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We expect to continue to hear high-profile announcements about new electric vehicle adoption targets, plans for phasing out coal power, and pioneering corporate environmental, governance, and governance (ESG), initiatives after the UN climate conference, COP26, in Glasgow, Scotland.
COP26 promises important insights about the role of financial markets and infrastructure investment, as well future adaptations that will help in the transition towards net zero.
Refinitiv created a website to provide insight into the current state of affairs in these many, but interconnected themes. A breakdown by numbers of the crosscutting issues that were addressed at COP26.
Among our top findings:
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Investors will continue to focus on the topic sustainable investing as data accuracy, consistent disclosures, and standardisation around ESG reporting will become essential.
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While the data suggests a decrease in global dependence on fossil fuels, it raises questions about whether broad-based climate goals can be achieved.
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A “green crime” global network of poachers, illegal loggers and waste traffickers has created an extremely lucrative industry exploiting natural resources.
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Refinitiv’s data-driven approach to COP26 includes statistical insights on finance, energy, “green” crime and infrastructure.
Finance
ESG risks are now less important for investors. Investors are less likely to ignore them or believe that they are not within their fiduciary responsibilities. Our data shows that 43% of compliance and risk professionals believe that the pandemic has made ESG factors more important to their companies.
ESG investing has risen in popularity and ESG funds outperformed non ESG funds in seven of 10 years. The record US$4.7 trillion (S$6.4 Trillion) total assets under management for global ESG-related mutual fund and exchange-traded funds was reached in the second quarter.
“Green” bonds that are financing products specifically designed to support climate- or environment-related projects raised US$365 billion in the first three quarters of this year.
It is evident that accurate data is the foundation of the ESG challenge. Investors will need climate-related information that is accurate and comparable if they want to assess the climate risk or opportunities of an asset. They need data that is inclusive across all industries, countries, and for companies listed in capital market.
Energy
Like the ESG-related trend in investment vehicles, renewable energy sources are a subject of great investor interest.
The 12 month forward price-toearnings ratio of global alternative, or renewable energy companies is currently 32.4x current earnings. This compares with the forward P/E of 11.9x for global traditional oil and gas index.
While intense focus is on renewable sources, research shows that industries such as maritime shipping are still relying on fossil fuels, and the cost of CO2 emissions continues to rise. The Refinitiv Carbon Market Survey shows that investors are increasingly considering the cost of CO2 when making investment decisions due to higher expectations in key markets.
“Green” crime
The annual criminal exploitation worldwide of natural resources is estimated to be worth US$256 billion. The UN and Interpol cite wildlife crime as one of the world’s top five most lucrative illicit activities.
Data is crucial to solving the problem. These criminal networks often use complex business ownership models and legal business structures to hide their illegal activities.
Lax due diligence often makes it easier for them to do this. Refinitiv research found that 33% of third party are not subjected to due diligence checks and 60% of respondents don’t fully monitor third parties for ongoing risks.
If delegates are serious about finding the solution, they will be eager to use large data sets and powerful analytics to eradicate green crime.
Infrastructure
The trend of sustainable infrastructure investment can create a new asset class and address many of the root causes for climate change.
Major world economies, as well as some of the biggest institutional investors, are reimagining cities, transportation networks, and utilities as efficient, sustainable resources. This could be the beginning of a sustainability revolution.
Refinitiv has tracked projects and found that US$272billion was invested in sustainable infrastructure projects in 2020. This is nearly twice the amount of a decade earlier. Wind projects are the most popular, with US$55.3billion invested in them last year. Globally, around 35% of all new infrastructure projects were sustainable last year, up from 10% a decade earlier.
The stakes are high at COP26 – literally life and death. Recent research from Refinitiv is developing context by analysing the efforts of every major country to reduce national emissions and weather the effects of climate change.
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