COP26 Daily Journal

COP26 is here, and marks a critical two weeks for building a resilient future for our planet. Each day, we will be sharing our perspectives on the key themes emerging from the conference.

Day 9 is transport day at COP26. One of the biggest transportation areas to address is supply chains. Daniel Polatajko, Carbon Accounting Specialist at Cervest, shares his insights on the Coalition on Materials Emissions Transparency (COMET) framework, and it’s potential to unlock visibility across global supply chains.

One positive note from the panels and sessions running alongside COP26 negotiations is the sense that the business sector is motivated to take climate action now, with or without policy in place. The real challenge is implementation. Many businesses want to set climate goals and measure progress, but they need to understand their climate impact first. One consistent message is that to enable implementation and identify vulnerabilities, we need shared, comparable, standardized data.

Capturing true visibility of climate risk across supply chains presents a significant challenge for most companies. Since supply chains cover the entire production process, from materials sourced through to delivery on customers’ doorsteps, they are often the areas with the biggest environmental impact. Businesses need to know how to meaningfully engage with the emissions occurring in their value chains. With eight global supply chains (food, construction and fashion are the top three) accounting for more than 50% of annual greenhouse gas emissions, it’s imperative that we make quick progress. To demystify climate risk across supply chains, standards applied within separate industries and geographies need to be made compatible and comparable. This is where the COMET framework comes in.

Among the many new initiatives and frameworks announced at COP26, it’s easy to understand why the COMET framework might have slipped under the radar. COMET, a global network of companies, universities and NGOs, are creating a standardized framework with universal metrics to attribute emissions across supply chains. A standardized framework means organizations can more accurately attribute embedded carbon to each actor as it passes from supplier to consumer. With a clear, democratised view of supply chain emissions, companies are held accountable for the emissions they cause, not just those they produce, providing the foundation for meaningful interventions that genuinely reduce climate impact.

Across 2021, COMET has been running a pilot program, testing out the framework in the steel industry. It’s too early to comment on the framework’s ability to harmonize carbon accounting across sectors, but initial outcomes seem promising. Here are some of the key challenges it has the potential to address:

Standardizing how we calculate Scope 3 emissions

Organizations calculate their direct and indirect greenhouse gas emissions using three categories, Scope 1, 2 and 3. Scope 1 and 2 cover all the direct emissions and indirect (e.g. electricity used) emissions created during the production process. Scope 3 is all the emissions a company is indirectly responsible for, up and down its value chain.

Scope 3 emissions account for up to 90% of companies emissions. Without addressing Scope 3 emissions, we won’t meet climate change commitments. Reporting has mostly focused on calculating Scope 1 and 2, mainly because calculating Scope 3 is very complicated. Supply chains are often extremely large, highly complex and impenetrably opaque. There is no standardized method of calculating Scope 3 emissions, and those that do exist are difficult to apply in practice. The framework is a step forward in removing the Scope 3 carbon accounting barrier.

Offering a solution on fair attribution of carbon across supply chains

Fairly attributing the amount of carbon each actor should be responsible for across supply chain networks presents a complex carbon accounting headache. Even when organizations have a good visibility across their supply chain, there is no real uniform guidance on how to decide the emissions each actor in the value chain should be accountable for, from suppliers to delivery services. Attributing carbon in a fair, consistent, standardized way is the key to targeted and collaborative ways to address climate risk in supply chains, and provides more confidence to consumers choosing products based on emissions.

Without transparent reporting, there is potential for carbon to just be “moved” away from a company or country. This practice, known as carbon leakage, gives the impression they are reducing emissions when in reality their climate impact is the same or increasing. The framework offers at least a partial solution to carbon leakage through increased transparency and fairer carbon attribution. Preventing carbon leakage must be a critical part of any Net Zero strategy, and will be enabled by standardized frameworks like COMET.

Advocating for horizontal data-sharing and collaboration across sectors

This does require a high level of cross-sector cooperation. Meaningful, impactful action means data-sharing and being open and transparent about climate risk. COMET aligns with a complementary project called the Carbon Transparency Partnership, led by the Rocky Mountain Institute (RMI) and the World Business Council for Sustainable Development (WBCSD). This project aims to increase collaboration between businesses in supply chains and create a shared understanding of emissions and lead to more collaborative and open approaches to climate risk.

