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In the latest episode of the Sustainability Matters podcast, Bruno Sarda and guests discuss the new COP27 initiatives from the perspective of the Africa and Latin American regions.
The COP27 climate conference in Egypt was billed as “The African COP” with the promise that it would give a voice to the developing world as it wrestles with climate change. Did the conference succeed and has it found a way ahead that addresses the differing agendas of the world’s developing nations?
Fresh from the conference, Clémence McNulty, EY Africa Sustainability Lead, and Ricardo Assumpção, EY Latin America South ESG Leader, join Bruno Sarda to discuss the successes and shortcomings of the conference for their regions.
From an African perspective, Clemence discussed the importance of the private sector’s participation but that the solutions need to be localized, with local municipalities and governments playing a key role.
For Latin America, Ricardo noted how COP27 was important in highlighting the unique assets Latin America has to create more value and the great potential of the carbon markets.
All agreed that the world is increasingly looking to the Global South to take a fuller part in the debate and play a more prominent role. Even with potentially imperfect outcomes, COP27 has further driven conversation and understanding of what needs to be achieved by all parties involved.
Key takeaways:
The Loss and Damage Fund is an important step forward in addressing the disparity between northern and southern hemisphere resources.
The private sector is likely to provide more and more financial and technological solutions. This was reflected in their presence at COP27.
Blended finance from both the public and private sector is key for addressing the Just Transition and closing the funding gap.
COP27 restated the connection between climate change and biodiversity, emphasizing the importance of the rainforest.
For your convenience, full text transcript of this podcast is also available.
Hello, and welcome to the EY Sustainability Matters podcast. I am Bruno Sarda - I'm a partner in the Ernst &Young LLP Climate Change and Sustainability Services, and your host for this series. Sustainability Matters is our regular look at ESG and sustainability topics and how they impact organizations around the globe. In each episode, we explore a topical issue in the sustainability agenda, and I’m joined by a mix of business and thought leaders, as well as EY colleagues as my guests. And today we will discuss an event that dominated the headlines in the world of sustainability over the last few weeks, the recent COP27 Climate Conference in Egypt. Held in November, the 27th Conference of the Parties, COP27 brought together countries from around the world to increase ambition and implement existing goals and strengthen prior commitments. This included high-level and side events, key negotiations and press conferences, hosting more than 100 Heads of States and governments, as well as over 35,000 participants from the scientific community, business and civil society. In this episode, we will be looking at what happened at the conference: its Achievements; its failures; billed as the African COP, the effects of climate change on climate vulnerable countries was high on the agenda; and the urgent need for those most responsible to deliver on their promises and support climate action in low-income countries. We will be looking at what agreements came out of the conference and discuss how the private sector found its voice and influenced outcomes.
Joining me to talk about COP27 is Clémence McNulty, Ernst & Young Advisory Services (Pty) Ltd, Africa Sustainability Lead, and Ricardo Assumpção, Latin America South ESG Leader and Chief Sustainability Officer, Brazil, Ernst & Young Assessoria Empresarial Ltda. Thank you both for joining me today. So COP27 was billed as the African COP. Hosted in Egypt, it hoped to reflect the voices and priorities of African nations and other climate vulnerable countries in the global south. These countries, as you know, have been increasingly clear in their calls for higher-income nations - those most responsible for contributions to climate change - to deliver on their promises and increase their support for climate action in low-income countries. So, maybe let’s start with the question of was COP27 successful in shifting this dynamic of the dialogue between the two hemispheres? Clémence, do you want to start?
Clémence McNulty
Sure, thanks for having me on, Bruno, it's lovely to chat. Honestly, I think one of the key aspects that was discussed, and where there was finding some agreement at COP27 after 27 years, was around the loss and damage issue which has certainly been something that's been a priority for a lot of least developed and very vulnerable countries that feel that they've had very little - if I can put it that way- role in the issues that we face around climate change, but are seeing some significant impacts coming through. And certainly I think there was a well-coordinated campaign from the African countries with a network of global developing countries coming together and really driving that, so I think that was a breakthrough, and I think it was certainly showing that there is good intent from the northern hemisphere to really support some of the countries that are not able to address some of these challenges. I think in some of the other areas probably we will have to wait and see how things evolve but certainly the integration of issues like biodiversity, food security, I think, the blue economy, which were more prominent, were also ones that I think of. Particularly they're important for Africa and developing countries so let's see how that progresses.
