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ICYMI, Glasgow’s Getting Closer

100 days from COP26, the road ahead looks steep.

How do you mark 100 days to the world’s “last best chance” to avert environmental disaster? US Climate Envoy John Kerry, who coined the phrase, used this milestone on the road to COP26 to call out China’s current net-zero targets as the biggest barrier to efforts to limit climate change to 1.5 degrees Celsius.

This might strike some as an odd way to “break free from the world’s current mutual suicide pact”, but Kerry did at least go on to acknowledge China’s record of outperforming previously-set climate targets, and state his intention to discuss carbon border tax proposals with Beijing.

With Glasgow almost in sight, one might argue the time is ripe for straight talking and it’s possible that the tragic consequences of extreme weather may encourage President Xi to accelerate existing plans, following the launch of carbon trading on the Shanghai Environment and Energy Exchange last week.

Group of 20 environment ministers are marking 100 days to COP26 with a summit in Naples, concluding today, but signs are not promising for an agreement on actions and timetables ahead of October’s G20 leaders’ summit. Differences on the phasing out of coal is a reported sticking point, while a draft communique covering food security, water usage, marine pollution and sustainable finance is “short on concrete policy commitments”.

A key focus in the remaining 99 days will be the detail provided by governments’ renewed nationally determined contributions (NDCs). Although not formally a signatory to the Paris agreement, the Scottish government has issued its own indicative NDC to coincide with the 100-day deadline. This outlines how the Scottish government would reduce greenhouse emissions by at least 75% by 2030. But it is surprisingly short on reforms to the agriculture sector, an oversight it shares with at least half of G20 countries, as investors have pointed out.

As climate diplomacy grinds on, demand for sustainable investment only grows. The biennial Global Sustainable Investment Review reported a 15% growth in assets managed via sustainable strategies since 2018, now accounting for 36% of global AUM, despite a fall in European green investments, precipitated by SFDR’s tighter definitions. The strengthening appetite of central banks, sovereign wealth funds and public pension funds for ESG-focused investments – notably green bonds – and active ownership was reported by the Official Monetary and Financial Institutions Forum.

Thematic, impact and private market funds are among the beneficiaries of rising demand, despite ‘transition’ challenges. A new PRI-sponsored report found that investing for impact typically falls within the terms of existing fiduciary duties, but called for reforms to provide greater latitude for investors. Meanwhile, the UK’s Financial Conduct Authority warned of the damage to consumer confidence from “poor quality” applications to launch sustainable investment funds.

It’s not only G20 finance ministers still grappling with exiting fossil fuels, of course. The oil and gas industry is still failing to invest adequately in new technologies, and hurdles remain for investors as they map their own decarbonisation journeys. The path from disclosure to decision is if anything more complex for social metrics. None of these issues will be solved in 100 days, but we’re all heading in the same direction, more or less.

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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