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• MA: Michael Avery – TV and radio personality and Business Watch host on Business Day TV
• OR: Olivia Rumble, director at Climate Legal and co-editor and co-author of Climate Change Law and Governance in South Africa
• TDS: Tanya dos Santos, Global Head of Sustainability for Investec
• TD: Tracey Davies, director of Just Share

• 00:00: Intro

  MA: Welcome to the show. You're watching Climate Conversations on Business Watch with me, Michael Avery. We're in week two of COP26, which ends tomorrow, and we've been discussing whether we're turning the tide on climate change brought to you by Investec.

  And so far in this series we've cut through all the hype to the big issues so far, in terms of what the overall focus has been for the South African government heading into this super COP.

  We've debated the race to net zero, and certainly whether the science is congruent with the promises and the greenwashing. We've spoken about the climate finance fight, which is still hotly underway and contested into this week two and also how all of this is shaping responsible investing.

  Last week, we discussed that milestone 130 billion Rand funding pledge to South Africa by developed nations via Just Transition. And in an effort to ensure that the success of the COP26 climate crisis negotiations are achieved and a goal of shifting away from coal, this week 40 countries and institutions signed a pledge to end coal financing but and it's a big but South Africa was missing from the commitment.

  And we also saw a draft of the COP26 Climate Summit Deal published at dawn yesterday, and that certainly fired the starting gun on fierce negotiations among countries to clinch a final agreement before the conference ends tomorrow. 

• 01:39: The Glasgow Pact

  MA: Well, to get the latest on COP26 I'm joined by Olivia Rumble, Director at Climate Legal and co-editor and co-author of Climate Change Law and Governance in South Africa, as well as our consultants on the series. Tanya dos Santos, Global Head of Sustainability for Investec, and Tracey Davies, Director of Just Share and regular contributor to Business Day as well, I've really been enjoying your columns, Tracey.

  But Olivia, firstly, with Copenhagen, I think casting a long shadow over COP26 for all the wrong reasons, what news is, or pledges at this meeting so far, have excited you most and equally, what has been most disappointing up to this point?

  OR: Thanks, Michael. It's the final throes so it's the last few days and we having a text on the table so that's a very important first start that's come out. I'll get to the pledges shortly. But I think most importantly, we have what they calling the Glasgow Pact with some initial thoughts penned down, and these thoughts are contributions that the COP Presidency of the UK has put together based on various country party submissions over the last few days.

  So it tries to encapsulate what parties have been angling for and debating over the last two weeks. And it's been a relatively disappointing text, you'll see a lot of criticism about it. But for those of you who are seasoned with COPs, we know not to really get too bothered by the first draft of these texts. Usually, they see some quite drastic revisions, usually within the very last final hours of the COP, usually maybe the hour after the COP ends at about one or two in the morning.

  OR: So at the moment, we have a draft text that's not particularly exciting. What it tries to introduce is this idea that under the Paris Agreement, country parties are required to submit this thing called an NDC, a nationally determined contribution, and to review and update it to reflect the highest level of ambition every five years.
  

  And revised NDCs were submitted last year, and this year and we know that if you gather together the levels of ambition expressed in those NDCs, it will get us probably towards a 2.4-degree future. So that is obviously a very disappointing result.

  We know that a 2.5-degree future is relatively catastrophic. It's far better than a three- or four-degree world but it has massive implications, especially for us in Africa. What the IEA has recently said, is that if you look at some of the other things that countries have been committing to phasing out coal, the methane pledge, which I'll talk about in a little bit, that might actually get us down to 1.8 or 1.9 degrees, still bad, but better than 2.4. 

• 04:41: Three pledges

  OR: And so there's been this push to say, well since we have all these pledges and tangential commitments happening outside of NDCs can we not revise our NDCs next year instead of in 2025, which is too late.

  And express higher levels of ambition, so for countries like Australia which have been absolutely shocking, Mexico as well, to have another chance at the apple and to revisit the process, devise an NDC, potentially next year, you don't see that language in the text but that's where it's going.

   And to then include all these things around, how are you going to reduce your methane emissions by 30%? How are you going to phase out fossil fuels by 2040 since you've recently just pledged that? How are you going to phase out petroleum and diesel vehicles by 2040?

  So those three things are the recent pledges, you've just mentioned, that we've seen parties commit to not all parties, some parties, and then we'll talk about the coal phase out in a bit. But we have a pledge to reduce methane emissions by 30%, which is going to plug a huge gap in global emissions, we've got a commitment to reduce deforestation by 2030. We have commitments to end unabated coal power generation for developed countries in the 2030s and for developing countries in the 2040s but that's only a few countries that have committed to that.

  And then, of course there's debates around climate finance, which I won't go into now but that has been feeding into this whole discussion and it's definitely a low point when it comes to this particular COP, there's very little ambition around it.

