Lombard Odier Investment Managers: About Coal, Money, Cars and Trees – A Commentary on the First Week of the UN Climate Change Conference

November 06, 2021, 11:01 am

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Zurich – At the beginning of the UN climate conference COP26, Boris Johnson uttered the slogan “Coal, money, cars and trees”. Now that the first week has ended (and a second week will follow), where do we stand on these four priorities?

By Thomas Höhne-Sparborth, Head of Sustainability Research, Lombard Odier Investment Managers

The exit from coal is perhaps considered to be the most important and urgent political step to limit warming to a maximum of 1.5 ° C. This week, more than 40 countries committed to phase out coal by the 2030s and 2040s. The US, China, India and Australia have not yet joined the commitment. However, given the falling cost of renewable energy, simple economic considerations could accelerate the transformation process, with coal-fired power plant failures in a rapid succession even during the last US administration.

Realignment of the entire economy and thus also of the investment portfolios
As for money, COP26 has often been referred to as the “financial COP”. Asset managers and asset owners have joined forces in the new Glasgow Financial Alliance to Net Zero (GFANZ), who are supposed to represent assets of 130 trillion US dollars (even if there were probably double counts here). Even if only a small part of it is specifically used for green solutions, the transition to a net-zero economy requires not only investments in low-carbon technologies, but also a large-scale realignment of the entire economy and thus also of the investment portfolios – and this is exactly where it can be the GFANZ alliance will have an enormous impact.

End deforestation and invest in reforestation
As for trees, climate change is being driven not only by energy-related emissions, but also by emissions from changes in land use – including those related to deforestation. Ending deforestation and investing in reforestation are becoming increasingly important, as not only are the comparatively low costs of this measure recognized, but also the associated benefits for the environment in general, biodiversity and the communities that depend on it. World leaders and 30 financial institutions – including Lombard Odier – have pledged to stop deforestation and provide financial support to certain priority areas such as the Congo Basin.

Clean electricity, electric vehicles, green steel, hydrogen and sustainable agriculture
And what about cars? Perhaps most noticeable was the presence of electric vehicles used by participants in and around Glasgow. A new agenda aims to further drive the tipping point at which electric vehicles and other environmentally friendly technologies are displacing the established alternatives. The first five targeted solutions include clean electricity, electric vehicles, green steel, hydrogen and sustainable agriculture – a taste of the technologies that will shape the net-zero economy.