What can we expect from COP 27?

This week the annual COP 27 meeting got underway. Leaders from 200 countries gathered in Sharm El Sheikh, Egypt for the 27th United Nations Climate Change Conference.

Recap of COP 26 (November 2021)

  • A new global commitment, the Glasgow Pact, was agreed
  • Nearly 200 countries signed up to the Paris Agreement, the framework to restrict global warming well below 2°C and pursuing efforts to limit it to 1.5°C
  • First explicit plan to reduce the use of coal, which is responsible for a third of emissions
  • Aiming to end deforestation by 2030
  • Reducing 30% of methane emissions by 2030
  • China and the US, agreed to co-operate better over the next decade

Did you know?

  • There is as much ice in Antarctica as there is water within the Atlantic Ocean
  • On average, one US supermarket goes through 60,500,000 paper bags per year
  • The amount of wood and paper we throw away each year is enough to heat 50,000,000 homes for 20 years

Anticipated outcomes for COP 27

Given the emphasis on key five-year cycles embedded with the event, COP 27 isn’t set up to make any ground-breaking announcements. However, experts are calling for COP 27 to be utilised to address implementation of policies, and not about new commitments. Indeed, the UN’s latest report does state that “international community is falling far short of the Paris goals, with no credible pathway to 1.5°C in place”, and added that the world had less than 10 years left to limit warming to 1.5°C.

Another interesting component of this year’s COP is where it is hosted. Being hosted in an African country might highlight Africa’s climate needs even further. Africa is the continent with the most direct exposure to physical risks (heat and water-related stresses), but also the continent with the least financial resource to adapt itself to current climate change. Adaption and resilience to global warming are top items of the COP 27.

Finally, energy transition is another key topic at the conference. With current uncertainty around energy supply (in no small part due to the war in Ukraine) developed market policies need to continue subsidising the cost of renewables to encourage further expansion. Collaboration between countries is a key element when it comes to financing these subsidies, to make sure energy transition in emerging countries is not harmed.

How is this related to my portfolio?

The issue of climate change has become far more widespread than just an environmental concern. We now view climate change as an economic matter which impacts many sectors, public finances and growth rates, as well as being a key driver of inflation. As a result, the concept of investing for sustainable growth has become ingrained in today’s world. This has a growing influence on the way portfolios and investments are managed.

Within our ESG and Core mandates we allocate to the Guinness Sustainable Energy fund, just one of many strategies available to investors to leverage the move towards renewables and environmentally friendly technologies. Despite a volatile year for ESG assets, due to the rotation from growth to value investing, the Guinness Sustainable Energy fund is in positive territory year-to-date, up 3.6% in sterling terms against a backdrop of global equities falling 7.5% in GBP.

Source: Refinitiv – Market returns 04/10/2022 to 10/11/2022

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