The 26^th Conference of the Parties (COP26) began in Glasgow over the weekend. This marks the fifth meeting since the landmark Paris Agreement of 2015 which is the point at which commitments made can be reviewed and progress assessed. 

The UN’s report in August 2021 described our current trajectory on climate as “code red for humanity”, again highlighting the need for urgent action to cut climate emissions. It’s clear that the ambitions need to be greater but that this needs to be backed up by action – the UN report really didn’t tell us anything new and there is a danger that politically challenging decisions will again be pushed back.

With this backdrop, four objectives for COP26 have been laid out, being to:

• Secure global net zero by mid-century and keep 1.5 degrees within reach;
• Adapt to protect communities and natural habitats, recognising the importance of our ecosystems and the role they can play;
• Mobilise finance, particularly to accelerate the $100bn of climate finance promised to developing nations; and
• Work together to deliver; building collaborations between governments, business and civil society.

It is imperative that governments lead the way by both setting out clear goals for emissions reduction, but also by providing clear policy pathways through which change can be delivered.  This need for ambitious yet unambiguous roadmaps across all carbon intensive sectors was one of the key asks for the Global Investor Statement on Climate Change, supported by 733 investors with over $52trn of assets, demonstrating strong investor support for change.

To make clear progress over the next decade, COP26 requires more than just promises of future ambition and procrastination, but consistent commitments to deliver change at both a national and sector level. Energy generation is one area where the underlying regulatory framework has been supportive although subsidies for polluters need to be removed and timeframes for the phase out of coal power generation need to be accelerated. This was reinforced by the message of the International Energy Agency which said there can be “no new coal mines”.

This is where collaboration is vital. Countries need to agree to follow similar trajectories in order to avoid the prisoner’s dilemma of all acting in their own best interests, something that would certainly put 1.5 degrees out of reach. Yet in response to clear commitments and collaboration, businesses can effectively plan for and implement change over a sensible timeframe, drawing capital from investors who are demonstrably willing to play their part. The benefits of agreeing to change can be realised.

For asset owners, COP26 will help to shape investment decisions over the coming decade.  The opportunity to invest in emerging solutions and support innovation, the need to push companies to adopt science based targets, the necessity of holding climate laggards to account, and the push for better disclosures on climate risks, all remain necessary. A positive outcome would be for COP26 to lead to greater policy certainty for all.

If you haven’t already, you can register here for our upcoming virtual event, COP26 and the journey to net zero, how to play your part.