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COP26 - what happened?

2 years ago
The United Nations Climate Change Conference (COP26) brought together leaders from more than 120 nations in Glasgow. The conference was hailed as ‘the last, best chance’ to get climate change under control, by promoting awareness and encouraging new action to tackle the issue. Here, we look at the main takeaways from the conference, and what they could mean for investors.

Tackling deforestation

A major development from COP26 was the pledge to end deforestation and reverse land degradation by 2030. Signed by more than 100 countries representing 85% of global forests, the pledge includes $19 billion of private and public funds. More than 30 financial companies, including AXA, also promised to remove investment in projects linked to deforestation. The commitment is encouraging, but how it will be enforced remains unclear.

Cut methane emissions

After its first proposal in September, US President Joe Biden and EU Commission Chief Ursula von der Leyen formally announced the formation of the Global Methane Pledge. This aims to cut methane emissions by 30% (from 2020 levels) by 2030. Methane is a particularly potent greenhouse gas, so reducing its atmospheric levels could buy more time to reduce carbon emissions.

Formation of the ISSB

The IFRS Foundation, a global leader in corporate accounting standards, announced the launch of the International Sustainability Standards Board (ISSB), a set of global standards for companies reporting on their climate and ESG impact. Investors and companies have struggled with the wide variety of current reporting initiatives, so the ISSB should help to bring some consistency to reporting, and make meaningful comparisons easier.

India pledges to become net zero

India, the world’s third-largest polluter, pledged to become net zero for carbon emissions by 2070. The country will also generate half of its electricity from renewable sources by the end of this decade. New scientific research has suggested that, if India and other nations stick to their pledges, temperatures are likely to rise by 1.9 degrees Celsius above pre-industrial levels – importantly, below the 2 degree upper limit set out in the 2015 Paris Agreement.

Phasing down coal

More than 40 countries have committed to shift away from coal. They include major coal users, such as Poland and Chile, but not the US or China. The nations have agreed to end investment in new coal power stations, and phase out existing coal power by the 2030s or 2040s (for developed and developing nations respectively). Several major financial institutions also agreed to stop financing new coal projects. At AXA, coal mining and coal-based energy production are already excluded sectors. 

The US and China agree to cooperate

Chinese and US climate envoys made a rare promise to cooperate on the issue of climate change. The announcement contained few details of new commitments, but it is a promising sign that the world’s two biggest polluters appear willing to work together to bring down emissions over the coming decades.

The Glasgow Financial Alliance for Net Zero (GFANZ)

UN Special Envoy Mark Carney announced that GFANZ members now account for total assets of more than $130 trillion. GFANZ is a group of 450 financial institutions, including AXA, which have committed to aligning their businesses (including their lending and investments) with net zero targets. This commitment should help towards funding the estimated $150 trillion needed to offset the worst impacts of climate change.

ESG disclosures for investments

The CFA Institute announced the launch of the Global ESG Disclosure Standards for Investment Products, with the aim of reducing greenwashing. The voluntary standards will provide a framework for investment product providers to disclose how they consider ESG issues in their objectives, investment strategy and stewardship activities.

More funding for developing countries

Japan’s newly elected prime minister, Fumio Kishida, pledged an extra $10 billion of funding for developing countries over the next five years. There were also new commitments from Italy, Spain, Denmark and the UK. This brings us closer to the $100 billion of annual funding pledged by developed nations 12 years ago – a target that was supposed to be reached by 2020.

Green technology

More than 40 world leaders said they would work together to speed up the global uptake of green technology, in an initiative known as the Glasgow Breakthroughs. Five sectors will be targeted initially, including electricity and agriculture. Countries will coordinate policies and new investments, helping to bring forward the ‘tipping point’ where new green technologies are more affordable and accessible than fossil fuel equivalents. Separately, the EU also announced a €1 billion ($1.15 billion) investment scheme targeting green technology.

Architas view

Our view

New pledges and announcements are often met with scepticism, and it remains to be seen how much of this talk will turn into action over the coming months and years. However, we feel encouraged by the wide variety of pledges in many different areas of the global economy, and are planning how best to take action as investors. If these pledges become coordinated action, investors can be optimistic that there is a genuine chance of limiting global warming to 1.5 degrees Celsius above pre-industrial levels.

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