COP26 Or Cop-Out? What The Agreement Means For Financial Services

After running from the 31^st of October to the 12^th of November, COP26 has finally come to an end, bringing with it a host of new agreements made between 130 countries across the globe. However, individuals have voiced their frustration following the results of the summit, stating that it does not go far enough to tackle climate change.

Let's take a look at the outcomes of COP26 and consider how businesses can take their sustainability practices to the next level and do their part towards global carbon saving.

What Is COP26?

COP26 was a large, international event held In Glasgow, welcoming over 25,000 delegates, including world leaders, opinion formers, and top businesses to discuss and inspire climate change action.

One of the summit's main aims was to increase global activity surrounding the Paris Agreement; a treaty a treaty signed by 195 countries, aiming to keep the average global temperature as close to 1.5°C as possible.

What Were The Outcomes Of The COP26 Agreement?

There were several main declarations resulting from the summit, including:

• The ‘phasing down’ of fossil fuels, with a particular focus on coal, as it remains responsible for an estimated 40% of annual CO2 emissions. A last-minute alteration by the summit from ‘phasing out’ to ‘phasing down’ caused a mass of complaints, with individuals stating the ‘watering down’ of the phrase will have damaging consequences.
• Securing global net-zero by mid-century and ensuring global warming does not rise above 1.5°C, as laid out in the Paris Agreement.
• Ending and reversing deforestation by 2030, with more than 30 of the world's biggest financial companies (such as Aviva, Schroders, and Axa) promising to end investments for activities linked to deforestation.
• Cutting methane emissions by 30% for the year 2030.

A Focus On Financial Services

According to COP26 organisers, ‘to achieve our climate goals, every company, every financial firm, every bank, insurer, and investor will need to change.’

This belief is also mirrored by consumers, with YouGov survey data revealing that 51% of consumers feel that financial services companies should be doing more to help the environment.

With the combined expectations from both authorities and customers placing a spotlight on financial services companies, significant changes are expected to take place going forward.

So far, the government has already committed itself to making the UK financial system the greenest in the world, placing increasing pressure on financial firms to commit to carbon reductions.

Large financial institutions will face mandatory disclosure of climate-related risks and targets by 2023, leaving firms with the decision on how best to adapt and decarbonise their business offering.

When considering how each COP26 outcome specifically applies to financial services, research has revealed that banks have delivered $3.8tn in finance to coal, oil and gas firms since the Paris Agreement.

This directly contradicts the efforts of COP26, highlighting that a global effort by financial services companies is needed to ensure fossil fuels are phased down to achieve net-zero, starting with less funding being made available to businesses dealing in environmentally harmful products.

Additionally, financial services must consider their paper usage to support the reversal of deforestation. According to a 2017 EY survey, an estimated 507 million documents are sent to customers annually.

When you consider that the average tree provides 10,000 sheets of paper, financial services could be said to be responsible for the deforestation of over 50,000 trees a year.

It's time for financial services organisations to take action, making sure they go above and beyond to implement green initiatives into their company and support the global carbon-saving agenda.

What Can Your Company Do To Stay Ahead Of The Curve?

With the new mandatory disclosure on climate-action plans coming into force, one of the largest considerations for financial institutions will be composing a carbon-conscious strategy.

McKinsey advises businesses to go beyond the bare minimum, taking the time and dedication to turn pledges into actionable plans.

One of the ways organisations can play their part in the climate change initiative is through sustainable digitalisation.

Described as the process of acquiring ‘specialised software solutions to transform their business model from analogue to digital’, the companies who complete this will be seen as digital enablers and innovators.

When considering the COP26 goal to eliminate and reverse deforestation, and the severe impact financial services paper usage has, digitising communications is the most logical first step.

Not only can UK firms reap the environmental benefits, but they could also achieve annual industry savings of £1.3bn if just 80% of their customers were to go paperless.

How Can Firms Go Digital With Their Comms?

Email remains one of the most utilised communication methods to date, with an estimated 316 billion emails sent and received each day.

However, due to an innate lack of security, it has remained unfeasible for sending any documents containing sensitive information.

Software like Beyond Encryption’s Mailock is a secure substitute for traditional mail, helping your business go digital safely and seamlessly.

Already used by thousands of intermediaries across the UK, along with an increasing number of global institutions, Mailock is the secure email solution designed for financial services. As well as protecting critical business information, it is helping firms keep ESG goals front of mind and contribute to the protection of our planet’s resources.

It’s part of Beyond Encryption’s mission to guide the financial services industry on its journey to becoming more carbon-conscious, starting with their communications.

Mailock is the prime initiative for helping the financial services industry digitise their communications, cut carbon outputs, and deliver a meaningful contribution to the COP26 targets.

To see this in action, find out how financial services provider Aegon achieved an estimated 270 tonnes of carbon saving.

Final Thoughts

COP26 has brought greater visibility to the importance of every business doing its part to reduce CO2 emissions and deforestation. However, visibility alone is not enough.

Businesses need to act now, making sure the safety of our planet for today and future generations to come.

References:

Business calls for more action after COP26 deal is watered down, FT, 2021

Delivering The UK Climate Pact, National Archives, 2021

What is the Paris Agreement?, United Nations, 2021

COP26: New global climate deal struck in Glasgow, BBC, 2021

COP26: Climate deal sounds the death knell for coal power - PM, BBC, 2021

COP26: World leaders promise to end deforestation by 2030, BBC, 2021

COP 26 ends with global agreement to speed up action on climate change, UK Government, 2021

Should financial services companies fight climate change?, YouGov, 2021

UK to enshrine mandatory climate disclosures for largest companies in law, UK Government, 2021

Big banks’ trillion-dollar finance for fossil fuels ‘shocking’, says report, The Guardian, 2021

How Much paper Comes From One Tree?, Ribble, 2021

COP26 made net zero a core principle for business, McKinsey, 2021

What is Sustainable Digitalisation?, Digital SME Alliance, 2021

UK financial services failing to go paperless, 2018, Pat Sweet

Number of sent and received e-mails per day worldwide from 2017 to 2026, Statista, 2023

Reviewed By:

Sabrina McClune, 05.06.24

Sam Kendall, 05.06.24