Reflections on COP26 – Financing the future

At COP26, the world’s leaders gathered in Glasgow to agree concrete steps for the world to take to limit global warming to 1.5C, and to provide adaptation assistance to countries in need through a climate fund.

Aside from the politicians, many other organisations came to Glasgow to run and attend events, to influence the world’s leaders, to communicate their products and services, and to network. The Net Zero Technology Centre organised a series of events at the beginning of the conference, including a clean energy start-up pitch battle, a technology showcase and a technology summit.

Talk of the energy transition abounded – how fast, how will it unfold and how will it be funded were some of the questions which were hotly debated. At a New York Times event during COP26, David Livingston, Senior Adviser to the US Special Presidential Envoy for the Climate, opined that the 2020s must be a decade of decisive action to keep warming within 1.5C. If no progress is made in this decade, it is very unlikely that the 2050 target will be achieved. Christian Bruch, CEO of Siemens Energy, urged us not to paralyse ourselves by talking about what is not working, rather that we need to take the first steps to climb the mountain. Bruch suggested that the speed of transition will depend on our society’s willingness to accept change. Is society willing to accept that energy will cost more, that we will need to change the way we live, that sustainability has a cost, he asked?

Many companies have yet to set net zero targets encompassing scope 3 emissions. Siemens Energy is one, and expects to set a scope 3 target in January 2022. The setting of more corporate net zero targets, with robust action plans in the short and medium term, will surely be an important fillip to the transition, as long as the private capital is there to fund it.

At a Scottish Enterprise event on the role of the finance sector to achieve net zero, Chris Stark, CEO of the UK’s Commission on Climate Change, underlined that capital is available, however the right pathway must be forged. Policies must be investable. Offshore wind is now thoroughly investable due to policy, one of the rewards being certainty of cash flow.

Craig Douglas, Partner at climate venture capital firm World Fund, asserted that putting all the responsibility at the door of government is simplistic because they won’t be deploying the capital, it’s the market that needs incentivising. The market needs to fund first of a kind projects and acceleration is required here.

To underline that point, we heard from Celtic Renewables who took several years to raise funds for their first biofuel plant. When they could not obtain the funding from venture capital firms, they raised debt and equity from two crowd-funding sites, equity from angels and the balance from Scottish Enterprise.

To keep warming within 1.5C we need to accelerate action on all fronts, and that includes the financial community taking more risk on new technologies.