For financial professionals in Uruguay

COP26: reflections, responsibility and legacy

Nov 15, 2021

Negotiations at the UN Climate Change Conference (COP26) in Glasgow extended past their deadline on the final official day of the summit to “keep 1.5° C alive.” In the aftermath of the event, Kelly Hagg, Global Head of Product Strategy and ESG, provides perspective on some of the key developments and what they could entail for the asset management industry.

Global Environmental Pledges

The overarching goal of COP26 was for countries to come together to act on climate change by agreeing to solutions that would limit the rise of global temperatures to 1.5° Celsius from pre-industrial levels, as outlined by the 2015 Paris Agreement. As we covered in previous posts, numerous global environmental pledges were made during the conference, including the pledge to end and reverse deforestation by 2030, the global pledge to cut methane emissions by 2030, and the global coal pledge to stop investment domestically and internationally in coal plants.

While nearly 200 countries agreed to the Glasgow Climate Pact to keep 1.5° C alive and finalize the outstanding elements of the Paris Agreement, significant challenges in reducing greenhouse gas emissions and climate change remain. For example, India, with support from China and other fossil-fuel dependent emerging nations, forced a last-minute change to the agreement to “phase down” rather than “phase out” coal-fired power generation. Clearly, public and private finance for emerging markets to address climate change remains a key issue and developed nations will need to follow through on their $100 billion a year commitment to support funding for developing nations.

Meanwhile, rules were established for a new global carbon credit market where schemes designed to reduce carbon emissions, such as planting trees, renewable energy projects and energy-efficiency improvements, generate credits for companies to offset against their emissions. Carbon offsets can be bought, sold or traded and the financing of offsetting projects is now likely to increase.

Individual countries made their own net-zero pledges, including a major announcement by Prime Minister Narendra Modi that India, one of the top CO2 emitters after China and the United States, will aim to achieve net-zero emissions by 2070. Leaders from China and Russia were noticeably absent from the conference; however, on November 10, the U.S. and China pledged to work together on climate change this decade, adding new life into the homestretch of COP26 and indicating that, despite President Xi not being in attendance, China is taking global climate concerns seriously.

After all these grand pledges and commitments, now comes the difficult task of countries following through on their promises. This comes as the world finds itself in a global energy crunch with such far-reaching negative social impacts that politicians may feel pressured to delay a green energy transition to secure re-election. The U.S. is facing considerable political wrangling on this front as President Biden attempts to pass his Build Back Better economic and social spending package, which includes important climate change measures. One of the most polarizing topics at COP26 – eliminating coal – is one item that threatens to block the bill.

Role of Businesses

One of the noticeable differences between COP26 and prior COP conferences was the unprecedented business presence and the sheer amount of influence these businesses held on the conference floor. Just as world governments announced their countries’ net-zero pledges, businesses – in particular the finance industry – made similar commitments, all while having the efficacy and validity of their pledges questioned by the ever-increasing throngs of protestors.

As businesses and the finance industry face ongoing accusations of greenwashing, another theme emerged at COP26 that stood in direct opposition to this backlash: The idea that geopolitics have derailed so many climate change initiatives on behalf of governments that businesses will need to step up and take responsibility.

Individual business leaders were also called upon to play a larger part in negotiations, with Jeff Bezos, Bill Gates and Michael Bloomberg all making large pledges to tackle climate change. Amid these pledges, accusations of greenwashing and hypocrisy extended to a personal level as protesters questioned how these billionaires have any authority to preach on climate change if they are unwilling to give up certain elements (e.g., private jets) of their carbon-intensive lifestyles. These questions will certainly escalate as protestors continue to attack the efficacy of carbon credits.

Regulatory Movement

Regulatory change in the asset management industry is already underway as a result of COP26 as the International Financial Reporting Standards Foundation (IFRS) announced three significant developments to provide the global financial markets with high-quality disclosures on climate and other sustainability issues. Rules for the global carbon markets are also being finalized that would create a new market for the trading of units by the private sector. The regulations would also create a system where countries that have exceeded their climate targets would be able to sell units representing emissions reductions to other countries to use to meet their own commitments.

Given the extensive environmental commitments made by governments and businesses at COP26, we anticipate additional reporting and regulatory guidance to be forthcoming in 2022 for the finance industry.

Responsibility and Legacy

Foggy ClimateOn a personal note, if I could sum up our firm’s perspective on COP26 and the changes that may result from the event in two words, they would be responsibility and legacy. This past summer, as wildfires raged in Oregon and California, a cloud of smog descended on Denver, Colorado – the site of one of Janus Henderson’s corporate offices – for almost the entire month of August, culminating on August 7 when the air quality in Denver was recorded as the worst of any city in the world. From our Denver office, my usual view of the mountains disappeared and the consequences of climate change were brought home in a very tangible way.

Our primary duty as an asset management firm is the fiduciary responsibility we hold to our clients. However, more and more we see this responsibility expand to the accountability our firm has to promote sustainability for the benefit of future generations and the legacy we want to leave behind.

While there was a great deal of anger and pessimism at COP26, manifested by large protests and accusations that the claims and pledges made by governments and businesses were empty promises, we choose to take an optimistic, yet pragmatic, perspective. At Janus Henderson,  our approach moving forward will need to be measured, authentic, and transparent. We must anticipate and prepare for the potential implications of the transition to net zero on our products and the global economy, all while being highly cognizant of the risks associated with climate change from an environmental, social and economic perspective.

The finance industry has been tasked with a great duty. As with the larger negotiations at COP26, there’s a great deal of confusion and conflicting opinion about how this task will be achieved. But no great tasks are ever easy. Ultimately, through all the confusion, protests and pledges, COP26 highlighted two resounding truths about climate change: doing nothing is not an option and the luxury of time has all but vanished.

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.


Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.


The information in this article does not qualify as an investment recommendation.


Marketing Communication.