Opportunity to include Scope 3 emissions in mandatory disclosure reporting

National governments have been ramping up new rules around mandatory climate risk disclosure, with New Zealand being the first country to implement mandatory climate reporting legislation in October 2021. Currently, Scope 3 emissions are considered a nice-to-have, optional addendum to emissions reports, despite the fact that for many large companies, Scope 3 emissions make up the vast majority of their overall emissions profile.

If reporting isn’t including Scope 3 emissions, we risk these remaining completely unaccounted for and absolving companies of their responsibility to reduce them. It is critical that we put standardized reporting in place, based on unified climate intelligence. This also makes automated disclosure possible, which makes the process of climate risk reporting much easier for businesses. If COMET can break down some of the barriers to accounting for Scope 3 emissions, this will support broader and deeper engagement with value chain emissions and strengthen the case for including Scope 3 in future mandatory reporting.

Cervest’s perspective is that as the framework develops following the pilot, one area COMET should look to integrate is physical risk. Full visibility and data sharing across industry supply chains will help support organizations to understand where their supply chains are vulnerable, especially in relation to extreme weather events like flooding and long-term climate impacts such as temperature increases. Mitigation is one half of the climate risk puzzle, adaptation is the other. Frameworks that support organizations to integrate the two will be most effective. With the world's population dependent on global supply chains, it is critical that they are both resilient and decarbonized.

To read more about mandatory disclosure requirements, and how businesses in the UK and US are preparing for such measures, download our ebook Navigating climate-related financial disclosure.

Nigel Topping announced that #RaceToResilience has released a metrics framework to support adaptation decisions and illustrate success. Dr. Claire Huck, Dr. Helen Beddow, and Sachin Kapila share their insights.

Decarbonizing our economies and businesses has been the focal point at this year's COP, and Net Zero is being actioned on a large scale. We need the same levels of global commitment to drive action on climate resilience.

Based on a 1.5 C scenario, 3.9 billion people will be exposed to climate hazards by 2030. The climate hazard with perhaps the biggest impact is heat stress, affecting a projected 1.9 billion. Sending a powerful visible message on loss and damage, Tuvalu's Foreign Minister Simon Kofe gave his COP26 speech standing knee-deep in seawater to draw attention to island nations threatened by rising sea levels. This message has been echoed across many stories of damage and loss presented to the negotiators at COP26. The impacts of rising temperatures are projected to cost the global economy over $2.4 trillion dollars with the loss of 80 million jobs across the globe by 2030.

How can we scale up action on adaptation?

The first step towards climate resilience is true visibility into climate risk. Everyone needs to see and understand how climate change will physically impact them, their families, and their communities. For this to happen, we need access to actionable, comparable, standardized data on resilience. Nigel Topping announced Monday that Race to Resilience has developed a metrics framework to support decision-making on climate resilience, and indicate what success on adaptation looks like. Here are the key points we’ve taken from the framework:

Resilience and Net Zero funding need to be equally balanced

Action on resilience will take funding. With climate volatility only set to increase, adaptation and resilience need to be given the same focus and funding as Net Zero. This week, the UK pledged £290 million towards a global Adaptation Fund. But this is a drop in the ocean in comparison to the estimated $100 trillion committed to enabling Net Zero by 2050 through global financial alliances under Mark Carney's GFANZ. Measuring and quantifying resilience means that targets can be set, tracked, and reported as part of national adaptation plans, hopefully scaling up both the volume and effectiveness of financing flow for climate resilience.

Create strong narratives on resilience and adaptation

Resilience is a measure of our capacity to cope and respond to the physical impacts of climate change, and adaptation is the process of adjustment we need to make to build resilience. How can we move adaptation further up the agenda? A lack of cohesive storytelling is one reason adaptation has been overlooked in comparison to Net Zero. Adaptation targets are much less defined than the clear 1.5 C target for mitigation. We need to quantify adaptation in ways that make resilience and adaptation tangible for the individual.

