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Asset managers optimistic on COP26 outcome

The world is heading in the right direction to attain net zero despite a lack of concrete action, said investment specialists at the Global ESG Summit.
Abbie Llewellyn-Waters, Jupiter Asset Management

The world’s two biggest carbon dioxide emitters, China and the US, have surprised the world by committing to work together in taking climate action at the COP26 climate summit in Glasgow.

Speaking at the Global ESG Summit, hosted by Bonhill Group, owners of Fund Selector Asia, panellists were mostly positive about the summit’s outcome.

“The cooperation statement was an important diplomatic step forward and a meaningful indicator in fighting climate change,” said Abbie Llewellyn-Waters, head of sustainable investing, Jupiter Asset Management.

She believes with the two largest emitters at the table, the bottleneck in tackling climate change will be addressed more effectively.

Llewellyn-Waters’ views were echoed by Danielle Welsh-Rose, ESG investment director, Asia Pacific at abrdn.

“The Sino-US cooperation is quite a promising development and hopefully will lead to some acceleration of climate action,” said Welsh-Rose.

“Although China’s President Xi did not attend COP26, I think it’s pretty clear that the Chinese government continues to see decarbonization as a strategic priority for the country as they are committed to reaching carbon neutrality by 2060,” she added.

Despite a lack of details in the joint declaration, James Cheo, chief investment officer, Southeast Asia, private banking and wealth management, HSBC, believes the cooperation has sent strong signals to many investors that the two largest economies are committed to the change.

Addressing climate challenges as asset managers

To play a more significant part in the move to climate transition, the panellists agreed that the asset management industry would need more transparent and better quality data.

Welsh-Rose said there are now 450 members managing $130trn of AUM in the Glasgow Financial Alliance for Net Zero, and the money is ready to be deployed to support the net zero transition.

Yet, she noticed that the asset management sector has raised questions about the credibility of processes and would need to know how emission targets will be measured and implemented in practice.

Her views were supported by Kalpana Seethepalli, director of ESG, Asia Pacific, Deutsche Bank.

“Although there are existing ESG indices and other consolidated metrics, asset managers would also need emission data on operating and financing activities, as detailed as transaction by transaction,” Seethepalli said.

To tackle the information gap, Cheo from HSBC believes it is important for asset managers, as shareholders, to scrutinize and demand disclosure by investee companies about their moves towards energy transition and carbon reduction.

The asset management industry can also contribute to the net zero transition by collaborating with third party agencies to standardise climate reporting, said Jupiter AM’s Llewellyn-Waters.

For instance, she is co-authoring the upcoming CFA climate investing certificate, in an attempt to enable capital markets to better price climate related financial risk into asset prices.

Last month, the CFA Institute launched the Global ESG Disclosure Standards for Investment Products, which is a list of global voluntary standards for full disclosure of investment products’ ESG approaches.

Part of the Mark Allen Group.