‘People make Glasgow’ is a phrase used by the city’s tourist board, and by Glaswegians themselves, to describe their place of birth. Now that the dust has settled after COP26, the focus has shifted to what people can do to make Glasgow a catalyst for progress on the ever-growing global climate crisis.
In the weeks following the conference, investors in Britain and globally will be confronted with a host of upcoming climate-related regulations that are nearing the implementation phase. In addition, major global coalitions such as the Glasgow Financial Alliance for Net Zero (GFANZ) have emerged to try to accelerate decarbonisation through targeted investments.
While these developments may provide plenty of new opportunities for climate action, what practical steps can investors with ambitions to become climate leaders take now?
Capital directly to adjustment activities
Despite progress made at COP26 with several new adaptation finance commitments, developed countries are still failing to meet their $100 billion per year climate finance commitment they made in 2009. The UN Secretary General, Antonio Guterres, recently called for 50% of climate financing. climate finance should be used for adaptation rather than mitigation.
The figure currently stands at 25%, with a significant opportunity for investors to fill this gap.
UK investors and many of their peers are preparing to use the upcoming EU taxonomy (with a UK green taxonomy). which follows below), which provides a set of clearly defined activities that companies undertake to support climate change adaptation (one of the six environmental objectives submitted). To achieve transparency where insufficient business information is perceived, The EU Taxonomy of Sustainalytics research solutions can provide the critical insight to target companies engaged in specific, technically vetted and environmentally sustainable activities.
Communicate with investee companies about their climate commitments
Investors who prioritize the good management of their investments require detailed company information to help them. Britain has taken the lead in requiring its largest domestic companies to disclose climate-related risks and opportunities from April 2022, in line with the TCFD’s recommendations. The additional economy-wide transparency provided by these disclosures will be critical to investors. They can hold companies they invest in accountable for their own science-based targets, or work with companies that have not yet made their climate targets public. Tools such as Carbon Risk Assessments from Sustainalytics can help companies break through the inherent transition risk inherent in their portfolios, which can be a useful signal for corporate engagement.
Make use of innovative organizations
Beyond simply leveraging new climate data and business intelligence, leading investors are partnering with organizations that are innovating new paths to net zero. GFANZ produced 17 investment opportunity roadmaps across four investment archetypes that allow investors to view high-priority global investment opportunities. For each, the required investment timeline (both public and private) is highlighted. The underlying Paris Aligned Investment Initiative (PAII) provides a framework to support investors in meeting their commitments, including a Net Zero Asset Owner Commitment with a set of ten actionable, net zero action items.
People make Glasgow, and with the private sector still accounting for 75% of global climate finance flows, it is clear that the global investment community will make or break the Glasgow Climate Pact.