Addressing the climate crisis in time to avoid its worst impacts will require a rapid increase in action and ambition — not only by national governments but also on the part of non-state actors (NSAs), including local governments, companies and private investors. The first-ever Global Stocktake synthesis report, which assessed the world’s action on climate change to date, underlined the need for credible, accountable and transparent actions by NSAs both in mitigating climate change and adapting to its impacts.
The good news is that momentum for climate action among NSAs is swelling. Since 2017, the total number of climate actions pledged by cities, companies and investors has more than doubled to over 32,500, with solutions ranging from renewable power generation and vehicle electrification to net-zero targets, Science-Based Targets (SBTs) and adaptation measures. As of 2022, over one-third of the world’s largest publicly traded companies have set net-zero targets.
But while these targets send an important signal, they are only a first step. Attention is now shifting from announcements of pledges and goals to how NSAs will implement them.
In 2022, the UN High Level Expert Group was formed to ensure environmental integrity, credibility and accountability in net-zero emissions pledges by businesses, cities and regions. Following this group’s recommendations, the United Nations Framework Convention on Climate Change (UNFCCC) started global consultations towards a Net Zero Recognition and Accountability Framework to enhance transparency in progress made by non-state actors towards meeting their pledges. In addition, the Global Climate Action Portal, which started as a platform to showcase climate commitments by NSAs, has started tracking voluntary climate action and publicly pledged goals.
Fortunately, this transparency comes with mututal benefits. As non-state actors navigate the shift from pledging to implementation, better data and tracking around climate actions can play a key role in helping them mobilize climate finance and achieve their goals.
How Data and Transparency Can Enhance Non-State Climate Action
While an increasing number of actors are developing climate action plans, many lack robust greenhouse gas (GHG) emissions inventories and detailed strategies for implementation. In addition, they are often short on technical capacity and finance to fulfill their commitments, leading to inaction and delays.
Detailed, quality data can help overcome these issues by improving accountability, identifying funding needs and gaps, and supporting the development of project pipelines and investment plans, as well as tracking progress and revealing opportunities for further emissions reductions. At the same time, national policymakers can utilize reliable information on non-state climate actions to understand where these efforts overlap with their own climate plans and more accurately assess investment needs.
Non-state and subnational actors can promote transparency in implementing their climate actions through various measures. For businesses, these might include:
- Defining key performance indicators (KPIs) and targets along with time-bound plans to achieve them.
- Compiling GHG emissions inventories that include emissions along supply chains.
- Getting buy-in, financial resources and public commitments from corporate management.
- Communicating interim results in annual reports.
Measures that can be taken by provinces and cities might include:
- Setting legally binding activities (such as those regulating GHG-emitting sources) and thresholds as well as short-term milestones towards achieving climate goals.
- Allocating finance to execute on climate action plans.
- Reporting on the investment status and potential impact of targeted climate actions.
- Communicating progress through online dashboards and regularly updated reports.
Governments and investors are increasingly asking companies for their climate risk-related information. For example, climate risk disclosure rules in the EU, the U.K. and the U.S. (where they are expected to be released in 2023) ask companies for information related to their climate targets and goals. This includes the target time horizon, interim targets, how they are planning to meet the targets, and relevant data to demonstrate progress on an annual basis. A new global standard for climate-related disclosures, released by the International Sustainability Standards Board, is helping to simplify and harmonize these disclosure requirements across countries.
The Benefits of Accountability Go Both Ways
Alongside helping non-state actors achieve their own climate goals and meet reporting requirements, better transparency can promote accountability and instill confidence in climate projects and actions. This, in turn, may benefit NSAs’ reputations, performance and access to climate finance.
A recent study that examined 465 firms with SBTs found a positive link between the firms’ climate performance (measured through change in carbon intensity from 2015-2020) and their financial performance — results which have been corroborated by additional research. These companies are signaling their ability to address climate risks, building trust and a positive public perception, which can lead to higher financial returns and make them more attractive to investors.
In addition, several multilateral development banks and financial institutions — both international and domestic — require NSAs to report on the progress and impact of financed climate actions and projects in order to receive financial support. The City Climate Finance Gap Fund, for example, underlines that cities selected for support should estimate the mitigation or adaptation potential of the proposed intervention under the fund. When determining eligibility for climate finance, banks are increasingly asking NSAs to demonstrate how funded activities plan to address climate-related vulnerabilities. These disclosures allow NSAs and financial institutions to strategically identify and plan for better financial and climate-related risk management.
