Reflections on COP26: 100 days on

As we pass 100 days since COP26 members of the asset management industry reflect on the pledges and commitments made. Many commentators note that while pledges are becoming bolder there is still a long way to go, and action needs to be taken quicker. Some of this needs to come from policymakers, but as some of experts highlight, asset management and investors also needs to step up their game.

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Paul LaCoursiere, global head of ESG investments, Janus Henderson  “With COP26 almost 100 days behind us, it is essential that the measures identified at the conference as necessary to reach net zero are now being actioned. One barrier to reaching net zero, as highlighted by our latest research on decarbonisation in emerging markets, is the lack of common standards. In Latin America, divergent climate bond policies are causing market fragmentation and creating obstacles to international investor participation in climate bond issuances. We believe it is increasingly important for private and public sectors to work together to provide a coordinated response to green financing. Consistent, unified frameworks will encourage domestic capital formation and attract foreign investment which will, in turn, support decarbonisation across the region.”

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Eleanor Fraser-Smith, vice-president and head of sustainability at Victory Hill Capital Advisors“We’re yet to understand how pledges made at COP26 will be translated into practical action and change. Although private investment in the energy sector will provide the different energy mix required, a broader and more global view is essential.Instead, we need flexible energy generation, efficiency, battery storage, grid digitisation and a circular carbon economy through carbon capture and reuse. Achieving net zero globally requires emphasis on investing into the process of developing and emerging economies to enable access to affordable clean energy.Investment firms need clear strategies for sustainable development for energy infrastructure. This enables the transition to net zero through capitalising on opportunities to invest in global renewable assets, as well as innovative and sustainable technologies.”

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Duncan Goodwin, fund manager, Premier Miton Global Sustainable Growth Fund, Premier Miton Investors “On reflection, it now seems evident that COP26 was never going to be able to deliver against expectations that had grown over the course of the year. The subsequent spectre of inflation and rising interest rates, along with the prospect of $100 oil has only exacerbated the sense that an opportunity came and went, and the world has moved on. The reality, we believe, was more encouraging. The role of governments to provide regulatory and political support to industries focused on tackling climate change, was at least to some degree met with progress made in areas such as carbon trading.  We see the next stage as crucial. The need for industry to continue to invest and more importantly to continue to innovate seems to be a greater challenge now than it was in November. It seems to us that it will increasingly be business leaders, rather than political leaders, that are best placed to drive real change in energy transition.”

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Eoin Murray, head of investment, Federated Hermes “COP26 can be considered a qualified success. But limiting warming to 1.5°C will require system-wide changes which will create huge investment opportunities in the following areas: electric vehicles; energy storage; grid connectivity; hydrogen, mining; new green technologies; and renewable energy. The speed and scope of these changes will determine how far we can restrict the economic damage caused by climate change. Investors urgently need to understand these issues and monitor developments, so that they can manage risks and spot investment opportunities – there remain low-hanging fruit for investors to pick. The cost of getting involved needs to be considered against the cost of inactivity.”

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Erin Leonard, head of sustainability, HSBC Asset Management “Since COP26, the asset management industry has taken significant strides down the challenging path to net-zero. First-round portfolio carbon emissions targets are in development across the industry, but it will be a multi-year task to truly develop the clarity needed on scope 1, 2 and 3 level emissions. There is no doubt difficult choices will need to be made, and balancing the ambition of Paris 2050 alignment with the complexity of global energy supply and Just Transition considerations for developing economies are a priority.”    

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Jennifer Anderson, co-head of sustainable investment and ESG, Lazard Asset Management “It would be naïve to expect COP26 to deliver a silver bullet that solves the climate crisis. Pledges are becoming bolder and success or failure rests not only on the direction of travel but on the real-world implementation of these commitments. Fuel prices are subject to extreme volatility while the demand for energy is growing faster than renewables. Investors need to further examine the complexities of rapidly moving geo-politics, the ability and cost associated with transitioning capital equipment to new fuel sources, and the efficacy of new technologies that can contribute to companies and countries meeting their commitments. Fundamental analysis will be required to successfully navigate the investment risks and opportunities created by the transition to a low-carbon future.”

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Stephanie Maier, global head of sustainable and impact investment, GAM Investments“If COP26 was about keeping 1.5 degrees alive, then 2022 should ideally see it move out of intensive care, but it’s still touch and go. Before COP27, countries are asked to revisit and strengthen their climate pledges and we will see GFANZ members publish their interim net zero targets and progress. While it is still early days, we should also start getting an indication of whether the dial on climate finance, in both the public and private sector, is turning to meet the significant investment gap. My sense currently is that countries and the private sector are certainly focused on the challenges but are yet to deliver on their commitments made 100 days ago.” 

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