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COP26: an overview on the next climate diplomacy summit

“We’re on the verge of passing those tipping points…” – said Lord Attenborough, the British climate studies guru [1]. This is the pre-opening of the Climate Summit in Glasgow, whereby the UK and Italy are co-hosting worldwide leaders’ summit to pursue a concrete climate diplomacy grand strategy [2]. Global security is intertwined with the global climate struggle. We cannot simply accept that Worldwide institutions are urging multinational enterprises to drive change without explaining why the challenge of the next fifty years concerns, more than ever, the durability, the scarcity of resources and Sustainability. Glasgow will greet different kinds of interests and powerful countries that will surely shape the status quo with a more ambitious plan. But the need for a Grand Strategy on Climate Diplomacy is surely the most urgent and hottest issue.

The biggest challenge is not whether leaders shall take more ambitious targets to fight climate change but it is rather what targets can be feasible for worldwide most powerful nations such as the US, India, China and Russia altogether. It seems to me that it could be less than a moral hazard to make more than a sole interest dovetail rather than keeping on glimmering on hope without meeting actual targets.

The Grand Strategy to be put in place should be the best mix of policies combining fiscal and monetary policy that member states are already making up in the EU. As much as Monetary Policy and Fiscal Policy coordination could pair up for better results, an interesting outcome could be happening for Sustainable financing and the Recovery Plan in the EU. On the one hand, the European Green Bond Framework will shift traditional capital raising towards sustainable financings. If such green debt creates substantial growth, efficient infrastructures, innovative facilities and energy capabilities it will be paid-off by future generations with less negative side-effects [3]. On the other hand, the Next Generation EU will serve to promote job creation, reduce the gender gap and create better perspectives for younger generations. So, if the European Green Bond Framework [4] is going to accompany that estimated enlarging Sustainable Finance market ($260 billion funding in year-to-date 2020 estimated by BCG) [5] it could spill over a worldwide Sustainable financing shift such as it recently happened with the World Bank Development Bond Framework [6]. If then the Next Generation EU will effectively reduce inequalities in the Union, that it will surely create better conditions for the Monetary and Fiscal Union itself – stakeholders agree [7].

Both plans correspond to expansionary policy measures. The EU Green Bond Framework does not correspond to an expansionary monetary policy from the ECB but it does create a set of spillover effects that might influence capital markets and the climate transition [8]. Conversely, the 750 Billion € Next Generation EU, defined as “the Brussel’s Bazooka” is perhaps the biggest expansionary public expenditure policy ever approved by 27 nations in concert [9]. Therefore, it is not so absurd to theorise that the European model could be exported globally, in this specific case.

To sum up, it is useless to have great expectations on the climate summit. It is rather in our best interest to understand what is feasible, agreeable, and then put it in place. Otherwise, the tipping points could be passing away with hopeless regards to future generations.

Di Manfredi Morello Fonti [1] Sir David Attenborough warns the UN of 'perilous' climate change threat https://www.youtube.com/watch?v=hTI15uI_Iao&ab_channel=TheNationalNews

[2] UK COP26 “The UK will be assuming the COP26 Presidency, in partnership with Italy”. https://ukcop26.org/pre-cop/

[3] Ansa (2020) Stripping young of future a grave inequality – Draghi. Must give more to new generations, ex-ECB chief tells CL meeting. https://www.ansa.it/english/news/politics/2020/08/18/stripping-young-of-future-a-grave-inequality-draghi_d478dd39-e9b6-4cb6-a42f-dee3334ade70.html

[4] Bruegel “The EU green bond standard: sensible implementation could define a new asset class” https://www.bruegel.org/2021/07/the-eu-green-bond-standard-sensible-implementation-could-define-a-new-asset-class/

[5] Boston Consulting Group “Climate Finance Markets and the Real Economy” December 2020. 1.4 The Current State of the Climate Finance Market, p.29 https://www.sifma.org/wp-content/uploads/2020/12/Climate-Finance-Markets-and-the-Real-Economy.pdf

[6] World Bank Sustainable Development Bond Framework, March 2021 https://thedocs.worldbank.org/en/doc/43b360bfda1e6e5b8a094ef2ce4dff2a-0340012021/original/World-Bank-IBRD-Sustainable-Development-Bond-Framework.pdf

[7] Euractiv (2020) “The Next Generation EU proposal can strengthen the European project, if done right”. https://www.euractiv.com/section/economy-jobs/opinion/the-next-generation-eu-proposal-can-strengthen-the-european-project-if-done-right/

[8] Nick Robins (2020) “Why governments need to issue just transition sovereign bonds and how they could do it”. Responsible Investor. https://www.responsible-investor.com/articles/financing-fast-and-fair-climate-action-why-governments-need-to-issue-just-transition-sovereign-bonds-and-how-they-could-do-it

[9] Bjorn Hacker (2021) “A fiscal bazooka from Brussels?” https://www.ips-journal.eu/regions/europe/a-fiscal-bazooka-from-brussels-4524/