In case you missed it, there was a climate conference in Glasgow this month! You might laugh, but some would argue the world leaders who attended COP26 missed it themselves. Or at least they seemed to, in many ways, miss the point.
Headlines were stolen by the 118 private jets that brought world leaders to Glasgow (pumping out 1000 tonnes of CO2 in the process), an 80-car presidential motorcade for Joe and Co. popped in to see the Pope on the way to Scotland, and the most ridiculous of all – the Bolivian President’s plane flying 22-miles from Prestwick to Glasgow Int.
All nonsense aside though, two weeks were spent trying to further climate crisis policy, so let’s take a look at some of the key takeaways – good, and not so good – and how they could affect your investments. Particularly the announcements by Chancellor, Rishi Sunak.
The Not So Good
Bad news first. The consensus is that nothing announced by the world’s governments is going to be enough keep us below the critical 1.5oC global warming target set in the Paris Agreement at COP21 in 2015. And that’s despite the conference overrunning by two days to reach some key agreements.
Of the agreements that were announced, there were many compromises and conspicuous absences. The wording of the Coal Power Reduction agreement was watered down from “phase out” to simply “phase down” coal usage, and even with that the US, China, India and Australia all still refused to sign it.
China, Russia and India’s signatures were also missing from the Global Methane Pledge, despite its somewhat modest aim to cut emissions by 30% from their 2020 levels.
The Good
Despite the above, COP26 was far from a total loss. A pact to reverse deforestation by 2030 was signed by 141 countries. India and Nigeria pledged Net Zero by 2070 and 2060 respectively. And, shockingly, China and the US agreed to “boost climate co-operation over the next decade” – though details on this were ominously lacking.
However, the biggest beacon of light coming out of COP26 didn’t belong to governments, but the global financial industry. And that is where the immediate impact on portfolios is most likely to come from.
What does COP26 mean for your investment portfolio?
There was a lot of noise from politicians that will have little to no impact on investors. But here are three major announcements from the finance industry that highlight how important investor decisions (like yours and ours) could be in halting the climate crisis.
Glasgow Financial Alliance for Net Zero
Hailed as one of the biggest breakthroughs of COP26, the Glasgow Financial Alliance for Net Zero is a global coalition of financial institutions committed to accelerating the decarbonization of the world’s economy. This includes banks, financial advisors, insurers and more, shaping the future of investing in ways that will help protect the future of our planet.
Defunding Deforestation
More than 30 financial institutions, including a number from the UK, have committed to eliminating agricultural community-driven deforestation from their investment portfolios by 2025! This is great news for the planet, as deforestation is a huge contributor to global warming. Many more institutions are likely to join them, or pledge similar sustainable actions, in the coming years.
Rishi Sunak Announces UK’s Mandatory Investment Transition
The Chancellor boldly announced the ambition to make the UK “the world’s first net-zero aligned financial services centre”. The UK was already the first major economy to commit to net-zero-emissions by 2050, and this next step highlights how crucial the finance sector (and investors in particular) will be in achieving environmental targets. Rishi Sunak also confirmed that ‘mandatory climate transition plans’ will be introduced for investment managers, asset owners and listed companies. This means the face of the UK’s investment landscape will change considerably in years to come.
We are here for you
The future will naturally see a shift more towards green investing. Although, with globals powers like the US and China dragging their heals on key pledges, traditional investment opportunities are in no danger of drying up any time soon. The wheels of change are slow, and some worry they won’t be quick enough to save the planet.
Much of the power lies with individual investors, like yourself. The more who switch to sustainable portfolios the faster change will come. Right now, however you feel about the outcomes of COP26 and the impact of your investments, we are here to support you and answer any questions you have.