There cannot be anyone reading this article who hasn’t heard of COP26, the conference on climate change and global warming which took place in Glasgow in the first two weeks of November. (If you didn’t know, COP stands for Conference of the Parties – those countries which signed the original UN Convention on Climate Change in 1994).
All our clients will have their own views on climate change and the Conference. Some will agree with Boris Johnson’s assertion that it is “one minute to midnight” for the planet: others may be slightly more sceptical, wondering why attendance at a conference on climate change needs 400 private jets – between five and 14 times more polluting than commercial airliners – flying in and out of Glasgow.
This is not the place to discuss the merits of those arguments – but perhaps it is the place to ask another question. What effect – if any – will COP26 have on my savings and investments?
Three days into the Conference, it was widely reported that most big UK companies and financial institutions will soon be required to show how they will hit climate change targets. “The rule book will be re-written for net zero,” said Chancellor Rishi Sunak, referring to the UK’s stated aim of reaching ‘net zero’ (a balance between the carbon a country or business is emitting and the carbon it is removing from the atmosphere) by 2050.
By 2023, companies will need to set out detailed plans for how they will move to ‘a low carbon future’. “The aim is to increase transparency and accountability,” said the Government, adding that it was not “making firm-level net zero commitments mandatory”.
…Not yet, anyway. You suspect that in the future that may very well be a piece of legislation that finds its way onto the statute books. Add in the increasing pressure on companies to comply with ESG (environmental, social and governance) requirements and you suspect that in the future, a company’s results may be reviewed for a great deal more than the bottom line.
‘Impact Investing’ – investments made with the intention of generating positive environmental and societal change alongside a financial return – is growing rapidly, especially among younger investors. Whatever their feelings about the environment, companies may well find themselves with little choice other than to meet the demands of legislative change and/or pressure from potential investors.
The simple answer to the question we posed is that COP26 – or even COP27, which will be in Egypt’s Sharm El Sheikh – may have little immediate effect on your savings and investments. But the mood of legislators and campaigners is clear: companies will need to change what they do and how they report results to investors.
That will be a challenge for the companies – as well as fund managers and investment managers. They’ll need to consider a lot more than profitability, market share and future growth prospects. But as all our clients know, we work with some of the very best fund managers there are, and we’re in regular contact with them, making sure that your savings and investments stay on track to meet your long term financial planning goals.