The United Nations Conference on Climate Change COP26: Aligning ESG Investments with Environmental Priorities

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The 2021 edition of the United Nations Conference on Climate Change held in Glasgow this year between Sun, October 31, 2021 – Fri, November 12, 2021, the 26th iteration of the international climate change conference known as COP26. Six years on from COP21 held on December 12, 2015, resulted in the Paris Climate Accords. It is clear there is still much work to be done to shift corporate thinking towards investments that truly reach environmental and sustainability benchmarks. 

This year's UN climate conference promises to be one of the biggest all-time, with over 25,000 international guests from 200 countries expected to attend the 12-day summit held in Glasgow, Scotland. High-profile guests such as Sweden's Greta Thunberg have already made headlines worldwide urging world leaders to stricter climate policies to reverse climate change. Against this backdrop of urgency, some question the legitimacy of carbon taxes, green bonds, and other so-called sustainability-focused investments. 

"To make clear, as long as no one gets hurt . . . I think sometimes you need to anger some people," said Thunberg in an interview with the BBC's Andrew Marr. "Like, for instance, the school strike movement would never have become so big if there wasn't friction." Despite not being invited to speak at COP26 officially, Thunberg represents a new type of media icon who has still managed to create a tremendous buzz at events around Glasgow this week. 

"I think that many people might be scared that if they invite too many radical young people, then that might make them look bad," said Thunberg. "It's not fair, when, for example, one country sends lots and lots of delegates, and then another country is very underrepresented. That already creates an imbalance, and climate justice is at the very heart of this crisis." 

International claims of greenwashing have run rampant, and despite many efforts to present a face of sustainability, many self-designated green projects are much less than their promises. There have been many cases where institutional investors and hedge fund managers have found themselves involved with projects that in no way are able to match the landmark sustainability benchmarks set forth back in 2015. Leading UN climate scientists agree: the world is on track for catastrophic warming in the coming decades without drastic efforts undertaken by the global business community and landscape of investments. 

Environmental, social, and governance (ESG) credentials have become popular in many places worldwide, such as the European Union, where 2/3rds of institutional investments are connected to ESG criteria. Around the world, companies raised more than $570 billion in ESG bonds allocated towards specific green or social projects on the local, state, nation, or transnational level. Back in 2016, the green bond market was five times smaller, and the global total for ESG investment funds was nowhere near the $2 trillion it stands at today. 

Currently, there is more money targeted towards green investment than there has ever been before. Despite this, analysis of over 16,500 investment funds worth USD $27 trillion has revealed that under 0.5% of the global fund assets are currently aligned with the Paris agreement’s temperature target of ‘well-below 2°C’. ESG priorities and compliance have not matched up for many companies, and despite massive inflows of investment, minimal institutional strength is truly being directed towards projects creating beneficial environmental outcomes. 

 

Working to Achieve Tougher International ESG Standards 

Six years on from the 2015 Paris Accords, there remains much work to be done to establish tougher ESG standards more firmly in alignment with environmental priorities. GHG emissions are raising global temperatures creating a wide range of adverse conditions, and action is the only way to reverse this trend. 

In 2015, the United Nations tried to desperately sound the alarm around global climate change policy in hopes of slowing a warming trend that could add 3°C to global temperatures within the coming decades. Warming to this degree would be so catastrophic it would completely change global climates and flood huge areas of currently densely populated land forever. There had been hope in the scientific community that international compliance in the Paris Accords could slow change to only 1.5°C or less. Unfortunately, around the world, few private companies, institutional investors, or nations have stuck to their side of the agreement and moved towards more sustainable environmental policies. 

Currently, the United Nations lists 68 nations as working to achieve a net-zero emissions standard, representing 61% of all emissions linked to environmental change. Though many countries, the United States, Canada, the United Kingdom, and the European Union have all enacted tougher climate standards, many nations struggle to set stricter standards. Large industrial nations such as China, Australia, Indonesia, Mexico, Brazil, and Russia have failed to set tougher environmental standards. 

It is also essential for more industrial nations to work to achieve more rigid standards understanding it will take time for developing economies to match their efforts. The concept of equity is an essential element that considers how different economies can meaningfully shift policies to reduce emissions leading to irreversible climate change. 

Policy frameworks need to be matched with genuine efforts to decarbonize economies and meaningfully invest in more ecological projects that meet more demanding ESG standards. The evidence is clear: companies are not doing enough ESG prioritization and are not meeting higher standards fast enough. It is essential to invest in clean energy and other strategic investments that will meaningfully reduce the climate impact of business. 

For humanity to continue to work towards the climate standards set forth by the Paris Agreement, ESG-targeted investments need to triple over the next decade. While this seems possible from the current perspective, ESG compliance has never been more critical. Together, the world has to work towards enhancing green energy-building capacities. The use of fossil fuels has to decline, or it is not possible to slow what will result in catastrophic warming conditions. 

Lastly, carbon taxes need to be utilized to create more harmonized international climate policies that promote cooperation and the pursuit of shared goals. Carbon taxes, quota trading, and many other mechanisms can be better utilized. Currently, less than 25% of global emissions are covered through these different mechanisms leaving lots of room for future growth in this area of ESG investment, 

Climate scientists worldwide hope that this year's COP26 event will result in renewed commitments towards meeting higher environmental standards. Without a concerted global effort, it is impossible to slow change to only 1.5°C or less in the coming decades. 

As the 2021 UN Climate Conference gets underway in Glasgow, Scotland, many climate change experts hope the event will result in firmer commitments and more demanding standards around environmental policies. They seem needed now more than ever. Despite more money allocated towards ESG investment, little real-world change is being done to address climate change meaningfully.

As environmental conditions change around the world, the balance of nature is shifted, resulting in dangerous conditions for humans and the many species that call planet Earth home. COP26 is a major opportunity for climate change policies to match better the science and environmental priorities of reducing emissions to slow warming significantly. 

 

Using Alternative Data to Drive ESG Compliance 

The environmental choices that companies make have a dramatic impact on the world we live in. Responsibility rests not just within individual firms but across entire global supply chains. Unstructured alternative data, also known as alt data, represents one of the most powerful ways to strengthen ESG compliance to pursue better real-world climate outcomes.

Bitvore was designed to make use of unstructured alternative data sources to provide a deeper understanding of the unique ESG risks organizations encounter when seeking to work with external partners. Uncover areas of ESG risk and capitalize on opportunities to build more sustainable and harmonized global policies. 

Trusted by more than 70 of the world's top financial institutions, Bitvore provides the precision intelligence capabilities top firms need to counter risks in their business ecosystem with the power of data-driven decision-making. Go beyond empty promises and greenwashing to drive true ESG standards to promote more sustainable and ecologically friendly business practices. 

Uncover rich streams of business insights from unstructured data that act as the perfect complement to the internal data and insights your firm is already generating. Our artificial intelligence and machine learning-powered system provides the ability to see further, respond faster, and leave a positive mark with your business activity and/or investments. 

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