We need shared, comparable, standardized resilience data

We need comparable and standardized data on climate resilience, but also data we can understand, interpret and therefore, communicate. However, traditional data capture and analysis of risk tend to be retrospective. This can give organizations a false sense of security that they are managing climate risk. It also makes it easy to overlook initiatives and actions that are improving resilience, because they haven’t yet had an impact and aren’t present in the data. To gauge an accurate picture of vulnerability, climate risk, and resilience, we need to combine data with forward-looking methods, such as scenario planning.

Set resilience standards for building new infrastructure

One area in the framework that could have been bolder is resilience standards. New infrastructure and assets are being built all the time. We need to ensure that resilience is built into all new infrastructure projects from the outset. Planning needs to prioritize being climate-resilient over being cost-effective. One way to ensure this is to put in place regulations that ensure new buildings are climate-resilient, and set resilience targets — for example, proposing that local councils and governments set a target that 100% of new buildings meet climate resilience standards by 2030. This means they have been designed to address the climate hazards that are critical in their local area, whether this is heat stress, flooding, or extreme rainfall.

This will be a challenge. When it comes to measurement, metrics, and disclosure on adaptation and resilience, it’s important we accurately reflect and articulate real outcomes and impacts that create measurable change in the real world. Resilience is a complex, multifaceted concept incorporating a range of climate hazard types and interconnected socioeconomic factors. Climate is a global problem but often needs regionalized solutions so metrics also have to incorporate local granularity. To push forward on adaptation, we need comparable success metrics to enable the same momentum and funding that drove Net Zero into the public consciousness.

Join the conversation on resilience on LinkedIn, or visit our COP26 page for our latest news and updates from the event.

Following Youth and Public Empowerment Day at COP26, Cervest’s Mark Hodgson, Chief of Partnerships, shares how universal access to open, shared Climate Intelligence can empower everyone to make decisions and take practical, tangible action on climate change.

Public engagement and empowerment is critical for a world where we all adapt with climate change to create a resilient future for our planet. A climate resilient world is built through climate intelligent decisions and actions, and this can only happen when the educational resources that will enable climate action are available to everyone.

There has been a lot of frustration and anger expressed towards international leaders during COP26. It’s clear that people feel disempowered, and want to convert their anger and frustration into tangible, positive impact. The scale of the change that needs to happen is immense, and understanding where to take meaningful action can be overwhelming. Climate change is an interconnected, highly complex issue to navigate, and will involve everyone making fundamental changes to every aspect of our lives. Sweeping statements about solving climate change that don’t connect to real action, no matter how well intended, can end up sounding like platitudes and sound bites. Real public empowerment involves providing everyone the knowledge to understand the direction their actions need to take.

We need to enable everyone to understand their individual relationship with climate change

The first step is to make climate change real at an individual level. Net zero is essential for climate stability. But it won’t guarantee us climate resilience. It's imperative that we invest in educating people to discover the connection between the things they care about and the visible impact of climate change.

On a personal level, I care about how an increasingly volatile climate will impact my family and my local community from our homes and workplaces, and critical infrastructure providing vital services such as transport networks, schools and hospitals. I care about how and when those services will be compromised by climate change, and what actions I can take now to prevent that. My son is nine, and he is concerned that his favourite animal, the lynx, might lose it’s habitat through unchallenged climate change. He wants to know what he can do. These concerns might be personal to me and my son, but they are similar to concerns shared by billions. We need to think about how innovation and technology can empower people to ask the right questions and understand their personal stake in climate risk.

Everyone must see themselves as a decision-maker on climate action

To truly empower public action on climate change, all of our responses, from policy change to green innovation and technology, need to consider everyone as an individual who has a personal stake in fixing climate.

Where we stand today with climate change is the result of humanity's billions of individual and collective decisions. Many of these decisions we automate every second of every day through business transactions and workflows. Ultimately, we need to align how we plan, create, and use our natural resources and built assets to the realities of climate change. This is not just about providing data and analysis to people and seeing them as passive receivers of changing policy, services and information. We need to see everyone as a climate-enabled decision maker, a potential agent of change. This means placing Climate Intelligence at the heart of every decision society makes.

