Podcast transcript: How COP28 can inspire meaningful climate action

Bruno Sarda

Hello. And welcome to the EY Sustainability Matters podcast. Our regular look at ESG and sustainability topics, and how they impact businesses around the globe. I'm Bruno Sarda, Climate Change and Sustainability Partner at Ernst and Young LLP, and your host for this series. Today, we have a special episode recorded on video here with our guests in person in New York City as we wrap up a busy and dynamic Climate Week, and UN General Assembly. And we're here to talk about the upcoming 28th UN Climate Change Conference of the Parties, more commonly known as COP28. And the conference will span two weeks, starting November 30th in the United Arab Emirates city of Dubai, where global decision-makers, policymakers and thought leaders from all over the world will gather with a mutual aim to discuss the urgency of climate change, related decisions and the need to drive global transformation for a climate-resilient world.

And this year's COP marks several important milestones that we will touch upon today with our guests. It's been seven years since the Paris Agreement was adopted at COP21. Only seven years remain to cut emissions in half by 2030 in order to remain on target to limit global warming to 1.5 degrees Celsius. As a result, this year's COP marks a pivotal moment for us to assess and address where we are today, and how much work is left to do. It's the first ever “Global Stocktake” that is scheduled to conclude at COP28 and will critically assess our global response as a global community to the climate crisis, where we need to accelerate climate action in order to achieve the goals of the Paris Agreement. And while a large focus of this year's events will focus on the Global Stocktake assessment, there will also be a focus throughout on the cross-cutting themes of technology and innovation, inclusion, frontline communities, and finance.

All of this important discussion and discourse will take place in a year, where we are seeing and living through the effects of climate change in real time. This past summer alone has been one of extremes. Canadian forest fires suffocating the US northeast, Maui fires or Libya floods and many other tragic and devastating climate-related events. Heat records shattered across the globe from Spain to Arizona. So, what can we do now, especially businesses, to address the crisis? Why are events like COP important for businesses and policymakers alike? How can we address the gaps and the pace and skill of progress and drive meaningful climate action forward?

The decisions from last year's COP influenced corporate responsibility strategies across the world in the past year. These are just some of the questions that we will explore today with our guests. And with that, I'm very glad to introduce my esteemed colleagues, Amy Brachio, EY Global Vice Chair for Sustainability, and Matt Bell, Head of EY Global Climate Change and Sustainability Services. Welcome to you both.

Amy Brachio

Great. Thank you.

Matt Bell

Thanks, Bruno.

Sarda

We're going to discuss this extremely, both important and urgent, timely topic. Matt, I'm going to start with you. As, you know, I mentioned earlier, this year's COP will be the first since the Paris Agreement to formally evaluate progress on the world's efforts to address and adapt to climate change through this process known as the Global Stocktake. So, what does this mean and what are we likely to learn from that?

Bell

Yeah, thanks, Bruno. Look, the Stocktake is a really interesting process. Let's go back a little bit. So, we just had the Sixth Assessment Report — the synthesis of all the climate science that tells us where we're heading. And it looks like we are not heading toward the Paris Agreement, right? We are definitely not going to keep within the 1.5-degree hope, or even the 2-degree expectation that was set in Paris in 2015. The Global Stocktake is the first chance for us to actually understand, at a country-by-country level, how we're progressing. So, each country has made a commitment around their nationally determined contributions: that is basically their plan. What are they going to do out to 2030 that enables them to hit their long-term trajectory of net zero? And this is the first chance that we take a really critical look at how we're going.

Sarda

Amy, COP28 attendance is expected to be maybe as high as 90,000 people, which would be twice as much as the last COP, which was already the biggest COP.  What does that mean? Is that good? What is that likely to achieve?

Brachio

Great question. And I think that what I would say is that it's good with balance. And so, what I mean with that is that we cannot lose what the heart of COP is all about and bringing together the parties to make sure that we're making the progress to 2030 that the world needs us to make. But the reason why I say it's good, because not all those people will be in there negotiating, right?

Why I say it's good is we need the attention. We have an urgent situation in front of us and we need to make sure that there is appropriate collaboration beyond just government officials to get it done, as well as attention on the matter to make sure that there's the accountability to make sure we bring it to life.

Sarda

Yeah, for sure. And Amy, if I can stay with you, you know, you meet and talk to clients all over the world, what are you hearing from them? Why are they going? What are they expecting to either do or see out of it?

Brachio

Yeah. So, I think, for many of EYclients, they feel it's very important for them to be a part of the dialogue. But those that are choosing to go are those that feel that they can have an authentic impact, because it's not something that you go as sort of a tourist activity. And so, where I'm seeing EY clients really intent on going is when they feel like they have a role to play in driving action forward.

