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A Week in Impact: It all hangs on COP 26

Does BlackRock's watershed CEO letter suggest the finance industry is finally taking climate risk seriously?

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🌐 COP 25 came to a protracted close on Sunday, with no overall deal reached between the 190 countries that attended.

🌱 The European Commission announced the European Green Deal: a strategy to combat climate change and reach net-zero emissions by 2050. (More on that.)

🛢️Goldman Sachs ruled out future funding for thermal coal mines and Arctic drilling projects, while pledging $750bn towards climate transition projects.

🏦 The Bank of England is setting up tough climate stress tests for UK banks and insurers, which will be scrutinised against three different scenarios.

📉 ESG controversies have wiped $500bn off the value of US companies over the last five years, according to analysis by Bank of America.

It all hangs on COP 26

COP 25 was steeped in drama from the outset.

Initially scheduled to be held in Chile, the conference was moved to Madrid after weeks of civil disturbances in Santiago. It ended up being a scaled-back affair, offset by the crowds of protesters who took to the streets.

The aim was to finalise the Paris Agreement Rulebook—a set of guidelines detailing how the Agreement will look in practice when it takes effect in 2020—with areas of focus including carbon markets and other forms of international cooperation.

Did it meet its objectives? Not really.

UN Secretary-General Antonio Guterres described the conference as disappointing, with no overall deal reached between the 190 countries that attended—even though negotiators extended talks by two days.

Few governments came with more ambitious targets to cut emissions, despite clear consensus that all countries need to up their commitments if the world is to reach the Paris Agreement. After the last fortnight, that's looking like an increasingly unrealistic target.

The main task—to finalise Article 6 of the treaty, which deals with international carbon trading—failed. Tension about CO2 accounting rules revealed a rift between countries supporting greater ambition and those comfortable with the status quo. By Sunday, more than two days after the scheduled deadline, negotiators agreed to shelve the final deal until COP 26.

A hell of a lot is already riding on the 2020 conference. Seen as a major crossroads in the fight against climate change, it's the year in which governments are due to review their pledges and raise their ambitions with policies and programmes that put the world on a path to net-zero emissions by 2050.

There's a silver lining for the UK, whose fractious election campaign culminated last week. Held in Glasgow, COP 26 will be a huge opportunity for the country to position itself as a green leader and retain its position on the world stage post-Brexit. It's a unique (and timely) chance to set the tone for the world's future.

And that seems to be one thing the electorate agrees on.