By creating a Climate Intelligence platform that enables anyone to link the effects of climate change to the assets that matter to them, Cervest is making the effects of climate volatility understandable, urgent, and actionable to everyone. Our rationale is simple: Giving everyone access to the same information is key to incentivizing collective climate action.

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Jake Jurewicz, Head of Strategic Projects, shares why delivering global Climate Action on the clean energy transition will need to take a nuanced approach to quitting fossil fuels.

Over 40 countries have pledged to phase out coal by 2030 at COP26. Although we agree this is a step forward to eliminate coal from the energy sector, the absence of the US China, India, and Australia could jeopardize the global effort. To realize these commitments to quit coal, we need to take a very targeted approach to electrifying and decarbonizing the global economy.

The scale and magnitude of infrastructure development this requires is massive. Over the next 30 years, we will need to roughly triple current infrastructure and the debt and equity markets that finance it. This will be a massive, global undertaking, but it’s important that we take a nuanced, asset-level approach to decision-making.

New infrastructure will need climate intelligent design

To economically transition our energy system away from fossil fuels like coal, we need to electrify as much of the global economy as possible while simultaneously decarbonizing all the power plants that feed the electric system. Meeting the goal of a 2oC temperature rise by mid-century translates to roughly a tripling of all-electric infrastructure globally, power plants, transmission & distribution, storage, and end-use. But we need to be very thoughtful about how and where to place new infrastructure. With a large amount of climate change already locked-in, we have to ensure we build resilient infrastructure that considers climate risk from its inception.

We need to take a data-driven approach to investment

The electric system is inherently a very distributed, responsive system and identifying the best infrastructure and policy options is often a very local question. Ultimately, it is controlled by national or state-level decision-making. But a lot of those decisions are made in response to the aggregated decisions that all of us individually make every day on our buildings, our assets, our vehicles, our gadgets, they all use energy and electricity. These drive upstream investment decisions at the distribution level, and ultimately at the transmission level and investment level.

Access to actionable intelligence on climate risk can support decision-makers to prioritize where and how to invest. Replacing fossil fuels with green and renewable energy sources is essential, but where and how we do that must be carefully considered. Installing wind and solar makes sense in certain locations, but it's not always the most economical, equitable, or affordable decision in others.

Electrifying everything in our workplaces could be great for decarbonization, but from a resiliency standpoint, what happens if they lose power when temperatures outside are subfreezing or over 40℃, conditions we know are dangerous to human health? We need to view all decisions about new, green infrastructure for decarbonization through an asset-level lens.

The Green Transition needs to keep energy affordable

We are all dependent on energy, but on a day-to-day basis, we don’t often think about what it takes to get energy into buildings, transport, and gadgets. Everyone depends on current infrastructure for basic human needs such as staying warm through the winter and cooking our food. But the energy that powers our lives exists behind the scenes and is often an afterthought - until something goes wrong and everyone swiftly realizes just how quickly the knock-on economic impacts can ripple out.

To truly support climate resilience, we need to consider what people can tolerate in terms of energy affordability. The recent rise in gas prices, particularly in Europe, is a good illustration. If it’s a cold winter, it will be a very expensive winter for a lot of homes throughout Europe. We have to be very specific about the investments we make to ensure the transition to zero-carbon solutions is affordable and equitable to everyone.

Navigating complexity and interdependencies within shared intelligence networks

Energy is the foundation of our modern economy and interwoven into every aspect of everyday life - which means that there are complex interdependencies we need greater visibility of when determining investment decisions. We shouldn't make energy transition decisions in a haphazard way, we must take into account the complex web of interdependencies first. And that means asset level granularity globally for all parts of the economy, across international borders and jurisdictional lines.

To deliver resilient, carbon-neutral infrastructure, we need to create collective, shared Climate Intelligence networks so that the projected impact of climate risk on physical assets is visible to everyone. When all decision-makers have the same visibility of risk on the same assets it enables a networked effect of climate-informed decisions that will drive change at a transformative pace and scale, with the nuance and care necessary to navigate highly complex, interconnected systems.

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For day three of COP26, Partha Bose, Cervest’s Head of Capital Markets, shares his insights...