Bruno Sarda
Great, thanks Clémence. Ricardo, what about you?
Ricardo Assumpção
Yes, I totally agree with Clémence. COP27 had an important advance in the loss and damage fund, which is crucial and is an important milestone to advance in the finance of impact, impact that we already observed, so I see that the mechanisms and perhaps necessary for the money to be delivered has become more clear, Bruno. So, I think behind all of this we have the transparency point so now we have more major metrics to measure the results so I think that will be great for us and will be easy for us to understand what we need to do and how we need to deliver the money, where we need to invest and what is fundamental, Bruno. The world knows that investing in sustainability or to address this impact, is to create value in the medium and long term. So, what I see is that all of the community, not only the investment community but all of the world, focus on finding all of the solutions to finance those impacts and they know at this point that it is not a cost, it's an investment We probably will have an impact on the world GDP in the next eight years but after that, for sure, we will start to see the results and I think for
me the main take away of this COP was the loss and damage fund.
Sarda
Great, thank you both. Ricardo, you talk about finance, you know a year ago at COP 26 there was renewed commitment and a call to action for countries to begin transitioning to green energy, transport, manufacturing systems, but access to financial resources to fund these transitions is certainly not equitably distributed among countries so beyond this idea of loss and damage which is very important, how did COP27 discussions address this idea of the just transition and closing this funding gap?
Assumpção
Bruno, it was a hot topic there. I participated in a panel to discuss the just transition and how we could make this more efficient for everybody. I'm afraid that we had some green washing at COP because we promised in one year and in the next year we forget the promise from the last year, so I think the just transition was for me important. Another important milestone, a lot of panels discussing that, blended finance so I think we have to have the private sector together with the public sector and we have today probably more understanding that the world needs the global south to reach the Paris Agreement goals. So, for me the just transition, we will start to see more discussions about that but Bruno again, I think we have maybe a grey zone between the money, the finance instruments and the projects that need this money to address all the impact. So, we need to understand how to make this distance shorter – and for me the secret is the private sector.
Sarda
Great, Clémence what about you?
McNulty
I think the just transition - and I'm based out of South Africa which obviously has a significant transition to do because of our energy mix which is heavily coal dominated and obviously supports also the coal mining industry that we have in the country but also, we know we have other sectors that are extremely at risk, we've got the agri sector, we've got a pretty strong
automotive sector that exports vehicles to Europe that will be impacted, with some of the transitions in terms of electric vehicles if we don't take proactive actions, and we've got a very big tourism sector which we also believe will be impacted and so what's happened in South Africa - and I think it's been hailed as a great example, and it was more concrete sort of details around the plan - is that we had essentially under our President, our Presidential Climate Commission be set up that brought together the private sector, the public sector to really define what a just transition means in a South African context, to really identify a pipeline of projects that will be priority in terms of some of the sectors that we need to transition, and to be able to take this package to international partners to get exactly what Ricardo said: this blended finance where you've got development finance coming in, you've got the private sector also crowding in because we know that this needs all sources of finance, and maybe we are now at the execution stage and we saw a similar example, I think at COP27, come through with Indonesia having its own just energy transition plan, and I think these formats really do, present a unique model. I guess in terms of finance one of the other conversations that’s really coming out of COP27 is these challenges around reform of the World Bank and some of the multilateral development banks in thinking more about really reassessing the way that we look at risk, and I think that it's great that that made it onto the agenda because we really will need a strong mix of elements and I think obviously the continued participation of the private sector and the focus on carbon markets, for example, which is going to be very important for Africa is also a good sign though obviously the challenge will be in the execution which is certainly in South Africa where we are now.
Sarda
Thanks for that perspective, and South Africa of course, within the continent of Africa, has a very unique position in terms of its level of economic development. Some of the challenges that have been highlighted for the just transition for Africa includes this capacity of fundable projects and even the fact that Africa related, even climate research, mostly originates outside the continent. Were any concrete solutions discussed to address these challenges and resolve some of these funding issues for Africa and its many countries?
