COP26 provided a breakthrough on the rulebook of the Paris Agreement. Although progress on the more ambitious policies for 2030 was good, this is still insufficient to get the world on a trajectory of below 2 degrees.
The COP26, the UN Climate Summit held in Glasgow, has ended. COP is the annual Conference of Parties that are signed up to the UN Climate Accord, also known as the Paris Agreement. Glasgow was the 26th time that the COP was organized, featuring two weeks of negotiations between 20,000 official delegates, and discussions and workshops amongst 20,000 non-state delegates. What are COP26’s key outcomes and how are these relevant to investors?
COP26 provided a breakthrough on the rulebook of the Paris Agreement, and good progress on more ambitious policies for 2030. Nevertheless, these are insufficient at this stage to get the world on a trajectory of below 2 degrees.
After six years of negotiation, governments agreed on the rulebook for implementing the Paris Agreement. This was arguably the biggest surprise of the summit, given the disappointing progress made in the first week. The US-China climate deal (‘US-China Joint Glasgow Declaration on Enhancing Climate Action in the 2020s’), clinched towards the end of the summit, may have helped to streamline these negotiations in the final hours.
The rulebook covers critical topics like the reporting of emissions, the monitoring of policies and, most importantly, the trading of emission rights through carbon markets. This agreement allows the focus to shift from negotiation to implementation. It will facilitate international cooperation and cross-border investments into emission reduction. More serious carbon markets may emerge, which in turn could support investments in forests and other natural carbon sinks.
A number of new policy pledges for 2030 were made, including reducing methane emissions, halting deforestation, phasing out coal power, and stopping public financing of fossil fuel abroad. Though some of these pledges are vaguely framed and not signed by the major emitters, they still have good potential to reduce emissions before 2030. Moreover, the US-China climate deal complements these pledges as the world's two largest emitters commit to collaborate and take urgent action in this decade. Overall, the temperature score for policy pledges up to 2030 is now between 2.4 and 2.7 degrees. Taking 2050 pledges into account, the score is between 1.8 and 2.1 degrees.
Significantly, nearly 90% of global emissions is now under a net zero commitment.
There was unprecedented private sector participation. Hundreds of corporates and investors committed to net zero in the run-up to COP26, and several ‘real-world deals’ were announced to accelerate low-carbon transport, building, industry, etc. Among banks, asset owners, asset managers and insurance companies, there is now USD 130 trillion committed to net zero, though that figure was rightfully criticized for including double-counting.
Robeco is among the 43 asset managers that announced concrete short-term targets and actions for achieving net zero; 180 peers will follow in the course of next year.
Industrialized countries were under strong pressure from developing countries to live up to their promises of providing climate finance (USD 100 billion per year) and supporting adaptation and a just transition. Though industrialized countries reinforced their commitment, the actual delivery will likely remain a thorny issue and may undermine progress in other areas. A positive example of progress in this area was provided by the USD 8.5 billion deal through which US, EU and UK will support Eskom, the South African state-owned power utility, to accelerate the transition of its coal-power fleet.
Governments have now formally adopted 1.5 degrees as their official target. Further ratcheting of policy ambition is inevitable. We believe investors ought to follow these developments closely, as climate policy has become a macro issue. The EU will be determined to implement its Green Deal / Fit for 55 package swiftly, so that it can demand more ambition from other countries.
Investors should also take note of the UN’s announcement that it will set up an expert group to develop a standard for credible net zero commitments. The response to investors’ net zero commitments has been skeptical, due to the limited scope of some of these commitments and the lack of concrete targets. Robeco’s approach has been to create a net zero roadmap with concrete targets and actions, and significant assets in scope (40%). Our net zero strategy is based on international standards, and we will continue to monitor closely how these standards develop.
Another important development, which has significance for investors, is the establishment by the IFRS of the International Sustainability Standards Board (ISSB). This is with the purpose of developing a global standard for climate disclosure in the course of 2022, which is to be embedded in legislation worldwide.
Watch our COP26 video series for more analysis.
The contents of this document have not been reviewed by the Securities and Futures Commission ("SFC") in Hong Kong. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. This document has been distributed by Robeco Hong Kong Limited (‘Robeco’). Robeco is regulated by the SFC in Hong Kong.
