Three COP26 takeaways for Canadian business leaders

Elliott Cappell Partner, National Climate Change Leader, PwC Canada November 12, 2021

Canadians are leading several initiatives to create a new investment landscape that supports our climate change ambitions

COP26 in Glasgow was like a giant waterfall of climate change news: a seemingly unending flow of powerful announcements and commitments, one after the next without pause for two weeks. Climate change impacts nearly every business, government and investor in Canada, and the resulting shifts in the climate policy and investment landscape will be felt nationally for years to come.

Here are but three important takeaways from COP26 for Canadian business leaders—each featuring Canadians playing a leading role:

Streamlining the climate and ESG standards, co-led from Canada

The world of climate and wider ESG disclosure and reporting has expanded rapidly. But that’s resulted in a complicated web of different standards and processes. At COP26, regulators, global accounting bodies and other organizations announced plans to significantly and urgently streamline the alphabet soup of assorted climate and sustainability reporting frameworks.

The new International Sustainability Standards Board will create “a comprehensive global baseline of high-quality sustainability disclosure standards to meet investors’ information needs.” Led from Frankfurt and Montreal, the ISSB will quickly consolidate and improve the landscape of “climate and general disclosure requirements.” The ISSB has already released early frameworks and drafts demonstrating a material change in direction that will impact how investors and businesses disclose and report on climate change.

Mobilizing the capital for a global transition, led by a Canadian

The Glasgow Financial Alliance for Net Zero (GFANZ), led by former Bank of Canada Governor Mark Carney, announced a landmark $130tn of capital committed to financing the global transition to net zero. This is welcome news for Canada, which—according to a recent report from RBC Economics—needs to attract $2tn in financing for our national transition to a low-carbon economy.

While there are already criticisms of GFANZ for double counting or of Greenwashing,  the magnitude of this capital allocation is a clear signal that climate action is now mainstream.  In years past, climate finance was considered somewhat on the fringes, whereas now climate risk and opportunity are clearly front of mind for investors.  As such Canadian business leaders need to know that there are opportunities for low-carbon financing, and that it may grow more challenging to access finance for higher carbon intensity initiatives.

Prime Minister Justin Trudeau joins the global call for an international carbon price

As detailed in this joint report from PwC and the World Economic Forum, an international carbon price floor could decrease emissions by more than 12%, with an economic impact of less than 1% on global GDP.

Taken together with GFANZ’s commitment and other climate finance pledges at COP26, Canadian investors and businesses in higher-emitting sectors—especially in energy generation—should be feeling the heat. COP26 provided ample evidence that investment is flowing away from coal, oil, gas and other carbon-intensive forms of energy generation. As explained in the Canadian Institute of Climate Choices’ recent report, Sink or Swim, 800,000 jobs are at risk across the country in this transition, including 9% of all jobs in Alberta. 

COP26 should be a wake-up call for business leaders in Canada to accelerate our transition. An orderly and swift transition is most likely to increase Canada’s share in the global low-carbon economy. There is too much at stake and too little time to wait. As PwC’s annual Net Zero Index notes, there are only two business cycles left to dramatically accelerate our decarbonization efforts.

With Canadians leading the way internationally, our business leaders are well positioned to deliver the multi-stakeholder and cross-sectoral approach we need to transition to net zero by 2050.

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