Insights / 09 November 2021
Why taking a plane, train or automobile is no joke at COP26
The COP26 UN Climate Change Conference summit should be one of the political generational events of our lifetime but what might it mean for fund and real estate managers, their boards, and the future of their business?
In this, the first part of a summary of the main talking points of the conference so far, we start by focusing on the implications of COP26 for real estate businesses and finance.
There was plenty of criticism directed at the number of world leaders and other delegates that travelled to the COP26 UN Climate Change Conference summit, which started in Glasgow last week, in private jets. How much environmental damage do they do - and did leaders have any choice was the questions that many environmental commentators and, of course, activists, were asking?
The Personal is Political
Our actions have consequences, which, when applied to decisions about what kind of carbon footprint we want, or how sustainable you want your business to be, is multiplied thousands of times if you are a fund manager with many clients or real estate manager with properties across multiple geographies.
Investors Take Note
The writer C S Lewis wrote that good and evil both increase at compound interest. As the debate at COP26 rages on, as the activists get louder and consumers, shareholders and investors take notes and/or take sides it becomes more incumbent on private equity and real estate managers to get building their environmental houses in a more sustainable way.
During the first week of COP26 there have been several pledges around methane and deforestation. On day two, world leaders signed a first-of-its-kind deal against deforestation, before announcing global action against methane emissions. The first Wednesday of the conference focused extensively on finance, the critical pathway to a transition and how business will be able to finance it. Mark Carney and other financial leads took centre stage, as a group of banks, investors and insurers announced that $130tn of assets are now pursuing net-zero emissions by 2050.
There was also a major announcement, linking finance, not to targets but to transition. This is important for the real estate sector to understand because we are going to find it difficult to access capital, or debt, as a business unless we have a robust transition plan. This has serious implications for the built environment, real estate assets and property portfolios globally.
Innovation and Technology Solutions
The conference has also focused on innovation and the technology solutions that are coming on stream. The organisers have outlined the need for a collaborative, inclusive and multi-disciplinary approach to innovation that ensures a diverse range of technologies and climate solutions are affordable, available, and accessible to all. The UN is leading three Presidency science programmes to advance science for higher ambition climate outcomes and support the negotiation, focusing on Futures We Want, Risk and a Health Programme.
The weight of financial support that is required from business and from government is going to be huge. It is one of the reasons we are going to see more protests from people of all ages who are really pushing leaders to act quicker.
This week is going to be important, as today (9th November) is the Bloomberg Green Festival, which will focus on embracing climate action as an opportunity, providing innovative corporate and finance solutions that are creating a positive impact on both their business and the planet.
On Thursday, it will be the turn of cities and a built environment day where the whole of COP26 is going to be talking about the Real Estate world. Real estate and the built environment, which is responsible for close to 40% of global carbon emissions – have a significant role to play, however, there is still a high proportion of organisations that are yet to develop clearly articulated and practical Net Zero action plans for their real estate. 70% of today’s buildings will still be standing in 2050, which highlights the need to repurpose spaces, retrofit older buildings and refurbish if businesses wish to act in accordance with sustainable principles.
Meanwhile, as this article was being written, we learnt that UK-based asset owners with investments of more than £5.9bn, including universities and NGOs, have set out plans to align their portfolios with a 1.5C temperature pathway on the road to Net-Zero by 2050 at the latest, marking new commitments on exclusion, divestment, and engagement at the conference. The initiative requires all signatories to exclude coal and tar sands, at a minimum. They should also outline plans to re-invest divested funds into climate solutions.
There is plenty more to come from COP26 and we will bring the highlights, as it relates to real estate and fund management to you, when it breaks.
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