McNulty
Yeah, I think the one big caveat is obviously Africa is over 50 countries: very diverse set of levels of development, very diverse sets of cultures, many, many languages and completely different probably in terms of some of the other parts of the world around our demographic stage where we will see a doubling of the population in coming years, so we really are at a different stage. I think there were maybe a couple of positives from an African point of view and again, thinking about the private sector really identifying more opportunities to participate, to fund, so we had an African business leadership group be set up under the UN Global Compact, we had an African carbon markets initiative that was set up between the various capital markets, so I think all of these things are encouraging because the more you have that rigour coming through, the more that you'll see that pipeline of projects. I think in terms of education, there was certainly a few initiatives that were launched as well around trying to have more of a global network of global south resources, focused on this, I think there were a couple of African universities, business universities, that came together to frame programs around these issues, to integrate them more, so I think those are all great signs but certainly, you know, I think one of the realities and one of the other themes that came through is that you do need these solutions to be localized, especially when we get to adaptation, and I think there were a lot of panels, and in fact EY facilitated the panel around finance which included a representative from the African municipalities’ representative, but essentially that linkage into also local municipalities and the role that local government can play was another theme that came through very strongly for me, and I think that that will really help to localise some of these solutions that we need and I think that was a positive as well, if we can continue to get traction in that space.
Sarda
Now that's a really insightful perspective, thanks Clémence. Ricardo, what was your perspective or take from Latin and Central America perspective, did you have similar feelings of the role of these kind of multi party institutional actors or, what did you take away from a Latin America perspective?
Assumpção
Bruno, I think like much of the global south, Latin America was isolated from the world debate for a long time, so partly because I think all the reports frameworks were forged to reflect the reality of countries with emissions from fossil fuels, which is not a case in Brazil and other important countries in Latin America. So, I think for me the COP was important to show all the assets that we have here in Latin America and how we can combine all of the assets to become more efficient and maybe to create more value with sustainability. So, what I mean about that we have here in Latin America the potential of biodiversity, for example one tree in the Amazon has more biodiversity than any other forest in Europe. We have a great potential for carbon markets here - about US$ 15 billion, the offset carbon market, US$ 15 billion to 2030 - we have a great potential, for example, for renewable energy. In Brazil, the energy matrix is 83% from clean and renewable resource, and of course what I think, we need to use all of these assets, combined, for example, to address our vulnerability problems. What was clear for me was we had two important panels there, one of them was a panel, how to create value with the Amazon, to show that we can create value and create instruments with bioeconomy and how private sectors can use the forest in the biomes to address the carbon problem that they have, not only to offset their emissions, but to create for example a business unit focus on carbon, and bio carbon. Another important issue for us here in Latin America is water, the water crisis - we had another important panel over there with Steve Varley and (it) was me, Steve Varley, and Professor Benedito Braga, he's the Honorary President for the World Water Council and the President for SABESP, the fourth largest water company in the world. They are based here in São Paulo, so we have a discussion how the water is stressed in cities and what we need to do to adapt the cities and the people and that. So, in Latin America, Bruno, we have maybe a different aspect because in Brazil I can give an example: 50% of our emissions come from deforestation for example so we have important discussions, how to avoid illegal deforestations and how to manage better the land use, so discussions with food systems, regeneration systems, so Latin America was very focused on that, and I think in the end of COP27, the world knows better that they need to look close to Latin America, to look close to Africa, of course, to the biomes, to the tropical forests and the importance they have in the world strategy to reach the Paris Agreement. So, I think the discussions were not only on carbon, which is good, but we discussed a lot about how to understand and to balance all these needs in the world, and Bruno, it was clear for me that we have, to use the private sector speed and scale to make things happen, so as you know COP is, I cannot say it is a trade show, it is a negotiation zone, where the private sector is showing how they can help. So, in Latin America we need to have the private sector, together with the public sector, together with the civil society and NGOs’ (non-governmental organisations) and I could see all of these things happening in COP27.
Sarda
Yeah, thank you both, such important concepts and I think you touched on many things, and about the role of markets, for example, carbon markets, the role of better accounting for the value of things like natural capital and these are topics that are rising in importance, and we will have a whole separate episode of this podcast following the COP15 conference on biodiversity and the role of natural capital accounting and nature-related financial disclosures that are emerging, but Ricardo, you also just touched on a really important aspect which is that we of course at EY work with the largest companies in the world, and that we have seen the private sector increasingly involving itself in the last few COPs including the fact that of course EY had a strong presence, many of our clients had a strong presence. So from both of your perspective, maybe starting with you Clémence, you know what messages and solutions did you see business bringing to the COP process? It's primarily a negotiating stage for nations, but increasingly also for sub national and non-national actors and how did, business perform and what did you take away from the business presence there?