Capital markets are powerful agents for change in our society and can provide a comprehensive framework of incentives and motivations to help create some of the systemic societal changes necessary to deliver on Climate Action. Partha Bose, Cervest’s Head of Capital Markets, shares his insight below.

Every financial decision needs to take climate into account

Net Zero commitments are essentially a way of trying to improve how we behave in the future, but we haven’t yet understood how to react to the physical impacts of climate change that are happening in the here and now. Recent trends in extreme weather events have amply demonstrated that climate risk is an economic risk. To quote Sir Nicholas Stern, ‘Climate change is a result of the greatest market failure that the world has seen.’

A large part of this is due to the complexities of working with Climate Intelligence. The financial system doesn't yet have the right visibility and metrics to incorporate all the many dimensions of climate risk into decision-making.

We need to understand not just how we finance the world of tomorrow, but also how we allocate resources and capital to protect existing investments and assets from the impacts of climate change. We might be making homes that consume energy much more efficiently, but we also need a framework for investing capital in adaptation and mitigation where it is most urgently required.

Climate Action needs urgent access to capital

Just as every financial decision needs to be informed by Climate Intelligence, every program for Climate Action will depend on access to capital. Financing is the key dependency for delivering on promises made at COP26.

Climate change impacts every person, business, and asset. The financing program has to go beyond domestic boundaries to address the most vulnerable regions and geographies where change is most necessary.

The financial system needs a global, standardized framework that enables everyone to assess the climate implications of investment and financing decisions in a way that is quantifiable and transparent. This combination of open Climate Intelligence and capital financing is a crucial mechanism to make climate accountable decisions within financial services.

To drive change we need mechanisms for embedding Climate Intelligence into existing workflows

Capital markets need systematic mechanisms to incorporate climate risk into existing workflows like credit approval, target investments, etc. with the same level of ease as accessing other information currently incorporated into their decision making.

Just like when someone applies for a credit card or a mortgage, all stakeholders can access their credit score - access to climate risk scoring needs to follow a similar process. Climate risk data needs to be shared, open and transparent, allowing everyone access to the same information, with confidence that they're comparing like for like.

Rethinking how we approach ROI for climate projects

Climate adaptation projects are preparing for risks based on projections of future climate scenarios which contain an inherent amount of uncertainty, making it hard to gauge success and measure impact. Within financial reporting, there are well-recognized methods of understanding return on investment.

Currently, the world is dealing with unprecedented costs due to climate hazards. We should be looking to adapt existing financial reporting methods to measure the decrease in spending in response to a climate hazard as a return on the cost of investing in mitigating them. For example, a drop in property value destroyed by wildfires in California would be a suitable metric by which to judge the return on any investments made to prevent future wildfires from occurring and spreading.

Climate action requires future-facing adaptation and mitigation financing. But without making sure that we are fully aware of the risks that are already baked into our ecosystem for the next few decades, we will miss the opportunity to harness the power of capital markets to build capacity for climate resilience.

This is where digital innovation in fintech and climate tech converges to provide decision-useful Climate Intelligence, bridging the gap between climate science and financial decision-making. At Cervest, we are fusing innovations in machine learning and modeling with climate science to embed Climate Intelligence into transaction-level decisions with EarthCap. Share your thoughts and join the conversation on climate finance on LinkedIn.

Cervest’s experts Adam Pain, asset data analyst and former Global Forest Watch data scientist, ecosystem scientists Emily Neil and Dr. Greta Carrete Vega, share their insights on the COP26 deforestation deal.

Over 100 global leaders came together to form an agreement (representing over 85% of the planet's forests, including Brazil, Russia, and China) to end and reverse deforestation by 2030, one of the first major commitments to come out of the COP26 negotiations. Delivering on this promise won’t be straightforward, as demonstrated by earlier deals on deforestation that have failed to meet their targets.

Incorporation of climate risk into planning for natural assets

The “conserve and restore” approach of the deforestation deal combines Net Zero emissions and climate risk mitigation efforts. New trees grow rapidly, removing and capturing carbon from the atmosphere, which helps achieve Net Zero targets.

