COP26 SUMMIT –

THE LOWDOWN

The COP26 summit which took place in Glasgow this month addressed how we can all live more sustainably to limit global warming.

During the 13-day conference, speakers laid bare the issues surrounding climate change and aimed to thrash out the way to get to net-zero – in other words, not adding to the amount of greenhouse gases in the atmosphere.

Progress was made with over 100 countries signing a pledge to reduce methane emissions by 30% by 2030 from 2020 levels[1]. India made the first commitment to net zero, albeit not until 2070[2].

Deforestation was also a hot topic. More than 100 countries, covering over 85% of the world’s forests, made the commitment to halt deforestation by 2030[3].

Guidelines for a global carbon market were approved to bring standardisation and clarity; a development that has been hanging in the balance since COP21 in Paris.

It was also noted by commentators that the US and China appear to be trying to work together on climate issues, despite geopolitical tensions.

While countries will have to regularly update their emission reduction targets and strategies, commentators maintain that the commitments made to date are not enough to achieve all the essential climate goals. And all the while emissions will keep rising in the shorter term.

COP26 and investment

In one of the many discussions that took place during the summit, financial services figures highlighted the role that public and private investment can play in decarbonising the economy, which has raised the profile of investing with an environmental, social, and governance (ESG) mindset.

ESG investing is where the focus is on backing companies with strong credentials when it comes to environmental, social and governance matters.

There are businesses all over the world that are dedicated to the environment by developing cleaner energy, sustainable transport as well as reducing plastic waste.

It’s not just about improving the planet with ESG investing. Under the social part, the focus is on a company’s treatment of staff and suppliers, and to what extent it upholds labour and human rights. Governance relates to issues include ensuring fair leadership of the business, matters of executive pay and its stance on shareholder rights.

During COP26 discussions, experts sought to highlight the importance of driving positive change. When individuals place their savings into an investment fund, its manager becomes a significant shareholder.

This gives them clout to steer firms to behaving more responsibly towards ESG matters.

Asset management firms take part in hundreds, if not thousands of what they call “engagements” each year to encourage, recommend or insist that improvements are made. This could be to ramp up on climate policies and practice or cutting emissions in a business.

Interested in investing for good? 

The jargon and high-level debate at COP26 can make sustainable investing seem like a daunting prospect.

Yet it can be pretty straightforward. Many people are already investing for good. The amount of money pouring into responsible investments totalled almost £1billion a month on average in 2020[4].

If you want to join the army of ESG investors you can talk to your adviser about how you can use the money invested in your pensions and ISAs to support positive change.

Source:

[1] https://ec.europa.eu/commission/presscorner/detail/en/statement_21_5766

[2] https://www.bbc.com/news/world-asia-india-59125143 

[3] https://www.gov.uk/government/news/over-100-leaders-make-landmark-pledge-to-end-deforestation-at-cop26

[4] https://www.theia.org/media/press-releases/responsible-investment-funds-under-management-66-over-12-months#