation, as demonstrated by the willingness of 95% of credit institutions to adhere to the Collaborative Climate Action Agreement or 75% of Spanish banking capital joining the Net-Zero Banking Alliance. This means that all entities must share a minimum common set of knowledge to respond to the complex regulatory and supervisory framework and, above all, to define emission reduction pathways aligned with 1.5ºC, with short, medium, and long-term objectives and detailed plans for supporting and advising their clients. In any case, these are two ways of understanding this transformation united by the same objective: to contribute through the exchange of experiences and best practices to the fight against climate change at a time when still incomplete regulation offers a high dose of interpretation to advance in the desired direction and at the desired speed.
In short, although the collaboration between the Netherlands and Spain on sustainable finance dates back to COP25 in Madrid, now, while the echoes of COP27 still reverberate, is the time to extend our framework of action and adopt practices that allow us to advance with greater clarity and ambition. Promoting a dialogue framework between the private and financial sectors, coordinated and endorsed by the government, as exists in the Netherlands, would foster significant progress and have a multiplicative effect on the commitment already declared by entities under the umbrella of the Principles for Responsible Banking and adherence to the Net-Zero Banking Alliance.
Juan Carlos Delrieu, Director of Sustainability at the Spanish Banking Association