McNulty
I think it is probably one of the ongoing debates in terms of the format of the COP and how much it now might get subsumed by the private sector involvement, but I certainly believe that first of all there is no way that we can transition without the private sector and also actually that if you don't have - and the South African minister of environment said this recently - if you think that not having the biggest polluters at the table is going to lead to any sort of solution, then you're kind of blind. So, I do think there's an important role for the private sector and I think there's a couple of positives, it's the reality is the private sector, as Ricardo's just mentioned, can do things in typically a much more nimble, speedier fashion than the public sector can, and really does have skill and huge reach, and I think ever since there's been a lot of discussion around the COPs at the boards levels and in, kind of our clients, what's happened is that there is a focus on how do we contribute, how do we contribute to the solutions, how do we ensure that we can actually bring solutions, you know the way that COP is structured is it does resemble a bit of a trade show in that you've got the country pavilions and you’ve got other zones and different members, and certainly the private sector presenting their different initiatives and solutions, but that is very useful in terms of showcasing different programs, there is lots of opportunities for learning and you know there was so many different players that were presenting, so there were various points in which obviously the private sector demonstrates some of the solutions. You know certainly it was very interesting to see some of the social media companies looking at green skills and how they can drive that agenda, create interest and create spaces to connect people into those which is going to be very important.
And then obviously you've got the oil and gas industry in terms of some of the initiatives that they're doing to decarbonize at pace, so, you've got pluses and minuses of the private sector being involved. I think it forces people to discuss these issues and really try and see if it's appropriate and I think what we also saw there was a very good report by the UN group of experts around net-zero and reporting and commitments by non-state actors so essentially the private sector that had very strong recommendations around good practices, what business should be doing when they are coming out with net zero commitments and recommendations obviously around you know if you still heavily invested in fossil fuels can you even make net-zero commitments, so I think there was also a lot of recognition that we do need more consistency, more rigor in terms of some of these commitments and I think it's a welcome development that these debates are ongoing and certainly the debates around reporting and the speed at which that might come is going to be very important because we need to be able to call out business if they are in fact green washing, or green wishing, and I think all of these things are being put in place.
Sarda
Great, thanks Clémence. Ricardo, what was your take?
Assumpção
For me, Bruno, you mention about COP15, and in the next month, and just in actually a week, we will have the COP15, the biodiversity COP. What is clear for me is businesses are rethinking their relationship with nature. So, what I mean about that, we are going to start to see nature-based business because the businesses understand they can create value with nature. So that's important, that's important to decarbonize the world, that’s important to reshape the way we make business, to go from a structuralism matrix for a more regenerative matrix so I think we have the perfect storm to make things happen, and that's very important. We are now connecting for example biodiversity and climate change, so businesses need to know that, how they can do that, how they can connect all of those things to make a better world. So, from the business perspective for me, it was very important to be there and to show to our clients that EY is a protagonist in this agenda, that we are leading the discussions, so our clients want to make business with who are there in the COP. So, to be there, be with them, was great for me. Most of the time our clients they are not sure what they need to do, how to combine, the carbonization or the net-zero strategy in the business plan of the company, so we have to show them and we have a good opportunity to do that on COP27 to show that it's all about transformation, it's about business strategy, it's about supply chain, it's about governance and compliance and, at the end of the day, it's all about human, so we have to understand that all of these discussions is because we have life on the earth and so now I think it is much more clear for business what they need to do, and, Bruno, I think most of our clients they have to understand and we can help them do that, that sustainability is a journey. You start with maybe a regulation agenda, a mandatory agenda, and we can see all of the work, regulations ongoing, central banks, or insurance agents, and of course SEC here in Brazil we have the CVM, they are all preparing their regulations package, and this is important of course, but at the same time is a risk. Why is it a risk? Because being compliant with the rules is not strategic and you don't create value with sustainability, and we have to show them how we can help them to transform their operations, help them to understand that they can be more effective, use a more circular economy, they can use less energy. So, in this way it's like a business transformation, they create value for the company, at the same time they create value for the planet, and of course in the end of the day we have all of the reporting agenda, and if you did your job before, a good job will be much more easier to report and the reporting are being transformed right now in the world. We have the ISSB, and I have some discussions about ISSB in COP27, how they will impact business in different areas of the world, of course, but how they will impact, for example, countries that have the emissions coming from land use or agriculture, others that come from fossil fuel. So, we have to understand how this new reporting frameworks will affect the businesses, so from this perspective was great to see that in COP26, for example, I had about 12 meetings with clients, in COP27 more than 25 meetings, and Bruno, we had a meeting in our booth in COP27 with more than 15 clients together, private sector, public sector, the financial institutions, World Economic Forum, for example, NGO, and science. For me was very important to put science together with business, so we can help our clients choose more reliable science or information from science to take better decisions. So, for me this was amazing to see, and I hope, and I totally agree with Clémence, that this COP was maybe twice the size of COP26 the private sector was massive there, with a lot of announcements, a lot of panels. What is good because we have scale, we have visibility, awareness but we need to understand that we have a mission, and this mission is to make emissions, or to be net zero by the end of maybe 2050, so we are able to do that, we have to understand or have to have this on our focus and maybe not use all these other announcements as a distraction, so we cannot lose the focus.
