The industry’s wish list for COP26

Expectations, aspirations and hope...

This week, world leaders will gather in Glasgow for the 26th round of the United Nations climate conference – COP26. This event is primarily one of vital global climate diplomacy; the essential outcome which the UK presidency hopes to deliver would see more countries declaring nationally determined contributions (NDCs) for achieving net zero emissions, rich nations making good on their pledge to provide $100bn a year for climate finance, and action to protect communities and natural habitats.

For the UK, this is a prestigious event, and the act of hosting COP26 has concentrated minds domestically and accelerated a programme of climate-related public policy.  Our industry’s role is to understand the long-term risks and opportunities associated with climate change, and a clear direction of travel is essential for us to do so. In return, our industry can be instrumental in financing these urgent solutions.

Representatives from the IA will be in Glasgow with industry leaders and experts. At the Green Horizon Summit, we will convene a group with representatives from international policymaking, the UK development finance sector, and the industry, to consider how we can mobilise private capital to support climate action in emerging markets – a key focus of the UK’s COP26 presidency.

Emerging economies may suffer the worst effects of climate change, with temperature rises, drought and rising sea levels making parts of the world uninhabitable or inhospitable. Developed nations have an obligation not only to help avert this threat but to make the transition to net zero as easy as possible for nations that have most to lose and fewer resources with which to fight climate change. It is imperative that private finance plays their part.

Expectations, aspirations and hope...

The industry’s wish list for COP26

At COP26, the IA wants to see the world’s governments deliver on their goals. This means:

These must be clear, long-term signals and guidance on the nature and speed of the UK’s transition to net zero, including the specific actions that will be necessary in each sector of the economy.
This will enable investment managers to factor climate transition risks more accurately into their investment decisions for the long-term benefit of their clients and the planet.

In addition, the IA has several specific asks for international cooperation at COP26:

Support for the IFRS’ Sustainability Standards Board to develop sustainability reporting standards.
And increased cooperation between national regulators to endorse and implement these standards.
A commitment to implementing mandatory economy-wide reporting on international Task Force on Climate-related Financial Disclosures (TCFD) reporting agreed by national regulators.
International common standards to be agreed on green gilts by governments and national regulators.
Governments to set out at a high level sector specific pathways to meet the Paris Agreement goals and prioritise providing further detail to reduce the risk of stranded assets.

We will continue to encourage the UK Government to work with our industry to identify specific areas and projects which align with the goal of net zero transition and where additional investment is needed. This could focus on sectors, nascent technologies, or underdeveloped overseas markets and should consider appropriate mechanisms to crowd in private finance.

COP26 will host a series of such important discussions and debates, but ultimately, what matters most is not just what happens during the two weeks in Glasgow, but that long-term and reliable policy direction is chosen so that every industry, including investment management, can make a meaningful contribution to the transition. If the world’s governments show the leadership we need, they will find private finance by their side.