Institutional Asset Manager Newsletter 15.11.24

COP29 faces significant challenges

The COP29 Summit in Azerbaijan is in full swing with government gearing up to agree how much finance is needed to cut greenhouse gas emissions and take the world to net zero by 2050.
The New Collective Quantified Goal (NCQG) on climate finance – which will secure support for developing countries, address funding gaps in climate finance, foster global partnerships, and support just transition pathways – will likely be around USD1 trillion a year by 2035.
But this figure is contentious with several reports claiming far more is needed, while others say that waiting until 2035 to hit the USD1 trillion goal will "create future problems".
Governments will not prove the only source of funding for NCQC; half is expected to come from private finance.
COP29 has so far secured pledges of USD120 billion a year by 2030 from the world’s largest banks, but other institutions are yet to make their commitments known.
There will be little point in looking to the UK’s new ‘pension mega funds’, however, since these will be encouraged to focus firmly on domestic investment.
Chancellor Rachel Reeves will use her inaugural Mansion House speech to announce more local authority pension pools, which will combine 86 council funds covering GBP354 billion in investments.
Not stopping there, the governmental also wants to merge smaller workplace pension schemes to ensure they are better placed to invest in energy infrastructure and other transition projects.
The government looks set to impose a minimum size limit on defined contribution schemes in the private sector, which manage around GBP800 billion of investments, to encourage the consolidation of the around 60 different multi-employer schemes.
This, Reeves says, could unlock GBP80 billion worth of investment into the UK.
The Chancellor takes umbrage at overseas mega funds – including those in Canada and Australia – taking advantage of British investment opportunities, telling the BBC that it made "no sense at all" that Canadian teachers and Australian professors were more likely to be invested in many long-term UK assets than savers in Britain.
Reeves does have a point; investing domestically should create a virtuous circle for the UK economy and its citizens. Yet the green transition is a global ambition; the world must move as one towards net zero or is it ultimately will prove a fruitless endeavour.
This week we bring you a report from the CFA Institute which offers suggestions to investors on how to better incorporate their net zero targets into their investment strategies.
In its report, Net-Zero Investing: Solutions for Benchmarks, Incentives, and Time Horizons, the institute is clear that a well-designed net-zero investment program can contribute to an asset owner’s fiduciary duty to manage their assets by striving for the highest returns within the defined risk parameters for the benefit of plan participants and beneficiaries.
But with so many trillions of dollars needed to ensure the end to harmful greenhouse gas emissions globally, investors will need to consider looking collectively – and globally – to affect real change.

Gill Wadsworth, Editor, Institutional Asset Manager
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