Banker Ana Botin offers hope of COP26 success, but critics remain unconvinced, says TERRY MURDEN
Half time at the summit to save the planet and – based on Boris Johnson’s football analogy – the optimists are probably still trailing the doomsters by at least a couple of goals. Young activists are chanting “blah, blah, blah” from the terraces, and even institutional investors are questioning the tactics. So who better to bring on as a potential match-winning substitute than one of the world’s top bankers.
Ana Botin, executive chairman at Banco Santander, has written an insightful blog outlining why there has been more progress than the boo-boys are suggesting. She takes issue with the critics who point to the number of countries which have not signed up to net zero and the lack of policy action by those who have.
“There is another way to look at it,” she says. “179 countries have sent delegations to COP. That’s nearly every country in the world. From nowhere, more than 80% of the world economy is suddenly covered by pledges, many made for the first time, or made more ambitious in the last few months or weeks.”
She points out that only a few years ago it cost the same to borrow money to finance an oil project as a solar farm. Today, estimates of the cost of capital for investment in an oil project can be as much as 20%, while for renewables, it is between 3% and 5%.
“The policy action we have seen, although not nearly enough, is also not to be scoffed at. …. although we have a lot to do, we have come some way from pre-Paris when we were heading for a catastrophic 3.6 to 4.2 degrees,” she says.
Ms Botin is particularly proud of her bank’s involvement in the Glasgow Financial Alliance For Net Zero, or GFANZ, announced at the culmination of the first week of the summit. GFANZ is essentially to hold the financial community accountable for its pivotal role in addressing climate change.
“As a group, we will be able to generate $100 trillion in the years leading up to 2050 to fund investments in new technologies and have a global reach enough to create pathways for our customers, large corporations and small SMEs to reduce their carbon footprint,” she says.
She accepts that the banks have been in the sights of the protestors and that Santander has been specifically targeted, but she asks that they “judge us on our actions”. By 2030, Santander will have stopped providing financial services to power generation clients which derive more than 10% of their revenues from coal.
Meanwhile, in 2020 Santander financed enough greenfield, renewable energy projects to power 10.3 million households. That’s roughly three times the number of homes in London.
The Wall Street Journal highlighted that when world leaders gathered in Paris six years ago, financial institutions and banks were not even a part of the conversation. Last year $5 trillion was committed to achieving net zero. Last week $130 trillion was pledged.
These are eye-watering sums, but Ms Botin points to comments by Adam Tooze, an economic historian, who says it is not on the scale of what has been spent regularly in wars.
Such optimism may be encouraging but we are reaching what Mr Johnson has referred to as a “tipping point” when the commitment to spend money must start to yield results. The critics remain concerned that the targets will not be met because the worst culprits are dragging their heels on reform.
Eva Cairns, head of climate change at abrdn, said there was little detail on clear action plans to achieve goals and no legally binding enforcement mechanisms.
She says: “India’s Net Zero 2070 commitment is the most important country level upgrade. Modelling based on latest pledges suggests that over 90% of GDP is now covered by net zero pledges and if implemented, would limit warming to 1.9C. But in our view, concrete policy commitments lack credibility for many of the net zero pledges we have seen. We need action plans to half emissions by 2030 and not just provide vague longer-term ambitions.
“It is critical to pay attention to what governments do, and not what they say, and while we expect a major energy transition to happen, the goal of keeping 1.5C alive as a result of COP26 is extremely unlikely.”
The Rainforest Foundation of Norway adds further scepticism, saying that in the last month alone 796 km2 of the Amazon rainforest was lost to deforestation, an area more than four times larger than the Glasgow metropolitan area. This is only 4.8% lower than last year’s all-time October deforestation record of 836 km2.
The figures were released shortly after the Brazilian government signed the international pledge presented at COP26 to halt deforestation by 2030.
Indeed, deforestation in the Amazon rainforest shows no sign of slowing down. During the first two years of the current Brazilian administration, deforestation rates in the Amazon reached a 12-year high. Both in 2019 and 2020, over 10,000 km2 of rainforest were destroyed, a 67% increase compared to the average deforestation rate of the previous 10 years (2008-2018).
Toerris Jaeger, Secretary General of Rainforest Foundation Norway, says: “It is appalling to see this steady growth in deforestation in Brazilian Amazon while the world is coming together to protect the world’s rainforest. Only one third of the world’s original rainforest now remains intact. We have no more square kilometres to lose.
“The world will remain sceptical about Brazil’s promises until the country shows concrete results. The pace of Amazon destruction needs to be reduced at the very least to comply with the country’s own 2020 climate targets.”
Terry Murden held senior positions at The Sunday Times, The Scotsman, Scotland on Sunday and The Northern Echo and is now editor of Daily Business