Glasgow's climate moment...Key goals and opportunities
CIO MONTHLY | NOVEMBER 2021
The 26th United Nations Climate Change Conference, commonly known as COP26, has begun in Glasgow. Four primary goals have been outlined for the conference – mitigation, adaptation, finance and collaboration, all of which have vast socio-environmental implications and associated economic and investment considerations. This month, we take a look at the key goals for the conference, and highlight where some of the most important investment opportunities will be, from renewables and battery storage, to adaption and financing.
- Mitigation – Countries are being asked to come with ambitious 2030 targets to achieve net zero, which includes clearer plans to phase out coal and other fossil fuels. We expect to see further commitment to non-correlated renewable energy generation, short and long-term storage, as well as grid infrastructure.
- Adaptation – Activities will focus on resilient infrastructure, enabling buildings, bridges and roads to withstand higher temperatures and more powerful storms. Protection and restoration of biodiversity will also be a focus. We see a significant opportunity for companies offering climate adaptation solutions – from agritech, to building materials – and for the development of new and existing markets, including biodiversity and water.
- Finance – There will be a focus on financial strategies to support the necessary adaptation and mitigation activities and develop new markets to de-risk investments. The needs of emerging economies will be a particular focus.
- Collaboration – The UN negotiations are consensus-based, and much of the focus of the collaborative efforts will be on the development of the rules now needed to achieve the Paris Agreement. Areas of focus include climate financing, innovation, transparency and disclosure, as well as global carbon markets.
- Climate investment themes – The COP26 event is likely to encourage and highlight an increasing cohort of opportunities across asset classes, from managed funds to individual securities. But it will also be important for investors to be keenly focused on understanding precisely where they are investing capital, the true nature of underlying investments, and to be valuation-aware. Equities will continue to provide largely unconstrained access to a broad range of climate-related themes, while in fixed income, investors can access a range of green bonds and sustainability-linked bonds. Alternative investments are likely to play a key role in the transition to net zero, with venture capital being used to fund new technologies, and real assets being a significant attracter of capital in the period ahead.