Lead Up To COP26

 In Market Intelligence

As world leaders prepare to assemble in Glasgow, there is an increasing expectation on them to leave the COP26 summit with a clear strategy on how to confront the pressing climate issues that threaten our planet.  Here we take a look at a few areas that are likely to be discussed.

The forthcoming climate summit will provide world leaders with an opportunity to push for greater consensus, on global reporting frameworks and climate disclosure standards for companies.  Remy Briand, Head of ESG at MSCI, believes a successful COP26 Summit will see the introduction of mandatory climate disclosures based on internationally agreed standards. He maintains that the disclosures should mandate companies into releasing their complete carbon emissions footprint and the emissions of their largest suppliers. As a result, Remy insists that this will provide investors with the complete information needed to assess the vulnerability of their investment portfolio to climate risks. Additionally, a consensus on a reporting framework, could prevent greenwashing and would lead asset managers into a key position of adopting investment frameworks that encourage and reward businesses that are making meaningful progress in tackling the climate emergency.

Another key topic world leaders need to focus on is a push for standardised measures in areas, such as corporate carbon emissions. Numerous surveys have shown that for the asset management industry, their most desired outcome from COP26, is an agreement on the global carbon price. The global carbon price is the metric used to calculate the financial impact of carbon emissions. The Net Zero Asset Owner Alliance, a UN convened asset management group has acknowledged the important role the asset management industry will play in expediting the transition to a low-carbon economy through the capital that is managed and invested on behalf of clients.  As a result, the Net Carbon Zero Asset Owner Alliance has called for a coordinated global carbon price to be trebled by 2030 to reach the world’s climate goals. However, according to analysis by the Financial Times, banks have been unwilling to end the financing of new oil, gas, and coal projects and have resisted to committing to the most meticulous guidelines for cutting greenhouse gas emissions to net zero by 2050.

In September, the Work and Pensions Committee (WPC) called on the government to use COP26 as a catalyst for change within the pensions space and to seize the opportunity to make the UK’s pensions industry a world leader. With the UK being the first country to mandate Task Force on Climate-Related Financial Disclosures, the WPC suggested that the UK government should play an “active role” in persuading and assisting other economies to require pension scheme trustees to disclose their climate-related financial risks. Furthermore, in the run-up to COP26, HSBC’s pension scheme has already announced plans to have all of its corporate bond and equity investments “fully aligned” to the goals of the Paris Agreement by 2030 and HSBC has also outlined an interim emission cutting target of 50% by 2030.

The COP26 summit is scheduled to begin on Sunday 31st October. We will keep you updated on any key outcomes.

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