This document has been prepared on a confidential basis solely for the recipient and is for information purposes only. Any reproduction or distribution of this documentation, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited. By accepting this documentation, the recipient agrees to the foregoing
This document is intended to provide the reader with information on Robeco’s specific capabilities, but does not constitute a recommendation to buy or sell certain securities or investment products. Investment decisions should only be based on the relevant prospectus and on thorough financial, fiscal and legal advice. Please refer to the relevant offering documents for details including the risk factors before making any investment decisions.
The contents of this document are based upon sources of information believed to be reliable. This document is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation.
Investment Involves risks. Historical returns are provided for illustrative purposes only and do not necessarily reflect Robeco’s expectations for the future. The value of your investments may fluctuate. Past performance is no indication of current or future performance.
Please read this information carefully.
This website is prepared and issued by Robeco Hong Kong Limited ("Robeco"), which is a corporation licensed by the Securities and Futures Commission in Hong Kong to engage in Type 1 (dealing in securities); Type 4 (advising in securities) and Type 9 (asset management) regulated activities. The Company does not hold client assets and is subject to the licensing condition that it shall seek the SFC’s prior approval before extending services at retail level. This website has not been reviewed by the Securities and Futures Commission or any regulatory authority in Hong Kong.
2. Important risk disclosures
2. Important risk disclosures Robeco Capital Growth Funds (“the Funds”) are distinguished by their respective specific investment policies or any other specific features. Please read carefully for the risks of the Funds:
3. Local legal and sales restrictions
The information contained in the Website is being provided for information purposes.
Neither information nor any opinion expressed on the Website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. The information contained in the Website does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, most recent annual and semi-annual reports, which can be all be obtained free of charge at www.robeco.com/hk/en and at the Robeco Hong Kong office.
4. Use of the Website
The information is based on certain assumptions, information and conditions applicable at a certain time and may be subject to change at any time without notice. Robeco aims to provide accurate, complete and up-to-date information, obtained from sources of information believed to be reliable. Persons accessing the Website are responsible for their choice and use of the information.
5. Investment performance
No assurance can be given that the investment objective of any investment products will be achieved. No representation or promise as to the performance of any investment products or the return on an investment is made. The value of your investments may fluctuate. The value of the assets of Robeco investment products may also fluctuate as a result of the investment policy and/or the developments on the financial markets. Results obtained in the past are no guarantee for the future. Past performance, projection, or forecast included in this Website should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Fund performance figures are based on the month-end trading prices and are calculated on a total return basis with dividends reinvested. Return figures versus the benchmark show the investment management result before management and/or performance fees; the fund returns are with dividends reinvested and based on net asset values with prices and exchange rates of the valuation moment of the benchmark.
Investments involve risks. Past performance is not a guide to future performance. Potential investors should read the terms and conditions contained in the relevant offering documents and in particular the investment policies and the risk factors before any investment decision is made. Investors should ensure they fully understand the risks associated with the fund and should also consider their own investment objective and risk tolerance level. Investors are reminded that the value and income (if any) from shares of the fund may be volatile and could change substantially within a short period of time, and investors may not get back the amount they have invested in the fund. If in doubt, please seek independent financial and professional advice.
6. Third party websites
This website includes material from third parties or links to websites maintained by third parties some of which is supplied by companies that are not affiliated to Robeco. Following links to any other off-site pages or websites of third parties shall be at the own risk of the person following such link. Robeco has not reviewed any of the websites linked to or referred to by the Website and does not endorse or accept any responsibility for their content nor the products, services or other items offered through them. Robeco shall have no liability for any losses or damages arising from the use of or reliance on the information contained on websites of third parties, including, without limitation, any loss of profit or any other direct or indirect damage. Third party off-site pages or websites are provided for informational purposes only.
7. Limitation of liability
Robeco as well as (possible) other suppliers of information to the Website accept no responsibility for the contents of the Website or the information or recommendations contained herein, which moreover may be changed without notice.
Robeco assumes no responsibility for ensuring, and makes no warranty, that the functioning of the Website will be uninterrupted or error-free. Robeco assumes no responsibility for the consequences of e-mail messages regarding a Robeco (transaction) service, which either cannot be received or sent, are damaged, received or sent incorrectly, or not received or sent on time.
Neither will Robeco be liable for any loss or damage that may result from access to and use of the Website.
8. Intellectual property
All copyrights, patents, intellectual and other property, and licenses regarding the information on the Website are held and obtained by Robeco. These rights will not be passed to persons accessing this information.
10. Applicable law
The Website shall be governed by and construed in accordance with the laws of Hong Kong. All disputes arising out of or in connection with the Website shall be submitted to the exclusive jurisdiction of the courts of Hong Kong.