A Brief on United Nations’ Climate Change Conference - Whitepaper

1. ESG Consulting Services WHITEPAPER A Brief on United Nations’ Climate Change Conference, 2021 Conference of Parties (COP 26)

2. ESG Consulting Services Overview of COP26, Glasgow and its prominence The 2021 United Nations Climate Change Conference, commonly referred to as COP26, was held in Glasgow from October 31 to November 12. The conference that had been delayed due to the COVID-19 pandemic is prominent since global parties/countries have united with an aim to make enhanced commitments to mitigate climate change impacts. This conference is considered an important part of the Paris Agreement’s ‘ratchet’ mechanism to provide improved national pledges, being the fifth conference since the 2015 COP21 held in Paris. Long before COP26, many nations had been experiencing the adverse impacts of climate change, such as cyclones, floods, wildfires, storms, and heatwaves that have been striking with increasing frequency and severity. Further exacerbating the situation, the economic impact of the pandemic has pushed many countries into poverty, particularly the developing countries with reduced income and cuts in government budgets, making livelihood difficult. Around 150+ countries had responded by submitting new or updated “Nationally Determined Contributions” (NDCs) to the United Nations. The new, enhanced, and stronger pledges had increased ambition of reducing 0.2 °C off warming, if fully implemented, to keep 1.5 °C alive, with a focus on action to address coal, automobiles, financials, trees and agriculture, and education. The Glasgow Climate Pact was agreed to by 197 nations aiming to stave off severe and dangerous climate change impacts. This pact reaffirms the Paris Agreement’s goal of limiting the global average temperature increase within 2 °C above pre-industrial levels and pursuing efforts to limit the temperature increase within 1.5 °C above pre-industrial levels. Furthermore, the pact recognizes that limiting global warming rise within 1.5 °C needs significant, swift, sound, and sustained reductions in greenhouse gas emissions by 45% by 2030 from a 2010 baseline and targeting net zero by 2050. On the other hand, achieving the target is not ensured, as with existing commitments and policies, the forecasted emissions in 2030 will be 14% higher than in the baseline year of 2010. The final agreement announced at the conference explicitly mentions phasing-out coal-fired power generation, which is considered the biggest contributor to climate change. The agreements announced in previous COPs had not mentioned coal, oil, and gas, or fossil fuels as the major causes of climate change. This makes the Glasgow Climate Pact the first ever climate declaration deal with a clear plan to reduce unabated coal power. The agreement explicitly refers to a phase down of coal power, rather than to phase out, which can implicitly be understood as utilizing coal power with ‘abation’ (net-zero emission). As a part of the outcomes of the conference, the Climate Action Tracker described the results as follows: • 2100 with existing policies and regulations. • pledges for 2030 are implemented. • targets are achieved along with achieving 2030 targets. • announced targets are fully achieved. Additional negotiations, and pledges on various aspects impacting climate change is described in the subsequent sections of this paper. The global temperature will rise by 2.7 °C by the year The global temperature will rise by 2.4 °C if only the The global temperature will rise by 2.1 °C if long-term The global temperature will rise by 1.8 °C if all information on the commitments, 2 A brief on United Nations’ Climate Change Conference, 2021 - Conference of Parties (COP 26)

3. ESG Consulting Services Pledges, commitments, announcements, and declarations at COP26 The conference was held with around 25,000 attendees from about 200 countries including World leaders’ summit where world leaders gave their national statement, keeping in mind the important goal of the conference to keep the temperature rise within 1.5 °C (2.7 °F). Various parties have taken pledges mostly in alignment with the Paris Agreement. A brief on the pledges during the conference has been subsequently provided. The US and European leaders stated that tackling methane is crucial to keep global warming temperature rise limited to under 1.5 °C (2.7 °F). The US and the EU have committed to an amount of USD 328 million through 20 philanthropic organizations, which will help with technical and financial assistance in the implementation of the pledge. Delivering this pledge should help in reducing the global warming temperature by at least 0.2 °C (0.36 °F) by 2050. Deforestation Two major pledges concerning deforestation were made during the conference. In the first pledge, leaders