Purpose on Payday- November 2024: Climate debate heats up in oil capital

Climate politics and popularism have dominated discussions around responsible business and ESG over the past month.

Donald Trump’s re-election as US President has come at the tail end of the ‘year of democracy’ which has seen new Governments elected in 64 countries around the world.

While the agenda for many of those elections focused on domestic economic and social issues, the response to climate change, and whether it is driving energy price rises and consumer inflation was a topic that got cut through in many countries. Populist views around ESG as ‘woke capitalism’ and cynicism about the cost and timing for net zero policy changes fuelled consumer and business concern.

President Trump’s re-election, on November 5, looks certain to see the US withdraw from the UN’s Paris Agreement on net zero and that loss of leadership, from the world’s largest economy, is a blow to UN ambitions to limit global temperature rises to 1.5C and deliver net zero carbon emissions by the same year.

President Trump’s energy policy, ‘drill baby drill’, and lack of support for renewable power investment further lays the foundations for energy to remain a key battle ground for politicians and business.

China’s continued mass adoption of solar and vast manufacturing capabilities have seen it capture global leadership in PV panel manufacturing. This sets a foundation for a future that sees countries having to choose whether they stoke US ire by investing into a solar future (powered by Chinese panels) or opting to soften their ambition and consume US and OPEC oil. It will also influence the investment decisions of banks and asset managers, with their funds being critical to driving this net zero transition, yet who are also being targeted by activists who either think their ESG investment approach is ‘woke’ and should be dropped or believe it doesn’t go far enough and needs to be more ambitious.

It’s certainly a tension that hung heavy in the air at Baku, the Azerbaijan capital which is literally and commercially built on oil and which hosted the UN’s COP29 climate change summit. COP29 was meant to be the finance summit and finance dominated the agenda but not in a good way.

Widely expected to be ‘a transitional COP’ (i.e. one that didn’t achieve enough) COP29 unfortunately lived up to its billing.

Pre the conference kicking off on 11th November, it was marked by concerns about the influence of Big Oil on the discussions, on reports that Azerbaijan was allowing side discussions and deals on oil and gas and by the number of business and political leaders who opted to stay away in the expectation that this was not going to be a critical COP moment.

Part of that reticence was driven by uncertainty over the US Presidential Election result – Trump’s victory was confirmed just before COP 29 started – and by political change and new government’s globally not having a clear priority on climate change adaption and finance.

It was also marked by geopolitical tension between Global North and South and between the US, Russia, Iran, China and the fall-out from conflict in Gaza and Ukraine. Global co-operation and a desire to negotiate in good faith to achieve a beneficial outcome for all felt like something that was in short supply.

The key outcome from COP 29, an agreement by developed nations to pay $300 billion a year by 2035 to help finance climate change mitigation and adaption, was met with derision by many in the Global South: ‘this is not just a failure, it’s a betrayal’ (Least Developed Countries negotiating bloc), ‘abysmally poor’ (India), ‘too little, too late’ (The African Group of Negotiators).

While the sum offered is three times the previous agreed payments of $100 billion a year it was well short of the $1.3 trillion a year which developed nations, who emit the least amount of carbon but are most impacted by climate change, had asked for.

The broad view is that COP 29 has left much to do and piles pressure on COP 30 (November 2025 in Brazil) to deliver far greater ambition and agreement on change.

With a vacuum of power likely to be left in climate leadership through the US Presidential result, who (if anyone) steps up to drive forward the net zero ambition, and how co-operation is re-shaped is an open question. On a plus note, there seems to be a far greater level of engagement already around COP30 with many business leaders we speak to planning to attend.

The UK made fresh Nationally Determined Contributions with Kier Starmer pledging to cut emissions by 81% by 2035. The UAE and Brazil have also made early pledges to accelerate their emissions cuts and all UN signatories have to publish their NDCs by February 2025.

That process will give a steer as to just how much of a battle will be reserved for COP 30. However, in a year that is set to be officially rated as the hottest ever and with significant climate change related extreme weather causing chaos in many countries, much progress was needed in November with relatively little achieved.