COP 26 and The Investment Industry

November 21st, 2021 | News | By Graham Wingar

Political considerations aside, the COP26 summit shows clear intent for governments to start to tackle climate change. This is not only bought on by a common consensus to protect the planet but it would not exist if there wasn’t a strong social sentiment and public will to make changes.

This public sentiment and future government intervention / legislation will directly impact business decisions. The Financial Conduct Authority (FCA) have also shown their intentions following the summit.


Investment Industry Implications

The growing investor sentiment behind the environmental impact of companies / industries has led to a greater number of investment vehicles which not only aim to provide a positive return for investors, but also meet Environmental, Social and Governance (ESG) criteria.

Matching funds ESG criteria with investors own personal ethics and investment goals has always been difficult. Following COP26, the FCA are working on new legislation for greater ESG disclosure on investments to assist with ensuring suitability.

Even with this new disclosure it can often be difficult to meet all the considerations fully. For example a client may want all their money invested in companies which engage in green energy production, but in doing so they would be wholly exposed to equities and wholly exposed to the energy industry.

This is a higher level of investment risk than a typical investor is comfortable with.

Many investment houses have taken ESG considerations into all their investment decisions. This is not only to meet public sentiment but also as a decision on their own corporate footprint. With others they have created clear and separate mandates to meet different client ESG criteria.

With the pending FCA legislation and increased investor sentiment around environmental issues, the investment industry will only become clearer on ESG issues in coming years with the aim of ensuring ESG considerations are taken into account with all investment decisions



For savers who do not have the risk tolerance to subject money to market risk, there is another option. The new Green Savings Bonds announced by the Chancellor of the Exchequer in the Spring Budget are now available with a 0.65% gross/AER fixed-rate over a three-year term.

Green Savings Bonds will help finance the Government’s green spending projects designed to tackle climate change and help make the UK greener and more sustainable. These projects will include making transport greener, using renewable energy over fossil fuels, preventing pollution, using energy more efficiently, protecting natural resources and adapting to a changing climate.