from over 130 countries signed the declaration on forests and land use, promising to work in collaboration to reverse the forest losses and degradation of land by 2030. The Leaders’ Declaration included key commitments as stated below: • support work to protect, restore, and manage forests sustainably, with a target to be completed by 2025 • funds and corporates • protection of forests in the Congo Basin • and local communities and advancing their land tenure rights Secondly, a new Forest, Agriculture and Commodity Trade (FACT) statement was made, jointly led by the UK and Indonesia, aiming to support responsible and sustainable trade between commodity-producing and commodity-consuming nations. A total of 28 countries had signed the dialogue, which represents 75% of global trade in key commodities that lead to deforestation. The dialogue identifies key actions and focused areas for further action regarding trade and market development, smallholder support, research, development and innovation, and traceability and transparency. Over one hundred countries agreed to end deforestation by 2030, which accounts to around 85% of the world’s forests. Brazil, home to 60% of the Amazon forests, promised to halt and reverse deforestation by 2030. Agriculture Agriculture plays a key role in any conversation regarding climate change. While agriculture is a victim of climate change, it contributes to it. Climate change impacts such as increased temperatures, variation in rainfall, and the frequency and intensity of extreme weather conditions and events, adding pressure to global agricultural and food systems by depleting natural resources and causing water scarcity and soil degradation. On the other hand, the main direct greenhouse gas emissions from agriculture, such as nitrous oxide emissions from soils, methane production from grazing by ruminant animals, and paddy rice cultivation have a considerable impact on climate change. Both nitrous oxide and methane gases have a significantly higher global warming potential than carbon dioxide. A total of 45 countries have pledged to contribute more than USD 4 billion for transitioning to sustainable agriculture. The countries include the US, the UK, Japan, Germany, India, Indonesia, Morocco, Vietnam, the Philippines, Ethiopia, Ghana, and Uruguay. Public funding of USD 12 billion from 12 countries to USD 7.2 billion in private funding from philanthropic About USD 1.7 billion set aside specifically for USD 1.7 billion commitment to support the indigenous Coal phase-out Another pledge of prime importance that has been negotiated during the conference is the phasing out of coal-fired power with the new and existing commitments. The UK secured a strong coalition of 190 countries committing to phase out coal power. A commitment by 23 countries to phase out coal and not build or invest in new coal power generation. This is the first global statement on an initiative to transition from coal to clean power as a part of an initiative on global coal to clean power transition statement. Over 40 countries pledged to move away from coal. A partnership fund of USD 8.5 billion was launched for the US, the UK, France, Germany, and the EU to support South Africa’s transition from coal to clean energy in the next five years. This will help South Africa implement its new climate target to cut down GHG emissions by one-third over the next 10 years. This commitment is considered a key positive outcome of the conference, and it will provide assistance for similar agreements. Global methane The global methane pledge was formally launched by the US and the EU Commission, referring to cutting down the countries’ methane emissions by 30% by 2030. A total of 109 countries have signed up to this commitment representing half of the global methane emissions and 70% of the global GDP. 3 A brief on United Nations’ Climate Change Conference, 2021 - Conference of Parties (COP 26)

4. ESG Consulting Services Fossil-fuel financing The signatories committed to end new direct public support for the international unabated fossil fuel energy sector by the end of 2022, except in limited and clearly defined circumstances that are in alignment with the Paris Agreement goals and within the 1.5 °C rise in global warming limit. Over 30 countries and financial institutions committed to ceasing all financing of fossil fuel developments and diverting them to spend on green energy interventions. The pledge Agreement on Climate Change, Trade and Sustainability (ACCTS) by the governments, accelerates the phase-outs and de-subsidization for the fossil fuel sector. Glasgow breakthroughs A commitment has been declared to work in collaboration with parties globally to accelerate the implementation of clean technologies and sustainable solutions that meet Paris Agreement goals. Over 40 countries