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Briefing for independent directors ahead of COP27 – the upcoming UN’s global meeting on climate

The critical role of business and boards for climate action

Businesses are experiencing unprecedented challenges, including geopolitical issues, rapid societal changes and climate-related disasters, which introduce a range of new risks to mitigate against. The role of corporate boards is becoming increasingly important to help companies focus and prioritise on both short and long-term issues. One of the most critical areas that presents both risks and opportunities is climate change. There are increasing expectations from both investors and society which businesses and boards must meet to ensure the long term sustainability of their organisations.

Governments and businesses are coming together at the global United Nations (UN) climate meeting this November, COP27, in Egypt. The latest science shows that ecosystems and communities are being pushed to their limits as the impacts from climate change increase. Urgent and collective climate action is required to reduce the devastating impacts to society.   

COP27 will build upon the progress made at the previous UN climate meeting, COP26, focusing on the commitment to deliver action on existing country pledges for climate adaptation, mitigation (emissions reduction), and finance. This will require coordinated mobilisation across governments, businesses, finance, and civil society. COP27 president Dr Sameh Shoukry has highlighted the fundamental role of the private business sector both in generating finance and in implementing climate action initiatives.

The UN Climate Champions highlight the priorities for businesses to strengthen resilience, mobilise finance, accelerate climate action and build the credibility of climate action plans. The We Mean Business Coalition also sets out an urgent call for business innovation in financing climate adaptation and resilience solutions: how to drive investment towards creating opportunities not just towards risk management; and how to collaborate with governments to develop policy frameworks supporting climate action.

Corporate board and independent directors have a critical role in guiding their companies on this important journey.


What are the UN climate meetings and what is their significance?

What is COP27?

Since 1995, the United Nation Framework Convention on Climate Change (UNFCCC) has been hosting an annual Conference of the Parties (COP), which brings together leaders from around the globe to prevent “dangerous human interference” with the climate. COP is the decision-making body responsible for monitoring and reviewing implementations of the UNFCCC and the Paris Agreement. This year, from the 6th to 18th of November, Egypt will host COP27 in the coastal city Sharm el-Sheikh.

COP27 will build upon the progress made at COP26 and prioritise implementation plans, strengthening of climate adaptation and resilience, the urgent reduction of greenhouse gas emissions (climate change mitigation) and climate finance.

Paris Agreement

The Paris Agreement was the first legally binding treaty on climate change and was the outcome of COP21 in Paris in 2015. As a result, most countries in the world have committed to:

  • Hold the rise in the global average temperature to “well below” 2°C and ideally 1.5°C above pre-industrial levels (the COP26 Glasgow Climate Pact reaffirms a 1.5°C pathway).
  • Strengthen their ability to adapt to the adverse impacts of climate change and build resilience.
  • Orientate finance flows towards low greenhouse gas emissions and climate-resilient development.

Each country has the autonomy to decide by how much they are going to reduce their national emissions each year. These targets are communicated to the UNFCCC via nationally determined contributions (NDCs). The NDCs will be revised every five years via a ‘ratcheting up’ mechanism, however, since there is a large gap between required emissions reductions and planned emissions reductions, COP26 ended with a call for all countries to revise their NDCs in 2022 aiming to strengthen these targets.

Highlights from COP26, the 2021 global UN climate meeting

COP26 in Glasgow saw some areas of significant progress in the negotiations, with much work still to be done and some areas significantly off track. Below is a brief summary with further details in our COP26 briefing note under the ‘Learn more’ section below.

Progress at COP26:

  • An agreement to update country commitments by 2022. To date, just 18 [at time of publication] of 198 countries have summited updated NDCs.
  • An agreement to end inefficient fossil fuel subsidies.
  • Doubling of climate adaptation finance to developing countries by 2025
  • The Paris Rulebook was agreed, including a framework for carbon trading
  • A pledge to end deforestation by 2030, with £14bn funding
  • A pledge to cut methane emissions by 30% by 2030

More to do:

  • Even though a global coalition of the financial sector was established with the creation of the Glasgow Financial Alliance for Net Zero (GFANZ) it was not possible to agree a pledge to stop or reduce fossil fuel finance.

Far off track:

  • 2020 target of spending $1 billion USD on climate finance was not met and the deadline was deferred to 2022.
  • The world is off track to limit global warming. Global emissions are still rising, and a tangible solution has not been reached.

COP27 significance and priorities

The COP27 President, Egypt’s Foreign Minister Sameh Shoukry, is emphasising the need to move from commitments to implementation whilst ensuring a fair distribution of resources, particularly for those who need it most. The COP26 President also emphasises the importance of re-routing financial investment from mitigation to adaptation whilst advocating for a multi-stakeholder approach.

COP27 is a clear opportunity to bring together state and non-state actors to identify and drive forward tangible actions that will enable fast and effective implementation of existing and increased commitments.


