Environment equals social

By Colm Kelly, Global Leader, Corporate Sustainability

As the dust has settled (just a little bit) post-COP26, I have been trying to figure out whether we are making progress in terms of the overarching objective of achieving net zero within the necessary timeframe. The debate on this question has been pretty noisy, so here are some thoughts as I try to stand back from the noise and consider the overall picture.

I think it important to start with a reflection that COP is part of an ongoing process, not just an event. The outcomes from the event are neither perfect nor complete in terms of the overarching objective of net zero. But I do think some of these outcomes have hugely significant implications nonetheless, perhaps more than might be immediately obvious. And there is an urgent reminder of the importance of the relationship between E and S, between people and planet.

For the first time, it makes sense to do a meaningful assessment of the overall significance from the perspective of two different but highly interdependent categories of actor - governmental on the one hand, and financial and economic on the other.

1. Governments

No question, some significant agreements were reached and commitments made (methane, forests, etc.) - but as many commentators have pointed out, they are clearly “incomplete” in the context of the current direction of overall travel. However, some of the broader signals on the direction of travel are arguably even more significant:

  • The inclusion of coal in the final statement is certainly more significant than the debate about the wording used. This is especially pertinent given the different realities faced by the different countries involved in the debate.

  • Without question, there is a strong sense of common threat and therefore common interest in responding. This has not always been the case, and is the first foundation for collective action.

  • But there is an equally strong sense of the essential reality of profoundly different starting points for the next stage of the journey, which in turn means the journey itself must also be profoundly different for different countries. Everyone understands the destination, but mandates for a common transition are not only unrealistic, they are both destructive to the overall shared ambition and potentially to the welfare of many human beings.

  • To be serious about a “just transition,” this essential human reality, the implications for citizens and their families and communities must be reflected in the expectations and the commitments - or we are doomed to failure in terms of the common ambition.  Markets in which hundreds of millions of citizens rely on carbon-based energy cannot shut off the supply to their citizens without a viable alternative.

Equally critical, therefore, is that this is about transition - everything must be considered in the context of the transition to a common goal - not (only) the current status.

The decarbonisation journey therefore requires:

  • A truly just transition which reflects human needs and realities for all citizens

  • The scaling of clean tech alternatives at a pace and scale which can match the need for alternatives to carbon over the transition period - an absolutely massive challenge which by definition must be reflected in transition plans and commitments (without diluting the emphasis on the common end goal).

The mechanisms, which can deliver on the specific elements needed to drive transformation at this scale and pace, will be essential - and other actors (beyond governments) have a huge responsibility to ensure this can happen. For this reason, the role of the private sector and of the broader economic and financial system as a whole cannot be understated.

2. Economic and financial system, private sector

The implications of a number of agreements, announcements, and commitments related to the operation of the broader financial and economic system are therefore hugely significant - and possibly under-appreciated in terms of the significance of the impact which will follow.

  • Establishment of GFANZ (the Glasgow Financial Alliance for Net Zero). This commits the participants in a range of sectors within the financial system in particular to specific requirements linked to the criteria of the UN’s Race To Zero campaign, which includes the making of a net zero commitment aligned with a 1.5 degrees scenario, with specific interim targets by 2030. The sectors involved include banks, asset managers, stock exchanges, insurers, ratings agencies, and auditors. Much of the immediate commentary has largely focused on a debate about the number - the volume of assets covered in the portfolios of the committed sectors ($130tn) and whether this is accurate. This is missing the point about the broader implications almost entirely.  The commitments, which underpin GFANZ, have already begun to resonate through portfolios (i.e., investees, borrowers, the insured, etc.), and by extension through their supply chains. This will certainly accelerate with hugely significant impact at pace and scale, cascading through to businesses and to their supply chains.

  • Significant commitments were also made for various important sectors - the Glasgow Breakthroughs focus on delivering clean tech alternatives at pace and scale for important sectors (e.g., agriculture, steel, hydrogen, road transport, power). Further progress was also made in a range of sectors under Climate Action Pathways - again with huge implications for the supply chains in these sectors.

  • And the establishment of the International Sustainability Standards Board (ISSB) with commitment to land on reporting standards for ESG generally and climate in particular (and to do so quickly) provides a hugely important and much needed element in the core of the financial system to enable this transformation.

These (primarily) private sector initiatives are also “imperfect and incomplete” - much work remains to be done to ensure that the necessary processes for implementation (and accountability) will follow, but nonetheless when taken together they have hugely significant implications for all businesses and their supply chains.

“Time and again, we need to remind ourselves that this entire debate is not only about protecting our planet, it is about protecting the people, the families, the communities who live on our planet."

What’s missing, incomplete, that now needs focus?

  • There is a major risk of shifting problem assets out of the increasingly transparent public markets and into non-public (could be private, but also state-owned) which means pushing the air out of one side of the balloon but into the other side of the same balloon. 

    1. Decarbonising a portfolio is NOT the same as decarbonising the economic system.

    2. This requires governments to play their part to ensure divestment does not simply lead to carbon-producing assets continuing to operate unabated, but under different ownership.

  • This leads to the significance of market based carbon pricing (not for offsets, which made progress in COP, but for carbon itself, e.g. via carbon taxes). The politics of carbon pricing are really challenging, but the role they can play to ensure a level playing field as well as drive carbon out of supply chains is hugely significant. But they must reflect real human concerns in the design - of which more below.

  • The scale and pace of providing cleantech alternatives is insufficient. The increasing focus on new and emerging technologies is genuinely exciting, but it has to be prioritised to deliver at the pace and scale we need to support decarbonisation within the time available - and in the places where it is most needed.

Time and again, we need to remind ourselves that this entire debate is not only about protecting our planet, it is about protecting the people, the families, and the communities who live on our planet. It feels to me like this can be missing in the debates about what needs to be done, but also HOW it can be done. There is plenty of well intentioned talk about a “just transition,” but we need to get more practical about what a “just transition” actually means in practice.

  1. Pace of transition must reflect human needs in different countries - albeit with a common end game goal of net zero. To decarbonise at scale, countries need to be able to provide for their citizens with alternatives. And we need to work together across the globe to make this happen.

  2. The inevitable disruption to communities reliant on carbon is not just about energy - it is also about employment and the economic viability of entire communities

    • Green jobs will not match the needs of these communities

    • This requires a holistic economic strategy for those regions and communities, not limited to green energy. 

  3. The political challenges of implementing carbon taxes and the resulting increases in energy prices are real and obvious, and cannot be ignored.  Citizens often cannot or are unwilling to pay the higher prices.

    • So the design of carbon pricing must reflect this reality, building in features which go beyond the technical economic objectives, and which reflect the human concerns and realities.

  4. We are not doing enough to protect vulnerable communities everywhere from the already real effects of climate change. Climate resilience is a very real issue for many communities, for businesses, and for governments. We need to move more quickly, to do more.


The outcomes of COP26 are neither perfect nor complete. But neither should they be dismissed as a failure. This is a process which will last years and decades. We have much to learn from what has already been realised, and even more to do. But we can and should remain determined to continue to make progress, and optimistic that we can do so. An overarching reminder at every step that this is about people, families, and communities will help, both in terms of the commitment required, and the imagination needed to design solutions to solve the very real challenges we face.

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Colm Kelly

Colm Kelly

Global Leader, Corporate Sustainability, PricewaterhouseCoopers International Limited