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Investors’ commitments before and after COP26

Investors’ commitments before and after COP26

06 December 2021

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Even before the COP26 climate summit in Glasgow began, several large investors had made major announcements about climate change, emissions and their own portfolios. 

A record 733 institutional investors globally, with more than US$52 trillion in assets under management, representing more than half of all managed assets globally, signed an ambitious statement to governments ahead of COP26 called the ‘2021 Global Investor Statement to Governments on the Climate Crisis’. It called for measures to help avoid catastrophic temperature rise and manage climate risk, including ending fossil fuel subsidies, phasing out thermal coal-based electricity, and mandating climate risk disclosure. (Click here for more.) 

Fidelity Investments announced on 26 October plans to halve emissions from its investment portfolio by 2030 as part of efforts to reach net-zero emissions by mid-century. “As a responsible investor, we must understand the carbon footprint of the portfolios we manage for our clients and work with the companies we invest in to reduce emissions in alignment with global net zero targets," said Jenn-Hui Tan, Global Head of Stewardship and Sustainable Investing, Fidelity International. (See here for more.) 

JP Morgan Chase reported that ‘a carbon border adjustment mechanism (CBAM), an import tariff designed to ensure that a product’s environmental footprint was priced in whether it was manufactured locally or imported, appears to be growing in appeal in Europe.’ They also advised investors to be aware of how COP26 announcements may influence portfolios. Some companies will benefit from new green infrastructure investments, or from being better prepared for the transition than peers. Others may lose out – particularly those facing higher costs due to higher carbon prices, and especially if they are unable to pass these on in higher prices. (More here)  

During and immediately following COP26, a number of the world’s largest investors released statements about aspects of climate change.

BlackRock’s CEO Larry Fink has warned that pushing only public companies, financial institutions and banks to green their portfolios and businesses — without the same focus on private companies — was ‘not going to change the world’. He praised public companies for increasing their reporting of emissions but criticized oil firms for selling parts of their businesses to private investors, saying it could create huge market arbitrage. “More hydrocarbons have been sold to private companies in the last few years than almost any time ever. That actually makes [things] worse, because it moves from public disclosed companies to opaque private enterprises. So, the mission is failing if that’s all you’re doing,” he stated. (Click here for more.) 

State Street: Less Focus on Risk, More Focus on “How”: Under the Glasgow Financial Alliance for Net-Zero, asset owners and managers (including SSGA) representing more than US$130 tn in capital have pledged to put the global economy on a path to reducing greenhouse gas emissions across their portfolios. COP26 moved the focus from making promises to delivering promises. While certain businesses will be under increased scrutiny (eg coal) the new initiative goes beyond divestment, requiring credible decarbonization plans, policy development (across many sectors and coordinated regionally) and rigorous stewardship. (Click here for more.) 

Goldman Sachs is rolling out a new tool for investors to figure out the carbon footprint of their holdings. With the new carbon analytics tool, investors will be able to measure their portfolio’s carbon emissions and dig into individual securities with the highest carbon-intensity levels. Available on Marquee, the bank’s portal for institutional investors, the tool allows Goldman clients to measure the carbon emissions of their portfolio, including public equity, junk bonds and other corporate debt. It also serves as a corporate engagement tool. Users can see if a company is on track of achieving their de-carbonization goals or net-zero objectives. (More here.)

And lastly, 28 new members and partners signed up at COP26 to the Powering Past Coal Alliance, the world’s largest alliance on phasing out coal, bringing total signatories to 165, including 33 financial services companies with a combined $17tn under management. (More here.)

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