FITCH COMMENTARY

Sustainable Fitch: COP26 Crucial for Global Climate Policy Momentum

Tue 26 Oct, 2021

Read the full report: ESG Credit Quarterly – 3Q21

Tangible successes across different areas of the four main goals set for the UN's COP26 will be crucial in maintaining the policy momentum towards coordinated action on climate change mitigation and minimising the risk of a disorderly and uncoordinated transition to a lower-carbon economy, Sustainable Fitch says in a new report.

Policy makers and investors' focus on climate and environmental objectives and policies is heightened ahead of November's COP26 in Glasgow. While the four main goals for the conference are ambitious and difficult, especially in the context of the current global energy crisis and rising prices, areas of tangible success could come from such areas as methane emissions reductions, time-specific climate financing plans, and agreement on standardisation and verification standards in voluntary carbon markets.

A key risk is if outcomes from COP26 are seen as underwhelming, with policy resolve from major signatories to the Paris Agreement wavering from their commitments, and specifically the 2030 commitments, which require more immediate and expensive actions.

Biodiversity and nature-related risks are also rising in policy makers and investor agendas, with higher scrutiny and demands for clarity on impacts, targets and disclosures. While mechanisms for investors to influence biodiversity are often more limited than for such risks as climate change, new financial instruments and disclosure mandates could point to ways to incentivise state-owned and private companies to stem biodiversity loss.

In an effort to strengthen sustainability-related disclosures, Japan, the US and the IFRS are all taking steps to enhance disclosures, particularly though not exclusively around climate, adding to the rising number of jurisdictions that are setting rules and regulations around sustainability disclosures. The impact of the International Sustainability Standards Board, known as ISSB, to be set up under the IFRS accounting standards and launched at COP26, can be notable with the organisation expected to find broad-based support in many markets where IFRS standards are already widely adopted.

The report, 'ESG Credit Quarterly: 3Q21', is available at sustainablefitch.com.

Contact:

Marina Petroleka
Global Head of ESG Research
+44 20 3530 1072
Fitch Ratings
30 N Colonnade, Canary Wharf
London E14 5GN
David McNeil
Director, Head of Climate Risk
+44 20 3530 1942

Media Relations:

Mark Tierney, London, Tel: +44 20 3530 1697, Email: mark.tierney@thefitchgroup.com
Eleis Brennan, New York, Tel: +1 646 582 3666, Email: eleis.brennan@thefitchgroup.com
Peter Hoflich, Singapore, Tel: +65 6796 7229, Email: peter.hoflich@thefitchgroup.com

Additional information is available on https://www.sustainablefitch.com.

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