Because the Net Zero will be the new North Star for investments
The analysis by Stephanie Maier, Global Head of Sustainable and Impact Investment at GAM Investments
The urgent need to accelerate the transition to net zero emissions is now widely recognized. The United Nations October report highlighted that the world faces a disastrous 2.7C global warming path based on current emissions commitments, making COP26 charged with "keeping the 1.5C climate target alive" , the most important climate meeting so far. The conference saw some of the major emitters, such as India, China and the United States, update their national commitments. While India's 2070 Net Zero target made headlines, shorter-term commitments such as generating 50% of energy from renewable sources by 2030 and pledging to reduce by 45% were equally surprising. the carbon intensity of the economy.
Likewise, despite President Xi's absence in Glasgow, it was crucial that China and the United States signed a joint declaration to strengthen their cooperation on climate action and to accelerate emissions. There have also been new agreements to tackle deforestation, methane emissions and accelerating the deployment of clean technologies. In addition, there has been explicit private sector support to address issues ranging from deforestation to coal, as well as a range of public-private commitments. This more collaborative approach and greater recognition of the role of the private sector in addressing climate change marks a significant paradigm shift.
The question is no longer why we should act to combat climate change, but how. For many companies, the Net Zero is the new North Star. Companies are shaping their Net Zero commitments in response to changing demands from stakeholders and consumers by recognizing the opportunities of the transition, rather than its risks.
The concept of private finance "on hand" was dominant throughout the COP26 conference, emphasized by Mark Carney's announcement that the Glasgow Financial Alliance for Net Zero (GFANZ) will commit $ 130 trillion to tackle climate change between now and 2050. In particular, GFANZ represents financial institutions that have committed to set goals – but achieving these commitments will be critical. However, the main aspect was the significant increase in committed capital to the $ 5 trillion dollar sum offered when the UK and Italy took over the presidency of COP26. This level of commitment is a signal of what lies ahead for us in the future.
Investors should expect more attention to disclosure and standards. While the planned harmonization of sustainability disclosure standards by the IFRS Foundation's new International Sustainability Standards Board will be well received, it will likely fail to provide a comprehensive picture for the future. The question is whether this will lead to better data or just more disclosure.
Shortly before the start of COP26, the UK announced that it will become the first G20 country to make disclosure of climate-related risks and opportunities mandatory for larger companies, in line with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD), with rules that will take effect from April 2022. During Finance Day at the conference, British Chancellor Rishi Sunak pointed out that 35 other countries have now set dates for the introduction of climate-related communication. The litmus test as we try to align investments to reach Net Zero will be whether these standards guide investment decisions or simply encourage further disclosure.
The period from now to 2030 will have to be more than the decade of action. We believe it must also be the decade of details. Metrics and methodologies for measuring sectoral progress and pathways towards Net Zero need to evolve. The traditional business used until now is no longer an option.
The theory of living beyond our planetary boundaries has been around for decades, but the fact is that we are now living on the equivalent of 1.6 Earths, which is already having profound impacts on climate, biodiversity, water and other natural resources. Now more than ever the statement 'the road from Glasgow is more important than the road to Glasgow' is appropriate. Sharm El-Sheikh is the next stop on the COP, and it will be even more important, as will every COP until real-world emissions are reduced and real action is taken that produces concrete results with respect to the commitments.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/emissioni-zero-netto-investimenti/ on Sat, 08 Jan 2022 07:33:33 +0000.