  Developing countries have been very explicit on the numbers they want to see on the table. 1.3 trillion 50/50 split between adaptation and mitigation and at least 100 billion in grant finance --- Developed countries. 

• 06:49: South Africa hasn’t signed up to any COP26 pledges

  MA: I was going to say on that point, Olivia, I think developing nations have been rightfully scathing of what's been put into this initial draft text of the Glasgow Pact, as you're calling it, and as it's being called over there, but to your earlier point, it is still early days as far as COPs go. Tracey, just to bring you in here, from your vantage point, what have been your highlights and lowlights so far?

  TD: Well, I think, you know, in the initial stages, we obviously saw a huge amount of flurry, as it was called in the media, pledges and fantastic announcements and we had our South African team going out there and looking very slick and well prepared. But now, as Olivia says we're coming down to the crunch and this is when the nasty stuff, and the self-interest starts coming out.

  So, I mean, on my way to work this morning, the headline in the news was South Africa has not signed up to any of the pledges at COP26 and those are just the pledges, you know, the non-binding pledges.

  So I think that as with everything, when you start looking into the detail of these, it's quite scary how many caveats and kind of backtracks there are even on the consigning coal to history list of countries that signed that, you know the main ones are missing, including South Africa.

  And many of the ones that are on that list have signed up with various caveats. The big announcement about the financial sector commitments at the start of COP actually don't mandate anybody to stop investing in fossil fuel expansion.

  TD: So I think that the positives have been that there is such an enormous focus on the crucial nature of this, that it's been covered in the mainstream media to an extent that has never happened before. And that people are very aware of the gap between what's being said and what's being written down on paper and committed to.

  And I think that it is now up to, you know, really kind of sounds a bit cheesy, but to the citizens of the world, to demand that their government's close that gap.

  Ending fossil fuel subsidies, agreeing on end dates for coal, and not resorting to kind of self-interested cop outs which I think is a lot of what South Africa is doing at the moment.

  Yes, we're a developing country but we're very happy to place ourselves in the same category as all the other developing countries that don't have any coal fired power generation, when actually we're the world's 12th largest emitter and we should be stepping up in a much more significant way.

• 09:27: A cop-out?

  MA: No pun intended, is this COP turning into something of a cop out? Tanya, just to bring you in and let's talk about the pledge the big one last week, I think finance of this magnitude 130 billion Rand to pivot from coal to renewables. Do you see this as a game changer towards our net zero ambitions? Let's just put that on the table.

  TDS: Well, I think the bottom line is that South Africa cannot reach net zero emissions without significant support from the G7 and the developed world, so it definitely is a game changer for South Africa.

  Despite caution, you know that the headlines are showing and surrounding this pledge, because we must remember that it is just a pledge at this point. So the details do still need to be negotiated and we have to be cautious around what all the strings will be attached to the finance.

  But I still think this is a massive win for South Africa to have the access to financing of this significance, you know all the emerging markets are going to be fighting for the same packages and same deals so it's great that we're in there first.

  And I think for me, it's also a strong signal that we must be doing something right. You know, these rich, powerful developed countries would not be putting these proposals forward if they didn't have some sense of comfort that the South African government is truly committed to this clean transition path. So I definitely think it is a game changer.

• 10:57: Mixed messages from cabinet

  MA: Tracey, I want to bring you back on their point, though. And the fact remains this week at an energy conference in Cape Town, we had the Minister of Minerals and Energy standing up and saying, we won't be dictated to in terms of our pathway that we've already committed to in terms of decommissioning coal, it sounded like something of a straw man argument because no one was really through the pledge, as far as I understand it, asking us to turn coal off tomorrow. The optics, again, inside cabinet are very mixed we're sending out mixed messages here.

  TD: Hugely mixed messages and I completely agree with Tanya that the announcement of the deal and the agreement that it would happen were a great sign of confidence in the South African government's commitment to this.

  But we must remember that, as she said as well, it's only a pledge, and I'm sure there are myriad ways in which we could undermine our what's looking what looked at the time as climate competence, and things like the conference that you mentioned, are exactly the kinds of things that do undermine that.

  I challenge anyone to find a single human being in South Africa, who has ever once suggested that we should switch off our coal fired power stations overnight, no one ever suggests that that's the whole point of a Just Transition. We do this over a period of time in a managed responsible way.

  It's being used as a political tool to whip up, you know kind of sentiment around things that really have nothing to do with taking climate action.

  So I think if I were the potential providers of that $8.5 billion dollars in finance to South Africa, those kinds of things would really annoy me and developed nations needed big announcements in the run up to COP.

  The big US deal that was hoping to happen didn't pull through, there were lots of disappointments in the run up to COP and that South African announcement was a great way for people to show that progress was being made. But now we get down to the nitty gritty, you know, are we as a country actually capable of taking that finance and using it in the manner for which it's intended?