The transition to sustainable agriculture and land use also reduces vulnerability to climate change impacts by reducing water stress, drought risk, and flooding risk. If implemented successfully it will contribute to both future climate stability and climate resilience, but all planning will need to take into account how natural assets, such as forests, will be impacted by locked-in climate change over the coming decades.

Rethinking the way we attribute value to our natural capital assets

We need to rethink how we attribute value to our natural capital assets, and truly see our remaining forests as assets that need to be safeguarded, rather than limitless, exploitable resources.

Forests are natural capital assets with an intrinsic value of their own. They contain a stock of resources, including water, soil, species, and provide valuable benefits and services that underpin our economy and society. One estimate suggests that half of the world's GDP, roughly $44 trillion, is moderately or highly dependent on nature.

What we need are standardized ways to quantify and compare climate risk by ascribing real, tangible value to our natural capital assets such as forests. Everyone will require greater visibility of the tangible benefits received from natural capital assets and to understand their natural dependencies.

If a riverfront hotel starts flooding suddenly and unexpectedly, stakeholders might not be aware that this is happening because of deforestation upstream. The conservation of these natural assets safeguards their contribution to climate resilience. Without knowing about such interdependencies there is no opportunity to act.

Empowering local communities with Climate Intelligence

Protecting our natural assets, reducing vulnerability, and building resilience means empowering local and indigenous communities with information on climate risk and including them in all decision-making. We can’t build climate resilience by being exclusive.

Everyone needs to be transparent about the risks — and opportunities — of climate change impacts, which can only happen if we all have access to shared information on climate risk. Equitable access to Climate Intelligence for informed decision-making is essential. At Cervest, we recognize strengthening natural assets will be a critical part of a climate-resilient future for many -- if not all -- organizations. We will be incorporating natural capital assets into our Climate Intelligence platform in 2022. Enabling greater visibility of climate risk and natural asset resilience.

Delivering on the deforestation deal will need everyone to understand their climate risk in relation to both built and natural capital assets. Transforming the deal from promises into action requires rethinking how we conceptualize value in relation to natural capital assets and ensuring the deal is put into practice in a way that is fair to all communities. To receive updates from Cervest about integrating natural assets into our Climate Intelligence platform, subscribe to our newsletter.

It’s fantastic to see adaptation to climate risk move to the top of the agenda as the COP26 Presidency released the seven-page Glasgow Imperative paper on adaptation, focusing on the implementation and delivery of five key pillars:

• Building Resilience Across all of Society

• Effective Risk Management

• Transforming Finance

• Catalysing Locally Led Action

• Harnessing the power of nature

Addressing vulnerability is central to building climate resilience and adapting with climate change. Reducing inequality is at the heart of The Glasgow Imperative, which makes building resilience across all of society the first of it’s five pillars, placing vulnerability at the center of any climate resilience framework.

Putting these principles in place is a key step towards building the necessary momentum for action on adaptation. However, there were places that the report needed to go further:

Integrating adaptation and mitigation

With the Net Zero strategy outlining the UK government's plans for mitigation last week, it felt like the report missed a clear opportunity to take an integrated approach to adaptation and mitigation and highlight the opportunities for innovation that finds synergies between both.

Climate Literacy

Effective climate risk management will need everyone to have access to the tools, skills and knowledge necessary to make informed, climate intelligent decisions on climate risk and this isn’t in place yet. This would have been a good opportunity to signal how we might bridge the gap between awareness and preparedness on climate risk.

International collaboration

Climate change impacts won’t follow international borders. The report avoids acknowledging the complexity of international collaboration on adaptation and the need for joined-up thinking and collaboration on implementation and delivery across international borders.

What next for adaptation?

To build a resilient future for our planet, decision-makers in policy, business and local communities should look at an integrated approach to physical and transitional risk. Joined-up thinking, commitments to adaptation financing and international collaboration are essential to understand climate risk, make adaptation plans now and protect the most vulnerable. To empower economies and communities to adapt with climate change on a global scale, we need everyone to be making climate intelligent decisions on climate risk.

Discover more about how Cervest is involved with COP26 here, and follow us on LinkedIn and Twitter for more updates.