IIGCC’s COP26 strategy
2020 marks a pivotal moment in our planet’s history: when we decide – or not – to collectively step up our efforts to tackle the climate crisis, and put the world on track to achieve no more than 1.5˚C of warming as set out in the goals of the Paris Agreement.
Tipping world governments, private sector actors and civil society in favour of this decision lies at the heart of what it is hoped will be delivered by COP26 – the UN climate summit which will take place in November in Glasgow and managed by a joint UK-Italy presidency. The UK’s COP President, Alok Sharma, has reiterated the five thematic priorities which will underpin their strategy to support such a positive collective decision: clean growth, nature, zero-emission transport, adaptation and resilience, and – crucially – finance.
At the launch of the COP26 finance strategy on 27 February, led by Mark Carney and with notable environmental and finance figures including David Attenborough and Christine Lagarde in attendance, it was again recognised that “finance is the COP26 deliverable that makes all the others possible”. The strategic and cross-cutting importance of finance places a responsibility on the financial system’s actors and instruments to support the global transition to a net zero emissions future, but the financial stakes of climate change are also increasingly apparent.
Being clear on the need to manage the financial risks and environmental impacts of climate change, while exploiting the many opportunities that the transition to a net zero emissions economy will bring, has long been at the heart of IIGCC’s work. In light of the importance of COP26 and the urgency that investors are now facing in scaling up and accelerating action on climate change, we have launched a targeted IIGCC COP26 strategy which builds on the strengths and leadership of our members while clearly supporting the delivery of a successful outcome at Glasgow.
In practice this means reinforcing and coordinating all the levers which investors collectively have at their disposal to support a net zero emissions future and the 1.5 ˚C goal of the Paris Agreement: their own investment strategies and decisions; their engagement activities as company shareholders and bondholders; and their advocacy for public policy measures.
On the former, and in response to the increasing demand from within and without the investor community to make financial flows consistent with net zero emissions, last year IIGCC launched our pioneering Paris Aligned Investment Initiative. Bringing together over 70 asset owners and managers, this project is exploring the definitions and various methodologies which are needed for investors to implement an investment strategy consistent with achieving global net zero emissions by 2050. Through four working groups we are identifying leading approaches to strategic asset allocation and measuring and undertaking alignment across four asset classes: Listed Equity; Corporate Fixed Income; Real Estate and Sovereign Bonds. A draft framework for alignment will be ready for stakeholder consultation in the spring. In parallel, we have written to IIGCC members to encourage them to join the Climate Investment Coalition; this will entail showcasing new pledges for allocating capital to green investments, building on the positive example set by Danish pension funds in 2019 when they committed an additional $50 billion into green solutions by 2030.
In terms of supporting investors in their engagement with companies, the Climate Action 100+ initiative which IIGCC co-founded continues to go from strength to strength. Over recent months, thanks to investor pressure in their role as shareholders we have seen world-first successes in terms of net zero commitments from companies in the oil and gas, cement, autos and shipping sectors, among others. In addition, we are seeing an ever-growing consensus among both investors and company boards on the need to integrate climate change considerations into their operations and business planning. Our work with members participating in Climate Action 100+ has been pivotal in making this happen and has helped secure net zero emissions commitments from global companies such as BP, Repsol and Enie to name a few. We will continue to build on this over the course of 2020, working to sector specific strategies with signatories, to encourage even more net zero commitments, reporting on progress in the autumn.
Finally, we recognise that investors and indeed companies can only go so far in their own actions on climate change so long as policy and regulatory barriers remain in place. Each year, IIGCC has coordinated a global investor statement to governments with our partners, in order to set out clearly the policy signals that investors need if they are to channel even greater levels of capital into the net zero emissions transition. We are in the process of revising these policy asks in light of what is required ahead of COP26 – notably, the urgent need for all governments to strengthen and enhance their domestic emissions reduction pledges that were made to the Paris Agreement (the so-called Nationally Determined Contributions or NDCs). Not only must the level of ambition in the NDCs be made consistent with achieving net zero emissions by 2050, this ambition must be investable if it is to be realised. As such, we will also support our members in undertaking more detailed advocacy with key jurisdictions in order to set out what specific policies – including carbon pricing, TCFD implementation and decarbonisation pathways for individual economic sectors – this will entail.
At the COP26 finance strategy launch, Mark Carney was clear that his objective for Glasgow is to “ensure that every financial decision takes climate change into account”. If this is to become a reality, then investors, companies and governments each have a key role to play. IIGCC therefore looks forward to working with our members and wider partners over the course of 2020 to support the delivery of this vision. Only by working together can we ensure that the level of ambition mandated by the Paris Agreement is translated into real-world outcomes within our lifetimes.
Stephanie Pfeifer, CEO, IIGCC