Tackling climate change is something that individual consumers can’t do on their own.
In fact, the actions of individual governments can have only a very limited impact.
What’s required is cooperation between every major government on the planet – and that’s the purpose of the upcoming international conference, to be held in Glasgow in the early part of November: the COP 26.
What is the COP 26?
The COP 26 is an international conference, where national leaders will decide how best to work toward the goals set out in the Paris Agreement, and in the UN’s Framework Convention on Climate Change.
We already know what is required, in other words – it’s just a matter of agreeing how we’re going to achieve it.
Among the more eye-catching of the commitments already outlined is the idea that we’ll eventually reach net zero emissions – which is a way of saying that we’ll be absorbing more carbon (through things like tree-planting and carbon capture) than we’re actually emitting.
The Paris targets would see warming well above 3 degrees by 2100 compared with pre-industrial levels.
The meeting aims to find ways to bend this curve downward, until we’re limiting overall temperature rises to 1.5 degrees.
This would require net zero carbon emissions by 2050. To this end, countries have agreed to publish their emissions figures every five years.
Such a publication is due to happen shortly before the conference.
What does the COP 26 mean for ESG?
Of course, governments can’t move toward net zero without the help of the corporate world.
Consequently, any progress toward net-zero will require the cooperation of both big business and the general public.
Business will have to work toward more ambitious ESG standards. This push will likely come as a consequence of the summit, resulting in a marked uptick in ESG initiatives and investments.
Indeed, this shift is already underway, with investments of this kind enjoying a fourfold rise between 2019 and 2020.
This summit has largely come about because of widespread concerns among the voters to whom politicians are ultimately answerable.
Given that young people are more concerned about the environment than their older compatriots, we might reasonably expect environmental concerns to become even more pressing as time goes on.
While the target date for carbon reductions might be decades away, it won’t be reached unless investment managers take action to reallocate capital today.
Investors who fail to do this might find that in time they run out of non-green options to invest in.
What’s required is an incremental reduction in emissions every year.
According to one estimate, an annual reduction of 10% for the next three decades would be sufficient to tip the scale.
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