Sarda

For sure. going back maybe to, to COP27 for a moment, maybe with you, Matt. We discussed last year's COP. We recorded an episode about a year ago, talking about this focus on maybe some of the global south. Some of the parts of the world that have more suffered from the impact of climate change than maybe had a voice in shaping the action for it on topics like, also loss and damage. Given the way COP28 is taking shape, how is that either supportive, reflective or potentially contradictory to what came out of COP27?

Bell

Yeah. Look, the global south was hugely represented at COP27. I mean we had indigenous communities, uh, we had, you know, small island states as well as a number of others that, that rightly, as you say, Bruno, haven't been part of the problem in terms of, you know, haven't really been part of the industrial era per-se, but are going to unfortunately be the ones who are most likely to suffer from the consequences of it. In the dying hours of Sharm El Sheikh, we saw a landmark agreement on loss and damage. And there was a fair amount of pushback that we should even be discussing that topic, right? That there should be some retribution paid from those who have benefited from the industrial, post-1880 growth that we've all seen, of course, to those who are going to suffer.

And while the framework was established conceptually, there was a lot of work to be done. So, between the last COP and into this COP, there's a lot of work to say, well, how do you actually operationalize that loss and damage function? There was a meeting in the Dominican Republic just a few weeks ago that set out some of the approaches that could be taken around governance, around structures for exactly how financing could be made and passed to some of those recipients, including who some of those recipients should be and who should pay. And critically as well, we're going to see coming up in Egypt, prior to the COP, the second discussions in the context of loss and damage, and that's really going to be focused on what are the financing mechanisms and how do we see to get greater levels of finance.

We really didn't see a huge amount of money being put aside from Egypt and that's largely because of the complexity of trying to determine how you would even structure this scheme in the first place. So, what do we hope from COP28? Well, I hope that we have further advanced this time in 12 months, because this is the first COP which is coming 12 months after the last COP, they're not normally every year. But in 12 months, we're hoping that they'll really have advanced this, because just like many of the policy decisions that need to be made around COP28, we do not have a huge amount of time before the adaptation measures that those countries will need to be put in place, are financed or even the mitigation measures, of course, from many of the developing nations and developed nations, uh, are put in place.

Sarda

Yeah, really important. And, of course, Amy, if I could maybe get you to reflect on the fact that climate change for many COPs, including COP21 when the Paris Agreement was signed, was still this kind of maybe, if not abstract, at least future condition. And the fact as we are in climate change now, and as I was mentioning earlier, coming off of a summer of extremes: extreme events, extreme tragedy, extreme heat. How does that potentially change or add to either the urgency or the dialogue at COP?

Brachio

Yeah. I had an opportunity to participate in a lot of different sessions as part of New York Climate Week. And I heard a climate scientist say that even though she had been studying this for years, she and her colleagues still found what happened this summer to be shocking, but not surprising. And the shocking part is because you can't go a day without seeing these tragedies and the real impact it's having on people’s lives on a day-to-day basis. But not surprising because it is what the models have been saying for quite some time.

And so, while I do not wish us to be in the middle of this, I think what it does is for everyday people who are not climate scientists or in this field, they understand the urgency and are now feeling it in their daily lives. I also think that we're seeing that come out with businesses. And those that were maybe not in the energy sector say and looking at this all the time, but now understanding how they have to think about cooling in their factories in a way they never had to think about before, because the extreme heat is impacting the wellbeing of their employees. And there are lots of additional examples where we're seeing action being taken as a result of the day-to-day that everyone is feeling.

Sarda

Yeah. Actually, I'm glad you mentioned that. A lot of the work we do in our day-to-day work with clients, a lot of climate risk assessment and actually heat impact to workers both those who work, obviously, outdoors in the field, you know, utility workers, service people, certainly in agriculture, but also in factories and buildings and offices. So, many parts of the world that historically have not had need to air condition either their dwellings or their offices are now finding that it's difficult to not do that. Matt, maybe if I could also add to this kind of layered context of COP. All of this is also happening in a time of global tension. We still have this conflict in the Ukraine. There’s tension between East and West. We have continued problems with things like inflation, this pandemic that's still kind of lingering. We hear from many clients a little bit of economic uncertainty and not always sure exactly how much or how fast to deploy capital. How does all of that potentially impact the trust and collaboration needed to make an event like, or a convening like, COP28 a success?