• 13:10: How should SA’s R131 billion just transition pledge be used?

  MA: And that is the issue now, how should that finance be used? Olivia how do you see the funds being effectively mobilised and prioritised here and what is the role in the private sector now in all of this?

  OR: It's a great question and I think it's one that I don't have an easy and readily available answer to you, because there's very little transparency around how this finance will be applied.

  I know in principle, that there is some grant finance, some concessional finance, and that it's anticipated that that will crowd in these massive numbers that we've heard about 131 billion, but we don't actually know how much of that is grant finance.

  And what is so good about it I think, and Tracey touched on this, is this is one of the few Just Transition deals that we've seen across the world. You don't get many packages like that, and I think the intention behind this funding and the way it was presented was that it would deal with some of the social and labour issues that are integral to us achieving a Just Transition.

  And I'm very curious to hear and I don't think we've worked out the nitty gritty of that yet, on how that funding will be applied to some of our social issues, reskilling and redeployment, pension fund pay-outs, etc, etc. And those types of things don't do well with concessional finance, those types of things need grant finance.

  And so I've heard numbers thrown out there that Eskom needs 1 trillion in that context, where does the 8.5 billion stand on grant finance and dealing with some of the social issues that we have and who will benefit from that?

  And I think that the ball is very much in our court as South Africa as well, to figure out how are we going to achieve the Just Transition. We have done huge NPC pathways projects; we've invested a huge amount of time and academic resources into defining the Just Transition, but we still don't have a National Just Transition Plan.

  We have the finance now and it's up to the Presidential Coordinating Commission on Climate Change, and all other actors across South Africa to really figure out now that we have this money, how do we want to spend it? And I'm sure that discussion has been had with the funders and is ongoing, but I think it's important that it's a national discussion as well.

• 15:31: The role of private finance

  MA: Absolutely, and one that is completely transparent, because there is also a lot of real and justified cynicism and concern that with an amount that large, it is naturally going to attract the sort of corrupt behaviour that has bedevilled South Africa in the past.

  Tanya, what do you see here as the role of private finance now, in the wake of this pledge, and how much more private sector capital could be leveraged on the back of this if the bulk of it, let's say and speculate is grant funding?

  TDS: Yeah. So you know, I think that there is definitely a massive opportunity here for private sector funding to participate. The local banks are all ready to participate, we are fully aware of what's coming and we have the tools and the knowledge and the capability to support this type of funding so we're ready.

  I think one thing that concerns me though, is that there needs to be an element of building some trust. South Africa's participation in this will be scrutinised by the rest of the world and we're going to need to ensure that it's completely transparent and above board in everything that we do with these funds.

  But on the other hand, we also need to remember that the developing countries also broke their promises of climate finance over the past few years. So I definitely think that there's going to have to be an element of acting with trust and integrity, to affirm those respective commitments because we're going to be monitored by the entire world on this now.

• 17:06: Can we innovate our way out of climate change?

  MA: I just want to shift to another area of the discussion. And Tracey, I think it's one of those debates that's as old as the hills if you're a COP watcher, but the broader philosophical divide at COP26, between those who think we can innovate our way out of the climate crisis and those who think that restraint and changing the culture is actually the way to go.

  And often the former are politicians who tend to like new, shiny, big projects, while the more sceptical voices, usually the environmentalists and the activists say we need to become more energy efficient and cut consumption.

  Can we innovate our way out of this particular crisis, what is going to be needed for us to ensure that we actually achieve that one and a half degree or lower goal?

  TD: Well, I think that innovation has to play a huge role because we even with if all the pledges and commitments and promises are achieved, we're still going to need and you know, hence the term net zero, we're still going to need technology that removes carbon dioxide from the air, because simply reducing our emissions at this stage of the day is actually not going to be enough.

  So of course, there is huge scope for innovation, and I think that you know that that is something that's kind of ramping up around the world. But what you need, of course, for innovation, first of all, we can't just sit back and say it's fine, we'll fix it or, you know, someone will come up with a clever way to fix the problem. Absolutely not, innovation whatever that means has to happen parallel with urgent and really drastic emission cuts.

  But crucially, innovation needs finance and at the moment, a gigantic proportion of the world find available finances being diverted towards fossil fuels, either via government subsidies, or in the form of private sector financing.

  And so, you know, the figures about the amount of finance you need to properly incentivise the development of the kind of innovation we're talking about here are gigantic. And yet here, we still have a situation where in the negotiations, there is no agreement yet on phasing out fossil fuel subsidies, there isn't even any agreement on whether we should talk whether we should use the term fossil fuels in these agreements.

  So I think one's just got to be really, really careful of the promises that have been made at the moment about innovation.

