Spotlight on COP27: everything investors need to know

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Global leaders are coming together in the fight against climate change at COP27. But it’s not all down to them – by investing responsibly, you can use your money to help create a world worth living in

COP27 is a much-needed chance for global leaders to refocus on climate change. One year ago, the world looked to Glasgow as a historic deal on climate change was announced at the COP26 conference.

The deal achieved agreement in many areas, including a critical commitment to cut coal use, with 190 countries agreeing to phase out coal power, and a commitment by 137 countries to “halt and reverse forest loss and land degradation” by 20301. Since then, the war in Ukraine and the energy crisis have highlighted the fragility of our current energy market and the importance of diversifying our energy sources.

Leaders at this year’s upcoming climate conference – COP27 in Egypt – are challenged to refocus the world on fighting climate change and building on the successes of previous conferences. Here’s everything you need to know about this year’s event.

When and where is COP27?

COP27 will take place in Sharm el-Sheikh, Egypt, from 6 to 18 November 2022. The picture in this article is of a solar power plant in the Sinai Peninsula near Sharm El Sheikh.

What will be discussed in COP27?

Topics will range from direct action to stop climate change to education, scientific innovation and climate finance. The most important theme is what countries and other bodies will do to further their carbon-cutting efforts. But there is increasing focus on adapting and building resilience to the impacts of global heating.

One criticism of COP26 was the lack of help for vulnerable nations in coping with loss and damage from the impacts of climate change. Many of these nations will need financial help in order to meet the ambition on emissions for 1.5°C and will be hoping for more action on loss and damage in Egypt.

What pledges were made at COP26?

The key goal in Glasgow was to “keep 1.5 alive”2. This means countries renewing their commitment to limit global warming to 1.5°C – the target set by the 2015 Paris Agreement.

After much negotiation, leaders agreed a deal that they claimed kept 1.5°C just within reach. Others said the deal wasn’t sufficient to keep 1.5°C alive. One prominent critic, former President of Ireland Mary Robinson, said COP26 merely extended by a year the window of opportunity to avert the climate crisis’s worst effects. “The world urgently needs them to step up more decisively next year,” she added.

The world will be watching COP27 to see if countries have come up with any more ambitious measures to cut emissions. There will likely be some tense discussions as some have said they are already doing all they can.

What if we don’t keep 1.5°C alive?

The world is already 1°C warmer than at pre-industrial levels3, causing climate breakdown and damaging livelihoods, cities and ecosystems. From heatwaves to droughts, cyclones and floods, devastating weather events are more frequent, intense and unpredictable. Heating the earth to 1.5°C and beyond will accelerate these problems.

The commitment to 1.5°C is critical for businesses too, as environmental threats now dominate the list of top risks to companies4.

What COP27 means for investors

Petra Lee, Responsible Investment Consultant at St. James’s Place, says: “COP26 received much attention, but that fell away quickly because of Russia invading Ukraine and the energy crisis. COP27 is a much-needed moment for us to refocus. While the energy crisis and Ukraine war are acute and front of mind, the climate-change crisis is chronic.

“People feel a sense of permanent crisis. But we must concentrate on solutions in our control. The future hasn’t been written yet and we can improve on previous decisions.”

Petra says COP26 had a galvanising effect. Speeches from broadcaster David Attenborough and Barbados Prime Minister Mia Mottleya helped spread a powerful message about climate change to a wider audience. Companies and investors committed trillions of pounds to carbon-cutting targets, showing how many are already working towards net zero.

“Companies’ share prices attract a premium because of that work,” says Petra. “But investing according to climate principles also creates a powerful collective effect because it aligns the world’s capital with carbon-reduction targets; holds companies to account; and pressures them to put weight behind their pledges.”

Building concrete targets

Another powerful trend at COP26 was countries and companies adding detail to interim targets, showing how they’ll get to their long-term net-zero goals3.

Many more companies are also adopting metrics such as science-based targets, which make these plans more concrete.

We have an interim goal to reduce carbon in investments by 25% by 2025 – with five-year milestones beyond that. 

“Many others are doing the same, including a number of our fund managers,” says Petra. “At COP27, we’ll be looking for more such developments and evidence of companies’ journeys towards net zero.

“We may not see so many big headline commitments in Egypt. The focus now is on implementation and watching this activity trickle through the economy. I’m also hopeful companies and governments can help each other improve climate action standards. COP conferences are a brilliant opportunity for collaboration.”

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up.  You may get back less than you invested. 

Sources:

What Were the Outcomes of COP26?, House of Commons Library, January 2022

Around 120 Leaders Gather at COP26 in Glasgow for ‘Last, Best Chance’ to Keep 1.5 Alive, UN Climate Change Conference, November 2021

Climate Change 2021: The Physical Science Basis, Intergovernmental Panel on Climate Change, August 2021 

Portfolio Carbon Emissions Report, St. James’s Place, June 2021 

Our Progress and Plan Towards a Net-zero Global Economy, The Glasgow Financial Alliance for Net Zero, November 2021 

SJP Approved 19/10/2022

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