Bell

It's not an easy question to answer, clearly. [LAUGHS] I mean, I think in truth, and look, this is obviously my view, but I think it's balanced in both directions. It's positive and it's negative, right? I mean, we have clearly seen the policy responses, the immediate policy responses to international conflict and access to gas, particularly through winter months, to make sure that nation states are looking after their people, which is counter to what we need to do from a climate perspective. It's understandable, but it's unhelpful in the COP context. At the same time though, I think what we've seen with all of this disruption, and whether that's the Inflation Reduction Act here in the US, which does two things. It obviously incentivizes business. It also helps to shore up domestic production of new parts of the economy that are going to be bigger into the future where we are quite reliant at the moment on international sources. So, what it's done is it's done two things. I think it's highlighted that we are subject to knee-jerk responses to climatic events, or to political events. At the same time, I think it's really kind of underlined the importance of a transition to a low-carbon, net-zero-carbon economy for every single country that wants to have a competitive advantage into the future.

And so, I mean Amy touched on this earlier in the context of why are we hearing our clients going to the COP. I think it's because there's now a recognition that we've had going into the 28th COP. And we aren't on track, and really businesses being informed as part of that process, they now actually need to be fundamentally driving the transition. So, I'm taking an optimistic view on it because I think a lot of these factors whether they are environmental, as we were talking about, whether they are political or they're geopolitical, ultimately, they all underline the same factor which is we are operating under, you know, one natural resource, one planetary resource. We need to use finite resources carefully and we need to make sure that we're protecting our future generations.

Sarda

So, on the topic of this is not the first one of these. In fact, they're numbered so it's easy to follow. We've seen a lot of commitments, a lot of promises, a lot of statements, a lot of speeches that have encouraged, but where maybe the follow through hasn't always been there. So, taking these commitments, these promises, maybe Amy, have we seen that accountability and follow through from countries change recently, maybe especially with more involvement from business and how an we, in our role and working with, you know, the world's largest organizations, potentially do more to encourage action?

Brachio

Yeah. So, what's clear is we're not on track and so, I mean the hope of staying within 1.5 degrees, I think no one wants to say we can't get there, but I think we're starting to get pretty concerned we won't get there, and that has real meaning for the livelihoods of millions, right? And so, we've got to move faster and we got to hold everyone involved accountable. But at the same time, we are seeing progress, right? So, Matt referenced the Inflation Reduction Act, that is putting money in to help invest in the energy transition that we need, and that really needs that government support to be able to get done.

We see out of the EU new reporting standards, that because of the global nature of many businesses, isn't just impacting those in the EU, but is driving greater transparency and accountability around the world. And so, as some of those become further matured, I think that we are going to see this advancement. The other thing that we're seeing in talking to EY  clients is that the  clients are authentically taking action. Now not withstanding all of the complexity and the environment in which they're operating. We're seeing them take this view of what are the risks that I need to manage? How do I need to change my product portfolio? And where are the opportunities for growth to be associated with the energy transition? And so, I'm going to take all of those as hopeful signs.

Bell

Can I add to this, Bruno?

Sarda

Of course.

Bell

So, one of the things I think we often do is we rely on a policy context to inform us of where the world's heading. And if we have some political backlash, as we've seen in a few countries in the few weeks and months, we tend to think that all is lost. But actually, coming back again to the people who are creating the emissions, ultimately the businesses that are driving those, we've seen 12,000 companies set net-zero targets as part of their commitments, that their boards have signed off of that have a fiduciary duty to meet. Half of those align to science-based targets. So, I feel like there is a significant continuous momentum that we've seen from the business community, at a time that we've seen some and not many frankly, but a few political ripples.

Sarda

Oh, for sure. And kind of maybe staying on that topic. So, just here in the past year, Amy, you were just mentioning, you know, the European Union. We've seen either a rise or a maturing of frameworks of regulation. Now the policymakers for sure not leading, but maybe catching up to capital markets and business and the way we've been trying to organize information and price, or at least make risk more visible. So, all of this kind of attention to regulation, mostly aimed at disclosure rather than, you know, performance or ambition. How does this relate to the Stocktake that will take place at COP28?

Bell

Okay. So, the Stocktake itself is obviously at a country level, but as I just said, you cannot really remove business from country because, obviously, with the exception of a few countries, businesses are actually the ones that are driving the activity, the economic activity, which is either leading to emissions or leading to emissions removals. Now, we talked about the fact that, you know, we are seeing a huge amount of regulatory pressure and actually voluntary initiatives like the IFRS', ISSB, the International Sustainability Standards Board, setting up their own standards around sustainability.

What it is doing is it's allowing a common framework for organizations firstly to think about risk to show that they're embedding that in their risk management practices as well as their strategy-setting practices, and then to transparently disclose on that. That's really important for a few reasons. The first is, unless the providers of financial capital, whether that's investors or even debt providers like the banks, unless they actually know the organizations that are going to be piloting their way toward this green economy and therefore, optimizing and being the recipients of the benefits of it, but also those who are going to better manage the inevitable risks of the climate change that we have baked in, they're going to want to put their money there.

