8 November 2021
Building a sustainable future – 1 of 4 Insights
Climate change, the momentum towards a net zero economy and the allocation of capital towards more sustainable development will significantly shape global markets over the next few decades. But how will COP26 impact the international real estate, infrastructure and energy sectors?
World leaders are meeting in Glasgow for the 26th "Conference of the Parties" to the UN Framework Convention on Climate Change. The purpose of the meeting is for governments to assess progress under the Paris Agreement, signed in 2016.
The goal of the Paris Agreement is to limit global warming to no more than 2⁰C (preferably 1.5⁰C) above pre-industrial levels by 2100 and avoid the worst impacts of climate change. To do this, countries need to cut greenhouse gas emissions by at least 45% of 2010 levels by 2030 and then reach net zero emissions by 2050.
After Paris, each country was responsible for preparing its own climate action plan (called an NDC) to show how it would achieve its part of the goal. But many of the initial NDCs fall short and the focus of Glasgow is on strengthening commitments to net zero.
Achieving the transition to net zero emissions relies on private finance. Mark Carney, the UK Prime Minister's Finance Advisor for COP26, says that the whole global economy will need to shift: "companies, banks, insurers and investors all have to adjust their business models and develop credible plans for the transition to a net zero economy and implement them". Major investors are already adjusting their approaches, recognising that climate change has become an important factor affecting their long-term goals: "climate risk is investment risk".
In major economies, governments are increasingly implementing policies and setting regulatory frameworks to ensure that every financial decision takes climate change into account:
The real estate, infrastructure and energy sectors have a major role to play in driving forward international policy and supporting investors, developers and funders with the challenges and opportunities that are coming their way. These include:
Opportunities will be particularly visible in cities which are estimated to be responsible for 75% of global CO2 emissions. Climate change, the momentum towards a net zero economy and the allocation of capital towards more sustainable companies and projects will significantly shape the international real estate, infrastructure and energy sectors over the next few decades.