The role of business and business engagement at COP

The High-Level Champions and the Marrakech Partnership

The Marrakesh Partnership for Global Climate Action was created at COP22 to enhance collaboration among governments, cities, regions, businesses, and investors to accelerate global climate action. Under the leadership of Dr Mahmoud Mohieldin, the UN High-Level Climate Champion for COP27, and Nigel Topping, High-Level Climate Champion for COP26 , the Marrakesh Partnership has developed an agenda with a focus on delivery of emissions reductions and a just transition to a net zero economy.

At the Net Zero Delivery Summit in May 2022, the High-Level Champions agreed that the focus should be on implementation of climate commitments, as well as developing innovative financing solutions for resilience and adaptation that leverage the role of the insurance sector.

Business engagement at COP

As with other UN COP meetings, COP27 will run in two spaces: the Blue Zone and the Green Zone. The presence of the media will be very significant. If physical attendance has been granted, there will be numerous opportunities for media engagement for your organisation at the conference.

The Blue Zone is where the official negotiations will be carried out and attendees must be accredited by the UNFCCC. The Blue Zone includes Nation-State pavilions, business pavilions and special event rooms. The business pavilions include exhibition halls to enable direct engagement of business with international policy delegates.

The We Mean Business Coalition will host the Business Pavilion for Climate Leadership engaging business and policymakers to deliver on pledges to keep 1.5°C alive.

The Green Zone is a space managed by the Egyptian government to showcase innovation and climate action facilitating interaction between private sector organizations, civil society, NGOs and academia.

Events running alongside COP27

In the run-up to COP27, there has been a range of events and conferences from different sectors, covering different elements of the COP agenda including the Net Zero Delivery Summit, Bonn Climate Change Conference, and Climate Week NYC.  There will also be a number of side events alongside the COP for businesses to attend. These events will mostly be in Sharm El-Sheik but can be joined also remotely: World Climate Summit, World Biodiversity Summit, Sustainable Innovation Forum.


COP27 engagement opportunities for independent directors

For independent directors, COP27 presents some clear engagement opportunities at board level, based around the key themes being addressed at the meeting:

Mitigation and implementation:

Implementation of existing mitigation pledges will be a key topic at COP27. The development of credible action plans supporting the corporate net zero transition is a priority area as processes and frameworks emerge to monitor business progress and combat greenwash.

  • Does your organisation have clear targets to reduce its climate impact across the whole value-chain?
  • Has your company integrated sustainability and climate action into its business strategy?
  • How clear is the underpinning climate implementation plan, how are you monitoring its progress, and are there regular climate-related reporting updates to the board?
  • What opportunities for climate-related reinvention, collaboration and innovation are you guiding your company on?  
  • Do you have agreed climate disclosure plans to meet legal requirements and expectations from your stakeholders? As well as a clear understanding of what potentially misleading information might mean for the company and the board?   
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Finance

An impactful group of Financial Services companies have come together as The Glasgow Financial Alliance for Net Zero (GFANZ). They will be active at COP27 working to enable net zero transition planning for financial institutions and mobilise capital for emerging markets and developing economies to decarbonise.

  • How will your organisation be affected by data reporting requirements of GFANZ members which are required in your business investment portfolios or lending streams? Is your board fully informed on these requirements and their implications for the company and the board?
  • How can your organisation support capital flows for net zero investment in developing countries?
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Adaptation

COP27 is aiming for increased pledges on climate adaptation funding to support countries disproportionally affected by the impacts of climate change and least able to respond.

  • What measures has your organisation put in place to address the risks, impacts and opportunities of climate change in the future?
  • Do you have a future-proof and resilient business model?
  • If you have operations, suppliers, or customers in multiple locations, are you addressing adaptation and resilience issues across those locations?
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Just Transition

The strategic integration of a just transition framework is critical to safeguarding the successful achievement of business transformation. Just transition means a movement to minimize the negative impacts on impacted groups, while transforming to a sustainable business. This integration will strengthen the company’s business and social value.

  • How has your company integrated a Just Transition framework into the corporate strategy and business operations?
  • What are the potential transition scenarios for your company and how are these impacting different stakeholders?
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Keep up to date on COP27  

Climate action is ongoing and rapidly evolving. Business needs to strengthen efforts by forging productive collaborations and developing innovative climate solutions, with COP27 providing an opportunity to engage with the global climate discussion.

Keep up to date by following COP27 news from the We Mean Business Coalition and the Climate Governance Initiative (CGI) post-COP27 briefing for board directors.

Exchange and engage with other independent board directors

Engage with other independent directors focused on making climate a boardroom priority by joining your local CGI Chapter – gain the knowledge and expertise needed to ask the right questions of your company’s executives to drive climate action in your organisation.

Build momentum and invite other members of your board to join a local CGI Chapter.

Be a role model and responsible leader – for your company, your society, and future generations.