Achieving Sustainability - Introduction to COP27

The first UNFCCC COP took place in Berlin in 1995. Afterwards at 1997’s COP3, the Kyoto Protocol was adopted, achieving a treaty for agreeing parties to acknowledge the occurrence of global warming and reduce greenhouse gas emissions accordingly. At COP21 in 2015, negotiations resulted in the adoption of the landmark Paris Agreement. The agreement formalised the goal of keeping the rise in mean global temperature to below 2°C above pre-industrial levels, preferably to 1.5°C. 194 of 198 countries party to the UNFCCC have ratified the Paris Agreement, with Iran, Libya, Yemen and Eritrea being the countries that have not done so.

Despite the Paris Agreement, current policies and actions are projected to lead to a warming of 2.4°C, which exceeds the level that was initially set. In addition, current emissions levels have rebounded to above pre-pandemic levels

Elevate ambition and expedite climate action

At the pre-COP meeting in early October 2022, UN Secretary-General António Guterres said that current pledges and policies are “shutting the door” on limiting global temperature to 2°C, let alone 1.5°C. Therefore, he made an urgent call for the world to elevate ambition and expedite climate action.

A key outcome of 2021’s COP26 was the Glasgow Climate Pact, and COP27 will be a vital opportunity to follow up on the resulting pledges. Participating nations will need to reaffirm their 2009 pledge, which stipulates that developed countries provide an annual amount of USD 100 billion to developing countries via the Climate Finance Delivery Plan and strengthen existing emissions reduction plans and targets as necessary to align with the Paris Agreement temperature goal. Moreover, they will need to phase out unabated coal usage as well as inefficient subsidies for fossil fuels while also increasing levy of proceeds towards the Adaptation Fund for developing countries

Another vital aspect of COP27 is the review of ambition in Nationally Determined Contributions (NDC). NDCs are each country’s individual commitments to contribute to the overarching global goals of the Paris Agreement. For example, China’s NDC is to reach peak CO2 emissions by 2030 and achieve carbon neutrality by 2060.

Despite the urgency of the situation, other current global geopolitical and economic challenges such as inflation, rising commodity prices and war may divert attention and resources away from addressing climate change. As such, increased focus and determination to work together is needed now more than ever in order to deliver on climate goals.

Sustainable investing and climate change

Sustainable finance remains one of the core topics to be discussed at this upcoming COP, which includes aspects such as fundraising through different investment channels in order to achieve positive climate action while ensuring credibility and realising potential. The reality is that if the world wishes to create transformational changes in economy and society for climate mitigation and adaptation, then financial resources must be utilised as efficiently as possible in support of this mission.

The Glasgow Financial Alliance for Net Zero (GFANZ) was launched at COP26. GFANZ aims to raise ambition in the financial sector with the goal of allowing firms to demonstrate their collective commitments to supporting companies and countries to achieve the goals of the Paris agreement. GFANZ also catalyses the strategic coordination of the necessary steps to align with a net-zero future.

As industry players, asset managers can contribute to GFANZ by being a signatory of the Net-Zero Asset Managers initiative, which requires asset management companies to set company-wide targets reducing financed carbon emissions. Furthermore, asset managers can contribute to climate action by offering sustainable investment products, especially those with climate themes. In doing so, retail investors and ordinary citizens can contribute to global climate action efforts while achieving returns by investing in sustainable or climate funds.

We should learn to live with the weather and protect biodiversity. These changes must be made in ways that enhance social equality and well-being, which is why inclusive capitalism is increasingly important

We will continue to focus on these three themes to shape our sustainability thought leadership and provide our customers with relevant investment solutions.