By disclosing how these targets are being met and managed, financial institutions can give insight into what kinds of mitigation projects they are prioritizing and how investors are responding to climate change. This also provides institutions an opportunity to align with mitigation priorities at the national level, channel finance accordingly for greater impact, and support countries’ macroeconomic and financial stability.
An analysis of cities applying for climate finance found that technical knowledge gaps were their most common challenge, including those related to lack of data and measuring the impact of actions. Cooperative initiatives between multiple non-state actors (for example, city networks and financial institutions) can help NSAs overcome these barriers by supporting the development of project pipelines; mobilizing technical assistance and financing instruments; and creating enabling environments that support local investment and project implementation.
One example is the Global Covenant of Mayors for Climate and Energy (GCoM), which adopted the Common Reporting Framework to help member cities quantify and compare their data and strengthen transparency. GCoM also launched the Invest4Cities initiative, which supports the development of GHG inventories, impact evaluations and climate risk assessments. This collaborative and preparatory work helps address gaps in technical knowledge and enable cities’ access to climate finance.
How Climate Reporting by Non-state Actors Supports National Climate Action
By transparently disclosing their emissions, GHG mitigation potential and financing needs, non-state actors can help national governments determine where to channel and prioritize climate investments to enhance their impact. National governments can also use this data to quantify the collective impact of non-state action and understand how it can contribute to national goals, helping to inform future policy decisions.
The Mexican government exemplified this by engaging a range of stakeholders over several dialogues, including ministries, private companies, universities and financial institutions. Together, they worked to estimate the cost of implementing mitigation and adaptation measures needed to meet the country’s NDC targets and to refine its climate finance needs. The bottom-up approach provided an improved overview of all nationally aligned climate-related expenditures, including initial investment costs, operating costs and technological costs. Non-state actors can better participate in similar processes when they have their own mitigation plans and strategies in place and know their investment needs.
The Initiative for Climate Action Transparency (ICAT) Non-state and Subnational Action Guide provides a step-by-step methodology that national governments can use to estimate the collective impact of various types of climate action and determine how they can support the achievement of national targets or even help surpass them.
Data on climate expenditures by local governments and other non-state actors can also contribute to building a national climate finance measurement, reporting and verification (MRV) system. A climate finance MRV system brings together information on public and private expenditure on climate action and its impacts, and identifies gaps and opportunities to mobilize new finance. For example, Colombia’s MRV system has promoted reporting of climate expenditure-related information from sectoral and regional entities and improved the transparency of finance data, making it easier to mobilize resources and enhancing trust between national and regional entities.
Governments should consider taking the following steps to facilitate increased transparency from non-state actors:
- Facilitate streamlined data collection processes and provide technical support for NSAs, enabling them to meet disclosure requirements in an effective manner. This could include supporting disclosure-related initiatives such as the Carbon Disclosure Project (CDP) and GCoM that help build capacity for tracking and transparency.
- Adopt standardized tracking and reporting frameworks, making it easier to disclose information on climate-related activities and risk. For example, several countries are taking action to implement climate-related financial disclosure requirements in alignment with the Taskforce on Climate Related Financial Disclosures (TCFD) framework to assess, identify and manage climate risks.
- Address concerns related to competitiveness by reducing risks associated with disclosing investments and impacts. For instance, to balance the risks and benefits of data access and sharing, Australia follows the Five Safes Framework, which helps to assess and describe risks and facilitate safe data release with appropriate checks and controls.
Every Climate Action Counts — and Should Be Counted
As major players in the fight against climate change, it is vital that non-state actors provide credible information on the implementation of their climate actions. Not only can this data support national climate plans, but it can also help mobilize the finance needed to meet these targets.
Cities and businesses can lead by example, following best practice to report on their climate actions and impacts, and may improve their own financial viability in the long run by doing so. Governments can support these efforts through technical assistance in data collection, incentivizing compliance with disclosure requirements, and creating forums for continued dialogue to bridge information gaps and facilitate collaboration. All contributions to climate action matter, and providing evidence to illustrate impact is one of the keys to progress.
