Was Finance the hand behind the curtain at COP?

Newsletter #19

The Four Horsemen of COP26: Bhupender Yadav (India), John Kerry (US), Xie Zhenhua (China), Frans Timmermans (European Commission): Photos by IISD/ENB

COP26 was gavelled close to midnight on Saturday 13 November, and the final showdown wasn’t about finance, it was about power, it was about John Kerry and Frans Timmermans failing to stop a last minute demand from India and China to kill the “phase out coal” paragraph.

The image of those four men in a room (yes, COP is still a ‘men decide’ world) in the final hours of COP26, and the ensuing paragraph of shame that made Alok Sharma cry, is what everyone will remember.

It reminds us that power and language matter deeply, that multilateral negotiations cannot be reduced to “blah blah blah”, and that one or two words can make a huge difference to millions of people for decades into the future.

But finance is the unhealed wound of COP26 that will continue to fester at future COPs. How to unlock flows of finance for adaptation and the energy transition in the global south is still one big open question.

The expectation from COP26 is that some public-private processes will catalyze big solutions, which begs that question: what’s the theory of change behind that expectation, and will it suffice?

Highlights from Green and Sustainable Finance

There were multiple items on the finance agenda at the multilateral negotiations, but delegates left Glasgow with only one win, namely a doubling of adaptation finance by 2025. All the rest - a new collective quantified post-2025 finance goal, how to make up the shortfall on the $100 billion, compensations to poor countries for loss and damage caused by rich country emissions, even an agreed definition of climate finance - was pushed out to the next meeting in Egypt.

These negotiations - where demands from the global south for action points were met with text on more dialogue and more processes - were the diplomatic hot spots in Glasgow. Emblematic of that trust deficit were the disputes about format: developed countries wanted workshops + high-level ministerial dialogues (emphasis on political steering), developing countries preferred ad hoc working groups or committees, complaining that workshops disadvantaged countries with small delegations.

What’s more, all of this was taking place in ugly rooms that were grey and starkly lit.

Informal negotiations on finance: Photo by IISD/ENB

On the non-state side, the big finance headline was Gfanz - Mark Carney’s Glasgow Financial Alliance for Net Zero - which now brings together over 450 firms with assets under management of over $130 trillion that have committed to a net zero by 2050 goal.

Carney, UN special envoy on climate action and finance, promises to "mobilise trillions of dollars of capital to finance decarbonisation in emerging and developing countries."

US special envoy for climate John Kerry has become a big advocate for such public-private finance solutions, and he was at the Gfanz press conference, saying: "Blend the finance, de-risk the investment, and create the capacity to have bankable deals. That's do-able for water, it's do-able for electricity it's do-able for transportation."

Pointing out the flaws of this initiative is easy. It’s already existing money, some of that money is subject to double-counting as the the alliance includes both asset owners and asset managers who manage part of the former group’s assets. The group includes fossil fuel funders, so its legitimate to call that greenwash.

But the real question that underlies everything, is:

Is capital, unified, capable of being a historical agent, or is it condemned forever to competition, rivalry and short-termism?

That was historian Adam Tooze, commenting on Gfanz on his podcast November 5, asking on whose terms this particular public-private partnership would get done.

👉 Gfanz and other initiatives are not just about mobilizing money, but also about lobbying governments to help make green investments profitable by covering part of the initial cost. This is what “derisking” is all about.

Take President Biden’s promise to quadruple US climate aid to $11.4 billion annually by 2024. Politico reported:

Anticipating difficulties in getting Congress to stump up, Kerry is turning to the private sector. Alden Meyer, a senior associate at the E3G think tank, said the climate envoy has been lobbying investment managers and banks to shift their finance to green projects in developing economies.

“Kerry's been running around the world and talking to BlackRock and JPMorgan and others,” he said. “That's productive. But they have to deliver the goods, and they have to stop financing fossil fuels.”

What could go wrong? Two academics expert in the “shock therapy” of the 1990s transition from command to market economies in the former Soviet bloc and in China, warned in the FT last week of the dangers of carbon shock therapy.

“The COP26 narrative on climate finance is that countries can mobilize the trillions from institutional investors like BlackRock to invest in the low-carbon transition. The key to unlocking finance for high-risk climate investments in poor countries is “derisking”: countries are expected to find fiscal resources to guarantee returns for private investors. This is at the heart of the all the mistrust and hurdles in the multilateral finance negotiations in Glasgow.”

They write that the alternative to carbon shock therapy is unpopular - state-led decarbonisation that would require central banks and ministries of finance and industry to work together after decades of separation.

👉 Central banks would have to actively redirect private capital flows from investment in dirty to low-carbon activities.

Italian think-tank ECCO has argued that what’s needed is a fundamentally new role and new rules for multilateral development banks and international development finance banks (ie not just ‘derisking’ investment to incentivize private investors) but rather a reallocation of special reserve assets that the IMF could issue to unlock the “tens of trillions” and close the solidarity gap between north and south.

What’s new at Glasgow

Youth Day at COP26. Photo by IISD/ENB

👉 The spin doctors of COPs came out in public.

COP26 was a narrative cluster**** (sorry I can’t think of a better word for this). There was just so much going on in all directions. At times it felt like groups and coalitions were so desperate for attention and air time the only thing they could realistically achieve was to blow up the context for other groups, thereby sowing more confusion and dissonance.

So it felt appropriate for the masterminds of the COP21 narrative, the Global Strategic Communications Council (GSCC) to unexpectedly “come out” in an article in Politco.

GSCC is a behind the scenes global PR and communications network that - among other things - played a huge role at COP21 in Paris coordinating a single narrative among the media, civil society and business that ultimately supported, facilitated, enabled a successful Paris Agreement.

Until they were contacted by POLITICO in preparation for this article, the Global Strategic Communications Council operated in semi-secret — “unbranded,” as they put it — to push a unified message from a diverse group of sources: it’s real, it’s us, it’s urgent.

The network of around 100 public relations pros in more than 20 countries has planned press conferences for the Swedish activist Greta Thunberg, trained media-shy climate forecasters to speak in soundbites, and collected and distributed scuttlebutt from closed-door climate negotiations, including in the ongoing COP26 climate talks in Glasgow.

Edouard Morena, a Paris-based researcher on philantrophy and climate action, and a previous guest on the podcast, said:

At the Paris summit, GSCC used what Morena described as a “flotilla approach” to help drive the perception of a united front on the need for climate action. Behind the scenes, the network’s members led a “range of different actors who are quite visible in the climate debate to more or less push a narrative that is similar,” Morena said.  

Anonymity was key. "Everyone is not under a shared brand, but everyone is pushing their own brand in the same direction,” Morena said. If the lead warship is invisible, it looks like "all these little boats are, by themselves, going in the same direction."

👉 Telling the story of future COPs will require a new context - less flotilla, more space for listening, multiple perspectives, inter-generational justice, inclusion of marginalized groups and voices, north-south solidarity, and seriously, gender equity.

Photo by IISD/ENB

From and beyond the podcast

Want to learn more about the ‘climate elite’ who were out in force at COP26? Edouard Morena was the guest in an earlier edition of the New Climate Capitalism podcast this year.

I can’t accept any requests to collaborate commercially on podcast guest interviews, but if you have themes or topics you’d like us to explore further, please reply with your ideas and any other feedback. And, oh, do hit the heart button if you enjoyed this newsletter!

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Until next month,