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In just under 40 days, the annual United Nations Climate Change Conference will be holding its next meeting in Egypt to discuss more effective methods of implementation to stop climate change. The conference has been held annually since 1995, bringing together governments and other organizations to discuss their progress and future goals toward alleviating climate change.
This year the conference will be discussing long-term climate finance, gender-responsive climate policies, progress on current targets, and tangible implementation of targets. The last topic is possibly the most important, as the private sector made very strong pledges for the first time last year and now it’s a matter of ensuring these pledges are actually being implemented, starting with climate-dedicated financing.
Since climate finance is yet again a major theme for this year’s COP event, financial institutions will play a prominent role when it comes to helping governments around the world implement strategies to become carbon neutral. Some banks have created their own binding environmental credit/investment policies for the agriculture, biodiversity, mining, oil and gas, and utility industries. However, only a few banks currently have policies developed for all these areas, Goldman Sachs and Swedbank AB among the few. It’s possible that after COP27, more banks will be incentivized to create policies relating to climate issues and actually implement these policies for the sake of the climate and their investors.
With all this talk of climate finance, sustainability factors will continue to play a growing role in investors’ portfolios. Not only is it a matter of risk management, as governments will begin implementing more regulations regarding sustainability and extreme weather patterns will continue damaging and disrupting supply chains, but it’s also becoming a matter of necessity if investors wish to see long-term growth from their investments. While investors are beginning to realize the importance of including sustainability factors in their portfolio analysis, the lack of data and transparency regarding sustainability remains an issue. Hopefully, events like COP27 and other regulations (like the SFDR) can help governments, financial institutions, and companies in general, develop standardized reporting that is easier to analyze.
Physis is a fintech company that offers investors a variety of sustainability offerings and data to manage, track, and understand the impacts of your investments. We make it easy for institutional investors to prove the sustainability of a company or fund beyond the ambiguous ESG score. Find out how we can help you today!