COP27 round-up: African leaders launch carbon credits initiative

Financial news from Sharm El-Sheikh: UK announces climate support package, ISSB launches partnership framework for implementation of climate-related disclosure standards.

A group of African leaders and carbon credit experts have launched an initiative at COP27 to scale up production of carbon credits across the continent. According to the Africa Carbon Markets Initiative (ACMI), African nations have a maximum potential to generate more than 300 MtCO2e, which is around eight times more than the total credits issued by Africa in 2021. The announcement was welcomed by the Integrity Council for the Voluntary Carbon Market, which is currently developing a market integrity code for carbon credits. Council chair Annette Nazareth said the initiative could “provide critical funding to help secure a just transition in countries across Africa”. It comes as Conservation International, carbon credits issuer Verra, McKinsey and other partners announced plans to develop a nature/biodiversity credit.

The UK has announced a new package of climate support at COP27, as prime minister Rishi Sunak aims to deliver on the UK’s Glasgow legacy at the conference. The aid includes £65.5 million ($75 million; €74 million) for green tech innovation, as well as significant clean energy investments in Kenya and Egypt. The UK will also launch a new forests and climate leaders’ partnership and allocate more than £150 million to protecting rainforests and natural habitats, including the Congo Basin and Amazon. Sunak will reaffirm the UK’s commitment to supporting countries on the frontline of climate change.

The International Sustainability Standards Board (ISSB) is launching a partnership framework to develop the implementation of climate-related disclosure standards throughout 2023 to coincide with Finance Day at COP27. The ISSB, which was established by the International Financial Reporting Standards (IFRS) Foundation at COP26, has released the guidance to support investors and other capital market stakeholders as they prepare to use IFRS sustainability disclosure standards. The main points include improving the assessment of sustainability-related risks; supporting the shift in capital allocation towards more sustainable investments and the global south; allowing for flexibility to lower transaction costs for more sustainable businesses; providing consistent information on corporate performance across global markets and increasing transparency to minimise greenwashing risks. The ISSB, the European Commission and EFRAG are collaborating on the framework to ensure the coordination of the standards align on key climate disclosures.

An assessment of 400 banks, asset owners, asset managers and insurers by the World Benchmarking Alliance has found a lack of transparency and alignment of financial institutions across sustainability challenges. The findings, published at COP27, show that less than 40 percent of financial institutions have disclosed long-term net-zero targets. Only 20 percent of financial institutions have publicly acknowledged their impact on the planet and communities, with less than 5 percent sharing their plans to identify the impact of their activity on nature. The research also found that just 2 percent of companies have disclosed their financing to developing countries, a key priority at this year’s COP.

Investors including Aviva, the European Investment Bank and Legal and General Investment Management have called for urgent action on gender participation in climate action and finance. In a letter to the UN coordinated by GenderSmart, Women in Finance Climate Action Group and 2X Collaborative, the investors warned that “far too little progress” has been made to increase the participation of women in climate change issues, despite the disproportionate impact they face from climate change. The letter asks for improved inclusion of women in climate finance, integrated gender into public and private climate policy frameworks, developed gender metrics to integrate into climate finance reporting, and improved gender-balanced representation in climate finance decision-making.

Canadian think tank Corporate Knights and the Global 100 Council have launched a joint initiative on climate action and policy engagement, supported by more than 50 global companies. The declaration aims to close the gap between commitment and action on countries’ emissions reductions. The targets include supporting climate action aligned with the Paris Agreement when engaging with policymakers, working with major trade associations to advance alignment with the Paris goals, and monitoring and disclosing climate policy alignment for companies and their major trade associations. The 50 signatories, with a combined annual revenue of around $900 billion, represent industries including mining, finance, healthcare and tech. All G7 countries, except for Japan, have also signed the declaration along with China, India and Brazil. Signatories will be required to publicly disclose their policy engagement activities by the end of 2023 but will choose their own monitoring and disclosure methods.

The UK’s top 20 defined contribution pension providers are failing to keep up with climate change action, according to research from financial campaign group Make My Money Matter. Sixty percent of the schemes have yet to publish their 2025 emissions reduction targets, and only four have committed to eliminating deforestation from their portfolios. None of the pensions have plans to end fossil fuel expansion, despite saying that they are engaging with their portfolio companies and asset managers to drive the transition to net zero. At COP27, Make My Money Matter will call on UK pension schemes to set short-term 2025 emissions reductions targets, to commit to removing deforestation from portfolios, to set climate voting policies that ask companies to align with temperature goals, to set policies on ending fossil fuel expansion and to direct investments into climate solutions.

Portfolio purity “starves emerging markets”, according to research from asset manager Ninety-One. Sixty percent of asset owners surveyed by the firm said tackling climate change is a “strategic objective”, with 51 percent saying that their fund has emissions-reduction targets with respect to to real-world impact. Just 19 percent are using transition finance in their portfolios, while 16 percent said their fund invests in transition-finance assets in emerging markets.

Free to access, the RI Road to COP27 report highlights 27 ways in which investors can help move the world towards a low-carbon future. Produced by the Special Projects team at Responsible Investor and PEI Media, it covers sectors from agriculture and industry to energy and transport, and is available for download here