The launch of COP26 in early November prompted a plethora of pledges and promises to turn back the clocks on climate change. As Janet Yellen, the first US Treasury Secretary to attend a COP, observed, climate conferences have not historically been in the remit of finance ministers. Nor has sustainability traditionally been a priority of the finance industry. Yet now, both the public and private sectors are on-the-hook for providing investment to climate change mitigating measures.
COP26 commitments
So, as we look to 2022, which COP26 commitments should investors expect to see coming to fruition?
Global Standards and Disclosure. COP26 has recognised the need for investors to have access to clear and comparable information on the sustainability of their investments. In response, the IFRS Foundation, the international accounting standards body, established a board tasked with developing globally consistent climate and sustainability disclosure standards for financial markets.
The first net-zero financial centre. UK chancellor Rishi Sunak outlined his plans to transform London into the first net-zero financial centre. The inaugural transition plan taskforce is to draw up a science-based “gold standard” for transition plans to net-zero in 2050.
Commitments to developing nations. In 2009, developed countries committed to provide $100bn per annum to help developing nations adapt to and mitigate climate change. Despite this pledge being reiterated in 2015, this target has been missed since 2013. The figures for 2020 are due to be released in 2022, and funding looks likely to have fallen short again.
Public financing. The UK has promised to spend £576m on initiatives in developing countries, as part of the effort to reach the $100bn target. In addition, Mark Carney’s Glasgow Financial Alliance for Net-Zero (GFANZ) aims to mobilise private financing into developing economies.
Engagement and stewardship. Shareholder engagement and stewardship are crucial for climate-conscious investment managers. While divestment permits only one opportunity to make a point, repeated engagement with a company allows shareholders to hold them to account and apply pressure.
Hannah Nairn is an investment associate at Ruffer
Ruffer LLP is a limited liability partnership, registered in England with registered number OC305288 authorised and regulated by the Financial Conduct Authority. The information contained in this article does not constitute investment advice or research and should not be used as the basis of any investment decision.
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