COP26: What should investors expect from the most significant COP since Paris?


As the focus on climate-related issues continues to intensify, the upcoming 2021 United Nations Climate Change Conference – COP26 – is set to be a landmark moment when it comes to tackling climate change. It comes after the IPCC’s Sixth Assessment Report on Climate Change outlined that global temperature rises are expected to exceed 1.5°C within 20 years and following a period where much of the world has been experiencing the physical impacts of a changing climate. The recently published World Energy Outlook from the IEA highlights that while a clean energy economy is emerging, the transition still has some way to go. Additionally, we have continued to see unprecedented levels of climate commitments from companies, investors and governments alike.

Against that backdrop, this year’s COP is expected to be one of the most significant since the Paris Agreement came into place in 2015, with stakes and expectations running high. It is the first deadline for updated nationally determined contributions (NDCs) since the Paris Agreement came into place and will be an opportunity for countries to collectively strengthen their ambition. The ongoing impacts of the Covid-19 pandemic will also make sure that this is a COP like no other, not only in terms of the physical preparations, but also in the need for outcomes that promote a sustainable and climate resilient economic recovery.

On the agenda for COP26

The UK Presidency has set out a number of priority topics for the negotiations, which will shape much of the agenda across the two weeks. These include:

  • the ‘Paris Rulebook’ – a set of common timeframes and formats for countries reporting on implementation of the 2015 agreement
  • progress towards adaptation goals and increasing adaptation finance
  • activities to address loss and damage associated with the impacts of climate change
  • setting out a delivery plan for the goal to mobilise USD 100 billion per year of climate finance, with the intention of surpassing the target in 2021 and future years
  • responding to gaps in the collective ambition demonstrated in countries’ NDCs
  • enhancing collaboration between governments and other parties on inclusive action

In addition, meetings leading up to COP26 have highlighted several themes and issues that will likely contribute to the discussion on the side lines. These include sector-level policy commitments, such as the phase-out of coal, commitments to mandate TCFD-aligned reporting and deforestation-related pledges.

Success or failure: how will COP26 be judged?

Any breakthrough on long-standing topics, such as the finance goal, will likely contribute to the perceived success of the conference. While we know that the USD 100 billion funding target has proven a challenge for countries so far, COP26 will be an opportunity to set out a clear plan for its achievement and discuss what will come next.

In addition, what is put forward in individual countries’ NDCs will be notable as this is the first milestone for countries to submit their updates under the Paris Agreement. Currently, they are not collectively aligning with a 1.5°C world, but we hope to see some increased ambition as discussions progress.

What can investors do?

Investors will play a key role, both in the run up to and during COP26, particularly in the context of finance being one of the priority negotiation topics. Attention will be on governments globally and how they will be addressing the climate crisis through domestic policy action, and so there is a tangible opportunity to secure the policies needed to channel trillions of dollars into building a sustainable future.

This is why IIGCC has collaborated with six other networks as part of the Investor Agenda to develop the 2021 Global Investor Statement to Governments on the Climate Crisis, which has now been signed by nearly 600 investors with over USD 46 trillion in assets under management. The statement calls upon all governments to:

  • Strengthen their NDCs to align with limiting warming to 1.5°
  • Commit to a domestic mid-century net zero emissions target, including clear decarbonisation roadmaps for each carbon intensive sector.
  • Implement domestic policies to deliver on those targets.
  • Ensure Covid-19 recovery plans that support the transition.
  • Commit to implementing mandatory climate risk disclosure requirements.

It represents the strongest ever global unified call from investors to governments to raise their climate ambition and implement meaningful policies, or risk missing out on the enormous investment opportunities in tackling the climate crisis, representing the extent to which policy change and action is urgently needed and this is a real priority for the investor community.

The statement is currently open for investors to support and will close on 20 October ahead of COP26. For more information and to become a signatory, click here.