• 19:27: COP27 moved forward to 2022

  MA: Absolutely. Just to move on to where we go from here. Olivia, in terms of bringing forward the conversation from 2025 to 2022, I think that's obviously got to be seen as something of a positive. Have we laid the foundation for an even bigger COP27 and what do we hope to achieve before then?

  OR: Good question. I think there's a very valid concern right now that what is happening is there's been this huge build-up to COP26 and because we are not seeing the type of traction and outcomes or at least some people aren't from this particular COP, that all we're doing is just deferring all that ambition to next year. So that is very well likely to happen.

  I'm relatively confident we'll get some concrete outcomes, like an Article Six Rulebook, etc from this year but it is very likely, as I said that we'll defer possibly NDC updates and enhanced ambition and reviews to next year.

  In the meantime, we have a lot of work that's being done by the standing committees under UNF triple C, looking at what are the status of pledges, how much of an emissions gap do we have? What do we need to achieve in the next year, and you'll see in the draft Glasgow Pact that they have committed to look at this on an annual basis?

  So in Egypt next year, where we have COP27 or likely to have it, it's very likely that we'll start making ambition an annual thing that we look at in a much more specific and focused way than we have ever done before. 

• 21:06: Carbon border adjustment mechanisms

  OR: And then, of course, we have all these side discussions happening around the COP, where country parties are trying to achieve leverage and enhanced ambition outside of the avenues of the Paris Agreement. So for example, there's a lot of discussion around using trade and carbon border adjustment mechanisms, and the EU's New Green Deal as a means to force countries into a cleaner emissions pathway.

  And it's likely that over the course of the next year, we will see the EU finalise the detail around that particular plan, the US is also talking about it although it's unlikely to get through Congress. And I think that will probably dominate the discussion over the next year as we see different groupings try and achieve what they couldn't in Paris through other political avenues. Sorry not at Paris at Glasgow.

• 22:07: How COP26 will inform Investec’s sustainability strategy

  MA: Glasgow, the issue though and you've just raised around the carbon border adjustment mechanisms, is one that could quite easily slip into the area of green protectionism, and I certainly worry about that when it comes to using trade as a significant lever and tool here and I worried that it's going to slip into that. Tanya for Investec what have been the key takeout’s for you as a bank that's got to now inform your climate change strategy, post Glasgow?

  TDS: Well, I certainly think that there are quite a lot of takeouts, and that carbon border adjustment tax is certainly one of them that the whole country has to consider because that will impact almost every sector.

  We will obviously be watching out how this 130-billion-rand pledge evolves and what those conditions will be, obviously we've got a strong position in power and renewables, so we want to play a greater role in the transition. So we would certainly look to participate in any of those opportunities.

  Then, there were some interesting country commitments that have come out around fossil fuels. So we certainly, you know, we're not just South Africa based we've got presence in the UK, so we certainly watching what's happening around fossil fuels and nuclear, but also industries like steel, forestry, I think construction and even tourism.

  There's so many different pledges and promises coming up but the detail hasn't yet been worked through. So all of those types of industries will impact our financing of those sectors.

  And then I think the last one is the reporting, the launch of the International Sustainability Standards Board. And we really welcome that, because that's all about aligning a global standard around sustainability disclosure, in particular climate disclosure. So a lot for us to be working through. I think we're going to be busy for the next month just trying to understand it all.

• 24:16: Monitoring, evaluation and measurement

  MA: Yeah, I mean, my head is swimming with questions. And let's just end with a final one. Tracey as we've got a minute and a half to go around monitoring and evaluation and measurement and reporting to Tanya's earlier point. I mean, who's going to be holding whose feet to the fire of accountability here? How are we going to get this right at a global scale with all of these dizzying pledges and the flurry, as you mentioned earlier?

  TD: Yeah, it's a crucial question and I think at the end of the day, there's always going to be some element of all of this that relies on trust and working towards a common interest. And regulation is key, and I think that's why the conversation about carbon taxes is a crucial one and one that hasn't probably been spoken about nearly enough in the context of COP conversations, because at the end of the day the only way we're really going to achieve what we need to achieve with this is by making it expensive to continue to emit huge amounts of CO2.

  So, you know, we can have hundreds of 1000s of reports and standards and monitoring, all of which is voluntary, which I think is problematic, it will help to corral the industry into a more sort of coherent way of reporting, but I don't think that anyone should be under the illusion that voluntary reporting standards are going to get us where we need to be. We need carbon tax, we need regulation, we need strong accountability mechanisms, and in many instances, those can only come from national governments.

  MA: Well, thank you very much ladies, we're going to have to leave it there. That was Tracey Davies, Director of Just Share, Olivia Rumble, Director at Climate Legal and Tanya dos Santos, Global Head of Sustainability for Investec. Ad you've been watching Climate Conversations on Business Watch, a COP26 conversation on whether we're turning the tide on climate change brought to you by Investec.

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