ICYMI, We’re Making Heavy Weather of it

Sore heads and sporting analogies cannot distract from the Olympian task ahead.

Climate-focused policymakers woke up with a hangover on Monday and had to endure a week of noisy and painful reminders that last weekend in Naples did not go as well as it might have.

Published a day and a half late, a communique from the Group of 20 environment ministers committed for the first time to attempting to limit climate change to 1.5 degrees Celsius, rather than two, and agreed to set new climate targets within three months. But China, Russia, India and Saudi Arabia blocked any action to phase-out coal or end fossil fuel subsidies, leaving Italian Ecological Transition Minister Roberto Cingolani sweating, literally.

A two-day meeting of 50+ environment and climate ministers, convened by COP26 President-Designate Alok Sharma, made a little further headway. On Monday, Germany and Canada agreed to help mobilise US$100 billion a year from developed countries to fund climate change action in less-developed regions, an issue which has dragged on despite re-confirmed commitments at the recent G7 summit.

After that, many tried to concentrate on the sports news and avoid weather bulletins, if SEC Chair Gary Gensler’s attempt to break the Olympics analogies world record on Wednesday was anything to go by. “It’s now time for the Commission to take the baton,” he said, confirming his intention to support investor demands for climate-related disclosures by US listed companies.

Politicians and officials will need some respite before they dive into the upcoming IPCC report that scientists sat down this week to finalise. A 40-page ‘Summary for Policymakers’ is expected to drop after two weeks of Zoom-enabled discussions on how to frame the latest scientific evidence for maximum impact at COP26.

With Iran’s water crisis fuelling fears of water wars across the Middle East and Africa, Earth Overshoot Day creeping forward, and meteorologists warning that disruptive climate change is already with us, one wonders how much starker the message can get. According to some, a tsunami is about to break too.

Investors continue to ramp up pressure, today calling for new corporate governance measures to help shareholders hold investee companies to account in meeting their net zero targets. A plethora of tools are being made available to track decarbonisation efforts, but big data gaps remain, even though regulators are increasingly scrutinising the providers to address “questions about relevance, reliability and greenwashing”.

Next on the regulatory agenda will be ‘blue-washing’, with both the European Commission and the UK’s Financial Conduct Authority making it clear to corporates and investors that social metrics, including board diversity disclosures, are not about to be forgotten, despite climate-first priorities.

With so many factors to consider and so much in flux, it is unsurprising that fund solutions reflect a world in transition. A Morningstar report this week revealed similar levels of thermal coal and oil and gas exposures across SFDR fund classifications, despite different underlying investment rationales. With the performance and cost implications of responsible investing again proving positive, according to a study by CEM Benchmarking, all we need to get right now is impact.

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