Perspective

Markets

COP26: Pressure growing for step change in climate policy


Andrew Howard

Andrew Howard

Head of Sustainable Research, ESG

See all articles

In November, global leaders will meet in Glasgow for the COP26[1] climate conference that could prove a make-or-break moment for global climate diplomacy. Leaders meet every year to assess progress toward tackling the climate challenge and agree new commitments. The focus is usually on incremental steps or agreements, which attract limited attention. Some provide focal points for political commitments to deliver step changes in the pace and intensity of action. 

However, pressure is growing on the UK government (which is hosting the event) to ensure a step change in climate policy at this year’s meeting. 

The Paris Accord, agreed in 2015, cemented a global commitment to limit long run temperatures to “well below two degrees”. The policies of individual governments fell far short of that global commitment, and continue to do so. This year’s conference is meant to provide a staging post at which national leaders return to the forum with tougher commitments, closing the gap between that shared ambition and their individual actions. 

A tightrope act

Success is not assured. Past conferences have raised hopes only to see them dashed amid squabbling between national negotiating teams. COP15 in Copenhagen was set to deliver an outcome similar to that finally delivered in Paris six years later, but fell flat. 

Today, a similar delay would make a smooth climate transition almost impossible. The International Panel on Climate Change has warned that meeting the more ambitious end of the commitment made in Paris will require global greenhouse gas emissions to roughly halve by 2030. To achieve the two degree target requires a less drastic fall but still demands a determined reversal in the decades-long growth of annual emissions. History has taught us that the political manoeuvrings needed to deliver agreement on the global stage take years to play out.

GCC-cop26-google.jpg

This year’s climate conference will be the focus for political commitments, corporate targets and social pressure. That backdrop will likely maintain financial markets’ focus on climate change as an investment driver, and potentially push attention beyond the conventional clean technology areas on which many investors have typically focused.

Conviction that political leaders will take the steps to drive decarbonisation in more challenging areas – such as heavy industry or air travel where adaption will prove costly – could reshape the market’s perspective of climate change, the risks it poses and the opportunities it will create. 

[1] The 2020 United Nations Climate Change Conference

Important information

This communication is marketing material. The views and opinions contained herein are those of the named author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds.

This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Investment Management Ltd (Schroders) does not warrant its completeness or accuracy.

The data has been sourced by Schroders and should be independently verified before further publication or use. No responsibility can be accepted for error of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions.

Past Performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.  Exchange rate changes may cause the value of any overseas investments to rise or fall.

Any sectors, securities, regions or countries shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell.

The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. Forecasts and assumptions may be affected by external economic or other factors.

Issued by Schroder Unit Trusts Limited, 1 London Wall Place, London EC2Y 5AU. Registered Number 4191730 England. Authorised and regulated by the Financial Conduct Authority.