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Will COP26 be a game changer for ESG investing?

The 26th United Nations Climate Change conference (COP26) is happening as we speak. Given the UN’s hashtag and strapline of #TogetherForOurPlanet Rebecca Tomes asks what this highly anticipated summit might mean for the investment and advice profession – and whether it will be a game changer for sustainable investing.

The long awaited COP26 summit is taking place in Glasgow this November. It aims to bring together world leaders to commit to urgent global climate action towards the goals of the Paris Agreement and the UN Framework Convention on Climate Change.

With so much of the future health of our planet resting on its outcomes, we take a look a little closer to home and ask what the summit might mean for the world of financial planning and investment?

We’ve been talking to a range of sector practitioners and experts to find out their views and expectations. Do they believe that the summit and the associated media coverage will be a catalyst for changing investors’ attitudes to sustainable investing? What are the challenges we face in doing so?

According to Gretchen Betts, Managing Director of Magenta Financial Planning,  “COP 26 is being described as the most significant climate event since the 2015 Paris Agreement” – it’s a promising and exciting claim.  “However” she warns “COP26 needs to be a meeting of ACTIONS” rather than a mere discussion of climate risks.”

Andrew Hardy, Director of Investment Management at Momentum Global Investment Management (MGIM), agrees that COP26 needs delivery of actions:The need and the expectation for this summit, six years after the Paris Agreement, is for concrete action to be agreed, particularly in the form of countries setting more ambitious targets for carbon reduction, together with much improved disclosure and governance around tracking progress. Wider agreements around carbon pricing are also on the agenda. Real progress along these lines would consequently force investors to place much greater emphasis on the environmental impact of their investments.”

Although Betts also recognises that COP26, and the associated media coverage, will, at the very least, direct attention to ESG issues and generate more interest in sustainable investing amongst the British public. She says, “the media coverage of COP 26 and focus on everyone doing their bit for climate change, plus the momentum gathered throughout the pandemic, will most certainly mean more clients want to talk about sustainable investing. I’ve been advising on ethical and sustainable investing for over 15 years, but at Magenta, we’ve seen a massive increase since 2018 –easily up by 60% – of those investors who want to talk about this type of investing, and we envisage this will continue.”

Ernst Knacke, Head of Research at Shard Capital, also believes that COP26 media coverage will increase considerations of ESG and claims that currently, “climate change is still under appreciated by society as a whole”.

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