Sarda
Fantastic, thank you both for such rich perspectives on your experiences there and how you've seen all of the various actors bring their own agendas, ideas, and contributions. To conclude the COP27 ended with an agreement on the Sharm El Sheik Implementation Plan that some hailed as a great breakthrough, others said it fell way too short of what it should be. From your perspective maybe in a few words, how will the outcome of COP27 help businesses in your regions and your clients further advance a climate positive agenda?
McNulty
The reality is that the discussion has increased exponentially, I think, over the last three years in terms of these issues and you know an event like COP27 even with its potentially imperfect outcomes and certainly there's still a long way to go really go such a long way in terms of driving more conversations more, more understanding of the issues and then obviously business then wanting to understand how they go forward. And I think there’s more and more of an understanding of the science of what we need to achieve that's seeping into our clients through these events because it really does each time lead to, a lot of education. I think that the side events as well or the side commitments around, for example, the ISSB, and things, we saw Nigeria from our region, put their hand up and say that they are seeking to be an early adopter of the ISSB. That's prompted Zimbabwe to make a similar comment, and I expect the reality is when you speak to a private sector company they are always interested to understand what's happening with their competitors, what's happening in other regions, what's happening in other sectors, and certainly when sustainable finance and some of the flows that we are coming through everyone is very interested to understand how they can position themselves, how they can bring these into their plans. So, I think that's just a real positive from COP27 and hopefully we'll see even more traction as we head into COP28. I think that will be a significant event and hopefully a lot more action.
Sarda
Thanks Clémence, Ricardo what about you?
Assumpção
Yeah, for me, I think what was a good COP of course and an important aspect was for example the rainforest OPEC, so the rainforest and climate leaders’ partnership between Brazil, Indonesia so a couple of countries that's important to understand the value of the forest. So, this was for me very important, very relevant for our scene in Latin America, so this was for me a good point. The connection between biodiversity and climate change for me was a second amazing take away so we had a biodiversity day, this is important. Another good thing for me was maybe to understand that food and agriculture is very important on the scene, so we have the food and agriculture day there, some space talking about that as Clémence just mentioned, a lot of side events about food, about agriculture, about a NET transition. We have to understand for me that e-mobility and the electrical vehicle may of course have this scaling up and getting some speed in the next two or three years, but we have to understand that we have different aspects around the world so maybe the best solution for Europe is not the best solution for Africa, for example, so we have to have solutions tailor made for each region so from the Latin American perspective we have great debate around indigenous people in local community and for me this is very important, to listen to them. They can help us, they can, they have to be more connected with businesses. So, I saw a lot of things going on, on that, and Bruno, I think we have maybe to rethink this COP model, COP28 will be in Middle East, COP29 maybe in Australia and maybe COP30 in Brazil but I think we have to have to rethink the business model of COP to leverage all the results. Not only the negotiations results between the countries but to understand how the private sector can contribute and not be a distraction for all of the important aspects that we have in COP, but let's see in COP28, and I'm optimistic about all of that.
Sarda
Well fantastic, thank you both for such a fascinating discussion and giving us these key insights into both global perspective and also what was at stake coming into COP27 and certainly coming out of COP27, so thank you again for joining us today.
Assumpção
Thanks for having me, Bruno.
McNulty
Thanks.
Sarda
Thank you for listening to Sustainability Matters. If you enjoyed this episode, please check out previous episodes on EY.com or wherever you get your podcasts, we'd love for you to subscribe and ratings, reviews and comments are also very welcome. Please also visit EY.com where you will also 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.
