COP 26: Focus to move from international to national monitoring as huge investment opportunities emerge

From

Chris Iggo

A key legacy of COP 26 will be attention shifting from big international events to closely monitoring implementation country by country, according to AXA Investment Managers (AXA IM).

Speaking after the conclusion of COP 26, Mr Giles Moec, Group Chief Economist AXA IM, who attended the event, said, “As things stand today, there are few ‘hard takeaways’ [from COP 26] for the private sector, apart from the methane deal which is going to have immediate consequences on the oil and gas industry.

“We continue to think that attention is now likely to shift away from these big moments focused on pledges towards monitoring implementation at the national level,” said Mr Moec.

Mr Chris Iggo, Chief Investment Officer, Core Investments, AXA IM, who attended the World Climate Summit (The Investment COP), said it is clear that the private sector is under pressure from investors and customers and is acting.

“Companies across a range of sectors are developing new technologies and shifting their operating models to be on a pathway to net zero. Technology is advancing everywhere and that means lower carbon production is becoming cheaper,” said Mr Iggo.

“The private sector can’t do it all and there is a far way to go. There were consistent calls for clearer policies and regulations, for governments to use taxes and subsidies more effectively and for joined up plans and financing to deliver the infrastructure necessary to rapidly shift to a low carbon economy.

“The mobilisation of green finance will be important in all of this and there are increasingly larger amounts of capital controlled by asset owners, asset managers and banks that are looking to be invested in a net zero way. This means huge investment opportunities in climate leaders that are developing the technological solutions to climate change and those companies that are leading the transition to a lower carbon business model. But it also means using ESG techniques to identify companies that are making changes to what they do today to reduce their carbon footprint.»

One of the lesser reported takeaways from COP 26 was a commitment to better and more consistent disclosure.  Mr Iggo noted the International Financial Reporting Standards (IFRS) Foundation will develop globally consistent standards for climate and sustainability disclosures for financial markets, addressing a key challenge facing investors, who need reliable, good quality, comparable information on sustainability factors to make investment decisions.

“For investors, the good news is that we are mobilising finance to help the transition and companies are developing more sustainable technologies. We are definitely moving towards a greener economy and that brings with it tremendous investment opportunities,” said Mr Iggo.

Advisers anticipate greater engagement

Just before COP 26, the Responsible Investment Association of Australasia (RIAA) surveyed advisers and found two-thirds expected increased engagement from investors around responsible investing.

“We already know nine in 10 Australians want their investments to be made responsibly,” said Simon O’Connor, CEO, RIAA.

“Given the strong signal Glasgow provided of a world moving ever closer to Paris Agreement targets, we anticipate this will only further encourage people to use their power as investors to take action. It’s now more important than ever that financial advisers can navigate the different products in the responsible and sustainable investment landscape and find quality investment solutions for their clients.”

AXA IM has partnered with RIAA to re-release the Financial Adviser Guide to Responsible Investment. The free guide assists advisers navigate the growing responsible investing landscape to enable them to have meaningful conversations with clients on the topic.

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