Phoebe Stone, Head of Sustainable Investing
Global leaders gather in Glasgow
COP26, or the 26th UN Climate Change Conference of Parties, commences in Glasgow at the end of October. It brings together the 197 UN members states which are all signatories to the UN Framework Convention on Climate Change, an international environmental treaty addressing climate change. Along with world leaders, tens of thousands of negotiators will be in attendance, as well as climate experts, scientists, activists, and observer organisations.
COP26 is the first review of climate policies since the Paris Agreement ratified at COP21 in 2016 and is being seen as the successor event. This year’s COP will act as opportunity to address what has, and hasn’t, been achieved since the Paris Climate Change Agreement was signed six years ago.
COP26 is a two-week event. In the first week, discussions will centre on issues such as enhancing rules for carbon markets, securing funding for countries vulnerable to climate change, beefing up net-zero policies and the need for nature-based solutions. In the second week, global leaders are expected to start negotiations and agree targets.
COP26 has four specified goals:
(1) Secure global net zero by 2050 to keep 1.5 degrees within reach;
(2) Adapt to protect communities and natural habitats;
(3) Mobilise finance to fund this; and
(4) Work together to deliver solutions.
Carbon emissions need to fall
During the summit, we are expecting leaders to agree that efforts towards reaching net-zero by 2050 need to meaningfully increase through the acceleration of decarbonisation pathways. Currently, UN member state proposals to reduce carbon emission production fall well short of the change needed. Currently, the 2030 pledges lead to a 0.5% emission reduction, whereas a 50% reduction is needed to reach the 1.5C degree target.
If during the COP meeting, pledges are made to get to at least 25% cut by 2030, they will put the world onto a 2°C trajectory.
Focus on biodiversity must sharpen
We also expect there to be focus placed on nature-based solutions during the conference. This will raise the profile of biodiversity, of which climate change is a part. Declines in biodiversity are putting our economies and livelihoods at risk. Whilst there is no longer a ‘nature’ theme for the conference, there is likely to be emphasis placed on the importance of protecting natural habitats.
Coordinated carbon trading required
Given the recent dramatic increases in energy prices, and the read-across to the shift to renewables, carbon markets and emissions trading schemes are likely to be areas of interest during COP. Europe is the trailblazing region in this space, having launched the bloc’s emission trading scheme in 2005. In recent times, other countries such as China, New Zealand, Japan, South Korea and Switzerland have also launched similar schemes. As more regions look to adopt this model, and if carbon prices in those regions track the trends of Europe, concepts like carbon border taxes may start to become a reality.
Carbon prices are likely to be a topic of conversation with global leaders during this year’s COP, with greater alignment between Europe and the rest of the world on the price of carbon desperately needed.
Bold action must be delivered
If we are to limit temperature rises to what was agreed in the Paris Agreement, we need some fairly radical action as a result of this year’s COP. We need global leaders to be bold in taking decisive action by setting more ambitious pledges and bigger regulatory steps. This COP must highlight the huge amount of commitment still needed to limit carbon emission production and slow global warming, as it is being seen by many as the last opportunity to avert a climate catastrophe.
We are delighted to have two representatives attending this year’s COP in Glasgow and look forward to sharing their experience and the outcomes of the event.
Read more from The Brief.
This communication is provided for information purposes only. The information presented herein provides a general update on market conditions and is not intended and should not be construed as an offer, invitation, solicitation or recommendation to buy or sell any specific investment or participate in any investment (or other) strategy. The subject of the communication is not a regulated investment. Past performance is not an indication of future performance and the value of investments and the income derived from them may fluctuate and you may not receive back the amount you originally invest. Although this document has been prepared on the basis of information we believe to be reliable, LGT Vestra LLP gives no representation or warranty in relation to the accuracy or completeness of the information presented herein. The information presented herein does not provide sufficient information on which to make an informed investment decision. No liability is accepted whatsoever by LGT Vestra LLP, employees and associated companies for any direct or consequential loss arising from this document.
LGT Vestra LLP is authorised and regulated by the Financial Conduct Authority in the United Kingdom.