The outcome of this year’s COP negotiations leaves a significant hill to climb in the coming years to deliver on the Paris Agreement, despite making significant progress in many areas such as coal and deforestation.
The Investment Association (IA) maintains that governments around the world must step up to deliver on climate actions needed to achieve global peaking of greenhouse gas emissions by 2050, and limiting global average temperature increases to 1.5°C. We hope to see continued progress as soon as possible, as failing to achieve this will threaten not just the value of our clients’ investment portfolios, but also the livelihoods of the pension and retail savers for whom we invest.
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The investment management industry remains resolved, however, to play our part in transitioning the economy to net zero-carbon emissions. IA calculations show that investment managers with more than £7trn AUM in the UK have now joined the Net Zero Asset Managers‘ initiative. Leveraging off the UK’s strength as a leader in sustainable finance, we are pleased to see the significant programme of work now underway to ensure that financial markets are managing the impact of climate change.
In parallel to the main COP agenda, we saw a suite of announcements on finance day, showcasing the domestic agenda for sustainable finance that cement the UK’s leadership in this arena. Climate adaptation reports from the FCA; BoE and Pensions Regulator; a new ESG strategy for the FCA; and greening of the UK’s corporate bond purchase scheme, to name a few. Of note for the investment management industry is the announcement that HM Treasury will require listed companies, asset owners and investment managers to publish transition plans setting out how they will decarbonise as well as the publication of a discussion paper by the FCA on the future Sustainability Disclosure Requirements and investment labels. These developments will play a key role in building the foundations for a sustainable UK economy.
A key global initiative is the announcement by the IFRS Foundation to establish an International Sustainability Standards Board (ISSB). This will be instrumental in setting a global baseline for company reporting on a wide range of sustainability issues. These measures will be pivotal for investors and companies to work together to achieve the Paris Agreement targets. The commitment to ensure strong investor representation within the board’s governance structure, leveraging the knowledge and expertise of existing reporting bodies such as the Value Reporting Foundation and Climate Disclosures Standards Board, will help ensure that the standards are focused on the information that investors need to make better investment decisions for the responsible allocation of capital on behalf of their clients.
See also: – Lack of standardised ESG reporting ‘biggest threat’ to effective disclosure
We look forward to the full establishment of the ISSB, the identification of their board members, and the final publication of sustainability reporting standards as soon as possible. This will enable the swift global implementation of a global baseline for sustainability reporting by the UK and other countries. This should be the foundation on which sustainability disclosures are shared across the investment chain from companies to investors and finally to savers.