have expressed their support for the breakthrough agenda. The commitment has five breakthroughs to target, which cover more than 50% of global emissions. Power: To have clean power as an affordable and reliable alternative to efficiently meet the power needs of all countries by 2030 Road transport: To have accessible, affordable, and sustainable vehicles with zero emissions as the new normal in all regions by 2030 Steel: To have a preferred choice of steel with near- zero emissions in global markets, along with efficient and responsible use and near-zero emission steel production being established in every region by 2030 Hydrogen: To make affordable, accessible, renewable, and low-carbon hydrogen globally available by 2030 Agriculture: The most attractive and widely accepted alternative for farmers is to adopt climate-resilient, sustainable agriculture everywhere by 2030. Zero-emission cars As there is a significant increase in the nations and people’s inclination toward electric vehicles, the conference placed electric cars and pledges for vehicle electrification as the focal point for negotiation. The conference has announced a declaration on accelerating the transition toward 100% zero-emission cars and vans. A coalition of 24 governments, cities, car manufacturers, and other institutions expressed their interest in working toward implementing sales of only zero-emission cars and vans in leading markets by 2035 and globally by 2040. The major automotive OEMs that agreed to the pledge are General Motors, Ford, Volvo, BYD Auto, Jaguar Land Rover, and Mercedes-Benz. Major car manufacturing nations such as the US, Germany, China, Japan, and South Korea, and manufacturers such as Volkswagen, Toyota, Peugeot, Honda, Nissan, and Hyundai have not signed up for the pledge. India at COP26 The Indian government considered the conference as a successful one as it has put forward the concerns and accelerating the climate change actions by enhancing the country’s targets. The country had presented a path for constructive negotiation and put forth the practical solutions at the summit. India being one of the largest contributors to carbon dioxide, by geography has promised to cut its emissions to net-zero by 2070, which is the largest target date considered at the conference, missing the adherence to the key goal of reaching the target by 2050. However, India had committed to reduce its projected carbon emissions by one billion tonnes and emissions intensity by 45% of the GDP by 2030. Furthermore, India had committed to draw 50% of its energy needs from renewable resources by 2030 and announced 500 Gigawatts (GW) of non-fossil electricity capacity in India. However, for the first time, India has committed to a target date for carbon neutrality as part of its climate policy. The country expressed the necessity to change draft text related to the phase out of coal and fossil fuels to reflect the regulations on fossil fuel subsidies for the poor in India. India suggested that the text be reworded to—“Call upon parties to accelerate the development, deployment, and adoption of policies, to transition towards low- emission energy systems, including by rapidly scaling up deployment of clean power generation and energy efficiency measures, including accelerating efforts to phase down unabated coal power and phase out inefficient fossil fuel subsidies, while providing support to poorest and the most vulnerable, in line with national circumstances, and recognizing the need for support towards a just transition.” The Glasgow climate pact was launched despite India’s request to change the text from “phasing out” coal to “phasing down.” Financial alliance Financial assistance for climate change adaptation and mitigation was a prime topic for negotiation during the United Nations Framework Convention on Climate Change (UNFCCC) conferences. Meeting financial obligations and alliances with the parties helped achieve the committed targets. The launch of the Glasgow Financial Alliance for Net- Zero (GFANZ) had committed a massive USD 130 trillion towards net-zero transition by around 450 organizations in 45 countries. The parties that agreed to GFANZ had to commit to the usage of science-based targets initiative (SBTi) to achieve net-zero carbon emissions by 2050 and provide interim goals for 2030. Net-zero commitments Evidently, many organizations have pledged to become net-zero and carbon neutral. Furthermore, over 140 nations have committed to reach net-zero emissions by 2050 or soon after, and they have enhanced targets for reducing emissions by 2030. More than 120 countries have announced new targets for emission reductions by 2030, and governments representing about 70% of global carbon dioxide (CO2) emissions have pledged to bring those emissions to net zero by 2050 or soon after. China, being the largest contributor to carbon dioxide, by geography has committed to net-zero carbon emissions by 2060, and India has committed to net zero by 2070. Green hydrogen is being considered a major area of focus for the companies to collaborate and it will help in decarbonization. and dissemination of technologies, 4 A brief on United Nations’ Climate Change Conference, 2021 - Conference of Parties (COP 26)

