For many, COP26 could be the most important climate summit since the Paris Agreement. In prevision of this venue, Bocconi University held the Think20 summit, a 3-day event bringing influential figures to discuss hot topics such as sustainability of debt, vaccines and health care, inequalities, and digitalization. Tra i Leoni was there to cover each day and here is our final reportage on the first day.
October 4th marked the first day of the 3-day Think20 Italy summit, held at Bocconi University in partnership with ISPI (Italian Institute for International Political Studies). COP26 will be the 26th Convention of the Parties, the annual global summit of the United Nations where member countries of the Convention on Climate Change adopt new decisions and policies for a greener future. In prevision of that summit, T20 venue aims at gathering influential figures from the G20 countries to exchange information and discuss climate change issues and as indicated by their slogan, at delivering for People, Planet, Prosperity.
As expected, the 2021 climate summit took a turn towards international collaboration after a devastating pandemic, bringing new challenges to reconcile environmental and social concerns with financial institutions’ interests. The first day was entirely dedicated to the sustainability of debt incurred during the pandemic and the economic growth for recovery.
Among the guests were Antonio Guterres (Secretary General, United Nations), Lawrence H. Summers (President Emeritus, Harvard University), Shamshad Akhtar (Chairperson, Pakistan Stock Exchange), Luiz De Mello (Director of the Policy Studies Branch, Economic Department, OECD), Ngaire Woods (Dean, Blavatnik School of Government, Oxford University), Vittorio Colao (Minister for Technological Innovation and Digital Transformation of Italy), Camilla Bausch (Director, Ecologic Institute), and Bill Thomas (CEO, KPMG Global). The venue was moderated by Andrea Cabrini, Class CNBC.
Mr. Guterres kicked off the summit by highlighting the importance of multilateralism, one of the key themes of the night. He put emphasis on the role of coordination between the United Nations, the G20 countries and the international financial institutions could play: “This would align the global financial systems more closely with global priorities including sustainable development and climate action.”
The legacy of debt
As the world is trying to recover from last year’s recession, one of the main challenges to tackle is the legacy of debt, especially in emerging markets and developed economies. In his keynote, Lawrence Summers told us that the current situation is worrisome, and that we should expect a strong period of inflation after many years of deflation across the globe. Lending levels have not followed the decrease in interest rates, and there is unused lending capacity from G20 countries. Summers agrees with the IMF (International Monetary Fund) decision to attribute SDR 456 billion in August 2021, and he hopes the allocation will take place efficiently even though he suspects a lengthy process. SDR, the Special Drawing Rights created by the IMF, are international assets that can provide additional liquidity to member countries.
The panelists offered several proposals to be discussed, agreeing on the lack of efficiency of current financial frameworks for climate transition. Among the solutions enumerated, the Vice-President of ISPI mentioned the creation of a world recovery fund to give emerging countries the possibility to swap their debt for new debt with favorable conditions. He also suggested the implementation of financial support for middle-income countries which are currently ignored by G20 initiatives. This further strengthened the urgent need for new or improved frameworks that would benefit a broader group of debtors.
Addressing the role G20 countries played during the pandemic, Ngaire Woods believes it was highly insufficient and that those countries have unnecessarily prolonged the crisis state by avoiding coordination and collaboration with emerging markets. As we are on the way to produce enough vaccine shots for the world population, Africa has still an alarming vaccination rate of less than 2%. Luiz De Mello also recalled the unevenness between the developed and emerging markets as a major problematic of the COVID-19 recovery. While the economy is performing better than anticipated in some countries, some parts of the world will take several years to come back to pre-covid output level, partly because of the lack of vaccination. G20 countries’ responsibility is increased by the role they played in virus propagation to the poorest countries. Research has proven the cities that failed to restrain the spread quickly in the underdeveloped countries were those with the largest in-and-out flows of people.
Referring to Greta Thunberg’s speech at Youth4Climate summit in Milan, Vittorio Colao affirmed: “We don’t want to be the ‘bla bla bla’ generation, we want to do stuff.” The Minister for Technological Innovation and Digital Transformation of Italy said his current priorities are to think about digital identity as human rights and make data freely flowing in a safe and seamless way across platforms. Too many communities are not connected in 2021 and the inevitable digital transition could deepen the gap between developed and emerging markets if no one tackles this issue. Colao recognized Europe is falling behind in technological initiatives and he emphasized the need for larger investments at the development level, and not only at research and policy-making levels.
Climate and growth
Six years after the first adoption of the Paris agreement, where are we? Global temperature reached 1.2°C above pre-industrial level, leaving little to no margin of error if we want to contain the temperature rise below 1.5°C. According to Camilla Bausch, there is still a chance to meet initial Paris Agreement’s targets, but we are certainly not on the right track. G20 countries make up for more than 75% of GHG emissions, holding the power to change the course of action. However, some countries (Australia, Indonesia, Russia, Brazil, Mexico, and New Zealand) have kept the same targets or even reduced their initial ambitions, making it hard to believe they will put in the efforts to achieve the agreed objectives. Indonesia and Vietnam even consider using coal in the future although we know energy transition is the key parameter for a green future.
Pointing out the financing needed for the climate transition, Bill Thomas claims there is enough capital, and that the issue lays more in the reporting structure:” Certainly, the barrier of information is going to be critical.” Increased transparency would greatly help banks and investors to assess the risks they face and understand the investments’ conditions. Current ESG frameworks restrain inter-companies’ comparability and hold back flow mobilization from capital providers. Thomas concluded his speech by encouraging individuals to put their money where their mouth is as we all have a key role to play in that global transition.
The first day of the summit ended with the intervention of Angel Gurria (Secretary General, OECD). He reminded us of the chaos created during the pandemic as countries were working individually, proving there is an obvious lack of cooperation among G20 players. Concurring in the same way as the other panelists, Gurria thinks of multilateralism as the key to a sustainable future: “It will be hard to find the balance between people, planet and prosperity, but it will be impossible without multilateralism.”
COP26 in Glasgow, the most important climate summit since the Paris Agreement in 2015, will be launched next October 31st. Member countries engaged themselves to renew and update their objectives every five years, and the due date has arrived last July. Outcomes are still very uncertain as China, India, Saudi Arabia and Turkey have not submitted the updated versions of their objectives. China, the biggest GHG emitter, has however announced it will stop financing new coal projects abroad, which is a step in the right direction. Is it enough? We will only be able to tell after the convention, as everything can happen in the meantime.
Another focus of the summit will be the financing gathered for developing countries. As developed countries are expected to mobilize at least USD$100 billion of climate finance a year, it is hard to believe the target will be achieved in 2021, following the pandemic economic crisis. 2019 total financing was short of more than USD$20 billion, and we must hope we did better this time. Time to 2030 is limited, and there is no excuse to postpone every objective anymore.
Between decarbonization, energy transition, ecosystems protection, financing of these investments, Paris Rulebook finalization, and international collaboration, there is a lot to be discussed in just a few days. These exchanges could change the future for good, and the stakes of this COP26 are more important than ever. There is a lot to bet the world will be riveted to its seat, analyzing non-compliant countries and G20 commitment to set the bar higher. Besides setting objectives, we need clear actions, and a lot of solutions have already been elaborated, as highlighted during the T20 summit. Minister Colao affirmed he did not want us to refer to his generation as the ‘bla bla bla’ generation. Let’s walk the talk.
Image credits: T20 Italy Photogallery day 1