COP26 and Climate Change: Sustainable Finance and Social & Environmental Progress
Mazharul Islam
August 2022
Climate change is a more critical issue in the twenty-first century than at any time since the Ice Age.
As a result of the Industrial Revolution and the global mass production of goods, emission of greenhouses gases has resulted in the gradual warming of our planet, resulting in melting ice caps in Antarctica and rising sea levels in the Pacific. But these are only the tip of the (melting) iceberg of climate-induced damage; the fact is that climate change is also having catastrophic consequences for human life as homes, jobs and lives are placed in acute danger.
But what are we, as human beings, doing about the situation? What needs to change? This article suggests that every part of humanity – not just the politicians and the activists, but also the public and the business world – has a part to play.
World leaders have been talking for years about climate change and what they can do to prevent further disaster. Around 120 heads of state attended the recent COP26 summit, held in Glasgow in 2021, to discuss their next steps, commitments and goals for progress. However, the question remains as to whether they will act on their promises or fail to fulfil them. This isn’t just cynicism, but rather a doubt based on history: for example, $100 billion per year in climate finance was previously pledged to developing countries, but by the target date of 2020, the goal was still far from met.[1] Will this time be different, with leaders finally taking the issue seriously so that society can progress at last to an era of sustainability? Or does more also need to be done elsewhere? And how do sustainable finance, sustainability analytics and an ESG sustainability credit score system fit in this equation?
Evidence suggests that action at the top is not only directly vital for change, but also key to influencing public opinion. According to a 2012 study, education on the science around climate change has relatively little effect on public opinion, whereas political movements headed by the social elite have an immense impact.[2] This suggests that if the former US Vice-President Al Gore, a determined environmentalist throughout his career, had defeated George W. Bush in the 2000 presidential election, America may have had a radically different perception of climate change.
It is clear, then, that if we want to see social progress on climate change – and indeed on practically any issue – politicians and elites need to be on board too. But is this going to be realised effectively if politicians are making empty promises and failing to practice what they preach? If the voices at the ‘top’ can’t be relied on, can we expect there to be a comprehensive shift among those on the ground?
A solution may be found by looking in the middle – at a layer between politics and public, namely the world of business. While politicians may speak and the public may protest, companies and businesses have an immense opportunity to take action that will make a genuine difference. What’s more, as the major gas emitters, large corporations in particular have an overwhelming responsibility to examine their policies and adapt their practices to promote sustainability. Furthermore, there is a huge role for financial institutions in this regard. If banks are environmentally conscious in their lending decisions – i.e. only provide funding to sustainable companies – they may play a crucial part in identifying and eliminating businesses that harm the planet and promote those that will heal it.
The Sona Sustainability Credit Score System (SSCSS) is a specially and carefully designed tool for gauging whether or not companies are sustainable. It uses indicators that encompass all factors related to sustainability, including businesses’ ability to contribute to social progress. If, for example, companies are publicly viewed as polluting or cannot adjust to policies, their sustainability scores will be negatively impacted, thus making them less creditworthy to banks.
The application of this system in the global context may produce a new era of companies which are fit for purpose socially as well as environmentally. The SSCSS provides a positive and pragmatic way forward, bridging that critical gap between political ideals and long-lasting social progress.
[1] Elena Ares and Philip Loft. ‘COP26: Delivering on $100 billion climate finance.’ House of Commons Library, 3 November 2021. Accessed 7 July 2021. https://commonslibrary.parliament.uk/cop26-delivering-on-100-billion-climate-finance/.
[2] Robert J. Brulle, Jason Carmichael and J. Craig Jenkins. ‘Shifting public opinion on climate change: an empirical assessment of factors influencing concern over climate change in the U.S., 2002–2010.’ Climatic Change, Vol. 114, 169–188, 2012. Accessed 7 July 2022. https://link.springer.com/article/10.1007/s10584-012-0403-y?version.
Keywords: sustainability; risk management; ESG; firm valuation; WACC; sustainable finance; scenarios; sustainability analytics; sustainability credit score system; Sustainable investing; sustainable analytics; analysing sustainability.