Weekly media briefing 26 October 2021

This week’s topics: 

• Good Cop or Bad Cop - the who, how and what behind delivering success in Glasgow 
  
• Tough decisions on Budget day - balancing domestic pressures with international expectations
• Virtual working is keeping insurers awake at night, according to the latest Banana Skins survey
• Carbon bubble lands in Trafalgar Square..

What does a successful COP26 outcome look like?

Kiran Sura, sustainability and climate change adviser at PwC UK, said:

The stakes are high but so are the potential rewards. The scientific community has warned that we have a narrow window of opportunity to keep 1.5degC alive. COP26 is the first major meeting on the climate emergency since 2019. Through coordination, collaboration and commitment it is possible to keep 1.5degC alive and deliver a resilient, sustainable, net zero world.

• The G20’s role in success:

With the G20 meeting the weekend before Cop26 starts, it’s important for them to set a unified and ambitious tone, committing to raising 2030 ambitions and net zero by 2050 as well as action on coal.

While building on the raft on new NDCs (national climate targets) already announced, we also need developed countries to make good on their promise to raise $100bn a year in climate finance. 

These actions will restore trust between counties and faith in the multilateral process.

• What do we need COP26 to deliver? 

A clear plan for how the emissions gap will be closed in the early 2020s through the acceleration of the NDC enhancement cycle and the setting of transformational sectoral targets that signal irreversible market shifts.

On climate finance, the delivery of the $100bn in climate finance, a constructive start to negotiations on long-term climate finance targets (with a floor of $100bn), and the mobilisation of private finance at scale through multilateral development banks, development finance institutions, businesses and investors. 

The science has confirmed that the impacts of climate change we have already locked in are worse than forecast, and will increase in frequency and intensity without urgent action. The process needs to put adaptation on a more equal footing to mitigation by ensuring half of all finance raise is directed towards helping populations and communities deal with the impacts of climate change and advancing negotiations on the global adaptation goal.

Last and by no means least, the finalisation of outstanding elements of the Paris Agreement Rulebook.

• What does success look like?

Success would entail leaving Glasgow having mandated for five year common timeframes for NDCs, an enhanced transparency framework that ensures accountability whilst also providing flexibility for developing countries; and an international carbon market that preserves the environmental integrity of the Paris Agreement. 

This is the first COP where business action is receiving significant profile with a real groundswell of action under the Race to Zero, Race to Resilience and GFANZ campaigns. Business will also be pushing to see progress on the establishment of carbon markets and signals on how sectors are transforming.

What will the Budget mean for the environment, people and businesses?

With the Chancellor announcing his second Budget of the year the week before COP26, our top tax experts share their predictions.

Stella Amiss, head of tax for regions at PwC, said:

• The Government will be hoping to use this Budget to deliver on both the levelling up agenda and on its climate change ambitions and could look to address both with key policy measures.
• Incentives and grants to help businesses transform to achieve net zero goals could be targeted at those areas of the country that have been ‘left behind’ and so also help drive the focus on new skills, economic growth and opportunities across the whole of the UK.

Amal Larhlid, ESG tax leader at PwC, said: 

• The Chancellor will have a tough decision on whether to freeze fuel duty for the 12th year in a row. 
• A rise is difficult given fuel prices are already at all time highs and in light of other pressures on household finances. However, credibility is at stake with the COP26 climate conference only days away. 
• It will also be interesting to see if the Chancellor considers what policy measures might be available to help avert the tax shortfall from drivers choosing Electric Vehicles such as a per-mile charge, any changes will need to be achieved without disincentivising consumers from making the switch.

And Lisa Hooker, consumer markets leader at PwC, heeds a warning on behalf of UK retailers:

• The industry is looking to the Government to help the availability of staff particularly for seasonal workers and in upskilling given the skills shortages. 
• There are headwinds coming in 2022 as rates and VAT are reinstated, the landlord moratorium ends and the consumer is facing inflation and tax increases - making the response to the review of business rates and efforts to control inflation more crucial than ever.

Cybercrime becomes the top ‘Banana Skin’ for insurers

Now in its 8th edition, the biennial Insurance Banana Skins survey details the risks facing the insurance sector across the globe in the next 2 - 3 years.  For the first time crime, and particularly cybercrime, has emerged as the number one concern - while the fastest-growing risk brings little surprise.

PwC Insurance Partner Andy Moore commented:

• What’s brought this to the fore is the increase in virtual working combined with the increase in the type, volume and, critically, the success of cyber threats.
• The challenge for insurers has become even more complex as businesses have introduced new technology, cloud computing and third-party services in longer supply chains. 
• Ironically as companies become more confident in implementing new digital solutions, they become more exposed to cyber risk. 
• The fastest-rising risk is climate change which moves into the top 5 for the first time. It is clear that the impact of climate change is a much nearer-term risk than previously perceived and in many cases, the effects are already being felt. 
• The worldwide focus on climate change as part of the wider ESG agenda is resulting in a step-change for most insurers. Reporting requirements are increasing, and governments and regulators continue to press companies to better articulate and explain how they are quantifying and managing the related risks. It would be no surprise to see this risk rise further in future reports.

Giant ‘carbon bubble’ at Trafalgar Square 

Ahead of COP26 in Glasgow, our giant ‘carbon bubble’ balloon, representing a tonne of CO2, will be at Trafalgar Square on Thursday 28 October. 

The bubble provides a visible talking point and photo opportunity about the climate challenge.

In collaboration with Westminster City Council, we'll be promoting participation in Count Us In, a global platform for individuals or organisations to make environmental pledges. The Leader of Westminster City Council will attend, alongside PwC's Global Climate Leader.

In the UK each year, we emit 5.3 tonnes of CO2, that's more than five of these 'bubbles', per person. 

Kevin Ellis, PwC UK Chairman & Senior Partner, said:

• Large cities like London are amongst the biggest emitters of carbon but this means they can play a massive role in cutting emissions. As a business with offices in the capital, we have to play our part in changing behaviour. 
• Raising awareness among employees, commuters, visitors and residents is crucial to achieve Net Zero emissions. We're headquartered in Westminster and are proud to work with Westminster City Council to do this. The carbon bubble may look light but its message is hard hitting.

Something to listen to:

‘S for Space’, the latest episode in PwC UK’s A-Z of #Tech podcast series, explores the prospects for innovation, manufacturing and new sources of energy in space. And, as the UK publishes its first space strategy, it looks at how the UK space industry is making its mark in the solar system. Listen here.

Something to read:

We’ll be tweeting live from our PwC_UK twitter account from 12.30pm today on the fiscal updates from the Chancellor’s Budget, assessing the impact and who the winners and losers are.  Join us on Twitter here.

Something to watch:

And the morning after, join Lord Gavin Barwell and Marissa Thomas, head of tax at PwC, and a panel of experts for a Budget download once the immediate dust has settled. Sign up here.