So, the transparency is going to help capital markets to put money into the organizations that are going to help us to accelerate toward a climate future that we can live within. But the second part is really that we're seeing an advancement at the national level and at multinational levels like the EU, where there is a real push on business to actually do more than just disclose. It's actually putting pressure on them to do things. And that's a little bit of a change. So, in the UK, for example, we've got a taskforce called the TPT, the Transition Pathways Taskforce. And its put out a requirement for every large company in the UK that they have to go beyond what most companies have been doing, which is looking at different climate scenarios and disclosing on what that means to their business.

They actually have to demonstrate how in the short, medium and long term, they're going to be reducing their own emissions to align with what is a net-zero commitment that the country, the UK, has made. But also, beyond that they have to give a huge amount of detail in terms of how they're going to do it and what it means. Are they using offsets? Well, if you are, we want to know what you've paid for them. We want to know how credible those offsets are. We want to understand if you've had third-party assurance over them. So, really these are disclosure requirements which can kind of seem like the tail wagging the dog, but in truth, they're actually driving action within companies.

Sarda

Yeah. And on that note, we've talked about the broader role of, well, for sure, government, business. You know, the three of us spend our days and weeks looking at the world through the lens of our organization, EY, you know? Amy, maybe you can speak to kind of EY has a special role actually at COP28 in this context of helping organizations really organize their information, align their commitments to their capabilities and present themselves to regulators or financial markets or their own employees or customers. Amy, maybe talk about the role EY is playing and why we have an important place or role in that place.

Brachio

Great. At EY, we're a purpose-driven organization and our purpose is building a better working world. And as part of that we have sustainability at the heart of it, we feel that we have a role to play. First, we have a role to play in the impact we can have  through EY services . So, whether it's reducing our emissions associated with travel or our buildings, or working with our big vendors to make sure that they're reducing their emissions if they want to do business with us, that's a really important part. Another important part is how we engage with policymakers. We've got amazing experience around the organization , including the two of you and others that we can bring to the dialogue to help move forward. We also have an amazing opportunity in that we are a global network where we work across all of the different industries. And we can bring people together so that we've got that collaboration and that mechanism for bringing together the discussion to drive action. And so, I feel really strongly about the positive role that we can play by being there and I'm excited that we will be.

Sarda

Great. Matt, maybe a similar question to you. You know, when you think of our place, our role what would be maybe something we would particularly wish for, or what would be kind of a breakthrough that we would either look for or look to help achieve at COP28?

Bell

It's a really hard one to give an answer to, because we know that historically actually during the COP process, it's hard to get really definitive outcomes. And what we can best hope for, I think, is conceptually agreement across frankly every single Member State, which is what you need at COP. You need a unanimous agreement on things of real importance. So, we talked about the Global Stocktake. Why is that important? Well, it only happens every five years and this is the first time we've ever done it. And it's not just like our national accounts where governments have to, under the UN, provide information on their emissions each year. It actually says what are they going to do, both from an adaptation and a mitigation measure, to accelerate action and keep them either aligned to their current nationally determined contribution, their own goal, or improve it. And so, I think what I would really love to see is a Stocktake process that highlights countries that have been unable to stay aligned to their NDCs, but then actually a credible pathway that is really obvious for them to be able to make that work so that we can then see the right policies put in place, the right incentives put in place. And then businesses are going to have certainty in the environment so that capital markets can invest and businesses can do the right thing.

Sarda

Fantastic. Well, you know, Amy and Matt, thanks for making time for this discussion today. You both spoke from a place of optimism, I think if I can join you in that, you know, when I see certainly the two of you, all the colleagues we have working on this. You know, as you mentioned, Amy, we're just wrapping up here Climate Week in New York, where we've been engaged with and surrounded by some of the smartest, most passionate, most, you know, agile people I've ever met that gives me optimism that we have the intellectual horsepower that is really kind of putting their shoulder to the wheel in the direction of this this important task. At EY, we say sustainability is everybody's business. Climate, for sure, is everybody's business and I, for one, I'm glad that it's ours as well. So, thanks again so much for joining us today.

Brachio

Great. Thanks for having me.

Bell

Thanks, Bruno.

Sarda

As I said at the beginning of the episode, this is the Sustainability Matters podcast. You can find all past episodes of the show on EY.com or wherever you get your podcasts. You can also now find the most recent episodes of our show on YouTube. And thanks for listening. If you enjoyed this episode of Sustainability Matters, we'd love for you to subscribe. Ratings, reviews and comments are also very welcome, so please also visit EY.com where you can find a wide range of related and interesting articles that will help put these bigger topics in the context of your business priorities. I look forward to welcoming you on the next episode of Sustainability Matters. My name is Bruno Sarda. You can find me on LinkedIn and feel free to connect with me there. Thanks so much for listening.