For those looking for radical action on climate change, COP26 might have seemed a little underwhelming. However, stewardship director at Rathbones, Matt Crossman, believes there is some cause for optimism. “The scale of activity at COP26 was pretty mind blowing. Glasgow hosted a staggering 38,000 delegates from 197 countries,” he says. “Now the dust has settled, we can reflect on the relative success of the event, which did bring some headline agreements to give us a glimmer of hope for the future.”
Crossman says it is worth taking a step back to look at what has been achieved so far through COP. “Back in 2015, only 127 countries had made any kind of mid-century net-zero commitment. By the end of COP26, there were 140 countries signed up to the net-zero pledge, including India and China, accounting for 90% of global emissions. Is it fast enough? Probably not, but it is significant.”
Crossman says that the onus is now on governments to follow through with their commitments. “There are still numerous pressing issues for us to address, but we are moving in the right direction. At a national level, governments need to make good their promises to mobilise climate financing – $100bn a year was agreed in Glasgow for climate mitigation and adaptation, and we need to see the phase out of fossil fuel financing accelerate.”
Aligning values, creating impact
For head of charities, Andrew Pitt, investors also have an important role to play in this transition. “There are two main things that all charities need to consider: there’s creating impact and there is values alignment. Sometimes I think these two objectives get confused. If you just divest from all fossil fuel companies because you feel they do not align with your values, then that doesn’t actually achieve a huge amount in terms of impact.”
Pitt suggests working together with companies to reduce their carbon footprint as part of a wider responsible investment strategy. “Obviously, you have to work with companies that are willing to engage, are willing to listen and have signed up to decarbonisation goals. By influencing their choices and helping drive their transition, then you are having much more impact.”
He adds that this is a long-term and complex process. “The first thing to understand is that this is not just about some distant net-zero commitment. It is about having genuinely robust plans that impact all of the carbon footprint of the business, and setting interim targets that are tangible. It has to cover the entire emissions profile of the company, not just the direct output. It should include everything from transportation to the footprint of the products it sells.”
To achieve the goals set at COP26, charities also have to shoulder some of the responsibility for their own carbon output, says Pitt. “It’s not just about their investment portfolios. One of the problems with the environment, social and governance (ESG) movement is that people think that if they have a ‘net-zero’ portfolio then they are doing all they can. They think the impact they are having on the environment is reflected entirely by the contents of their portfolio. But that’s only one part of it. We should all be trying to reduce our personal and organisation’s carbon footprints as much possible as well.”
Focus of responsible investment
How and when change might come about is uncertain, suggests Crossman, and it is important to realise that the pandemic has not fundamentally altered behaviours. “It’s pretty clear despite all the talk of building back better, emissions pretty quickly resumed that pre-pandemic path and the trajectory of global warming remains unchanged.
“Having said that, change in society is very rarely linear and predictable. When it happens, it happens rapidly. Just as manufacturers of horse-drawn carriages couldn’t have predicted the rise of the motor car, or executives at Blockbuster couldn’t have anticipated the rise of Netflix and streaming, change when it comes is usually fast and furious, and led by the private sector where regulation leaves a gap. So, when we reflect on the capacity of our institutions to deliver the change we need, I think it makes the focus of responsible investment all the more important.”
This gives cause for optimism, believes Pitt. “Behind the scenes, there is a huge amount of pressure being brought to bear by investors on high-emitting industries to change the way they operate. And there is now much more quantitative evidence to suggest that shareholder engagement in its various guises – from formal voting to regular engagement with management – is actually driving this transition. We are seeing major change across the fossil fuel industry as companies look to renewables, cutting emissions and changing their business models. By being stakeholders, charities can be part of that change.”
What we do
We like to work in partnership with our charity clients which means you have direct access to the person managing your charity’s investments, resulting in a portfolio that accurately meets your needs and is as individual as your charity.
Key facts*
- £7.1bn of charitable funds under management
- Over 1,900 charity clients
- Segregated or pooled investment
- Dedicated team of charity investment specialists
- A history grounded in philanthropy
*All figures as at 31 December 2021
Matt Crossman is Stewardship Director and Andrew Pitt is Head of Charities at Rathbones
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