5. ESG Consulting Services The way forward Around 200 countries have committed to report their progress on combatting climate change impacts. Aggressive and drastic actions and stringent regulations would help the world to get back on track. As published by the United Nations Environment Programme (UNEP) in its 2021 Emissions Gap Report, such actions are not strong enough. It is unlikely that the world will meet the goal of limiting global temperature rise under 2 °C, considering the rapidly worsening climate change impact. However, by putting an effort to limit global warming under the 1.5 °C target, COP26 had done justice to the targets in accelerating the climate actions. The conference was a success given that about 50,000 participants across the globe shared their innovative solutions and partnerships in addressing climate concerns. The developed countries’ commitment of USD 100 billion per year by 2030 addresses the needs of developing countries. However, the final outcomes of the conference have not met the expectations of its stakeholders. Although important progress has been made during the conference, it did not address emission reduction significantly. The long-standing financial commitments by developed countries have not been fulfilled, which makes current progress more difficult. Many countries have deferred ambitious actions. There are many unanswered questions – Whether COP26 commitments would keep the hopes alive for a 1.5 °C target and what could be the way forward for countries to safeguard themselves from the worsening impacts of climate change? India would need additional financial assistance of approximately USD 1 trillion over the next 10 years to meet its commitments on climate change at the conference. So far, the Indian climate actions had been financed domestically. The Indian government had already undertaken Perform, Achieve and Trade (PAT) scheme in targeting carbon emissions reduction in 13 energy- intensive sectors. Furthermore, it has allowed Foreign Direct Investment (FDI) up to 100% in the renewables sector, waived off the Inter-State Transmission System (ISTS) charges for sale of solar and wind power, and set up renewable energy parks. a few large initiatives taken in combatting carbon emissions. Although Glasgow Climate Pact was agreed to at the COP26 to accelerate climate actions over the next 10 years, this deal does not seem to be enough to aggressively limit global warming temperature rise within 1.5 °C above pre-industrial levels. This pact is an agreement of compromise. It is an important step to accelerate the actions, but it is not enough to address the climate catastrophe, making our chance of achieving net zero would be next to the impossible. References COP26: Together for our planet Uniting the world to tackle climate change. Glasgow Climate Pact 5 A brief on United Nations’ Climate Change Conference, 2021 - Conference of Parties (COP 26)

6. ESG Consulting Services About the Author Vidyanath R • ESG Solutioning With over 11 years’ experience in ESG and sustainability advisory, stakeholder engagement, responsible supply chain, environment and social advisory, research & development, and project management. Vidyanath has worked with various corporates and institutions including Ministries, bilateral funding institutions, the central and states government, and public sector units from various sectors. He has provided various advisory services and led niche assignments, such as ESG performance assessment, stakeholder engagement, ESG framework and disclosure development, water balance audits, climate change management, EHS audits, and GHG accounting. Disclaimer This document makes descriptive reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by SG Analytics (SGA) and is not intended to represent or get commercially benefited from it or imply the existence of an association between SGA and the lawful owners of such trademarks. Information regarding third-party products, services, and organizations was obtained from publicly available sources, and SGA cannot confirm the accuracy or reliability of such sources or information. Its inclusion does not imply an endorsement by or of any third party. Copyright © 2021 SG Analytics Pvt. Ltd. www.sganalytics.com GET IN TOUCH New York | Seattle | Austin | London | Zurich | Pune | Hyderabad 6 A brief on United Nations’ Climate Change Conference, 2021 - Conference of Parties (COP 26)