News and Analysis | David Macdonald, Founder | October 27, 2021

Good COP, bad COP?

We’re preparing to launch our new Climate Solutions Portfolio

As world leaders prepare to gather in Glasgow for COP26 this weekend, we are ourselves preparing to launch our new Climate Solutions Portfolio. More details to follow in our next blog post, but we’re very excited that the impact investment universe is now mature enough to allow us to forge ahead with an exciting development to further empower investors.

In the meantime, some reflections on COP21: the Paris agreement was signed in December 2015 and ratified in November 2016. There were ambitious declarations of intent from many nations, and it marked a turning point with positive global commitments to make meaningful change. The main aims of the Paris accord were to: limit global warming to “well under” under 2°C, preferably 1.5°C by 2100; protect communities and habitats; mobilise finance to help achieve this; to work together to deliver solutions.

Cynics will say that most countries have missed their targets by miles and that we are already on track for 2.6°C. Yet, we have seen significant shifts in behaviour, especially amongst consumers. Amid many changes that would have been surprising five years ago: there is a huge increase in people eating plant-based diets; EVs have gone beyond a tipping point towards replacing internal combustion engines, and there has been a transformational move towards more investment funds taking Environmental, Social and Governance factors (ESG) into account.

There was a time when very, very few funds analysed ESG metrics when selecting the companies they invested in. Traditionally they were the preserve of faith-based investing and screened out the so-called “sin” stocks (not including fossil fuels!)

Since around the early to mid-2000’s, “impact” investment evolved to not just screen out the negative, but to screen in investments in companies whose products and services were aligned to solutions for people and planet, usually with reference to the United Nations Sustainable Development Goads (SDGs).

Path was launched as the first financial adviser to operate exclusively in the impact investment universe, since we realised that there were by then an adequate number of funds to draw from in that arena with which to create well diversified portfolios with the capacity for superior investment returns.  It was also clear that there was a huge pent-up demand from consumers who were frustrated that the current financial advisory framework was not delivering what they wanted.  That has proved hugely successful and we have now garnered an enviable expertise in this area.

We are now confident that the impact universe has matured further to the extent that we can offer a unique opportunity for clients to go beyond impact and tilt their influence towards investment in climate solutions. With somewhere around $100tn (that’s $100,000,000,000,000) held in private, liquid investment funds around the globe, there  is a more than adequate sum alone to address the climate crisis with – ignoring all other wealth and government action.  According to the United Nations, we only need to deploy $5-7tn annually  for the next ten years in order to successfully deliver the SDGs.

By pushing the climate agenda in this way, we are further empowering the consumer whilst continuing to apply pressure to the fund management industry.  We have a responsibility to help further “mobilise finance” by developing more granular thematic funds to satisfy demand.

So, whatever is discussed and agreed at COP26 – and however long it takes to deliver – individuals can act immediately to mobilise their money.  Our Climate Solutions Portfolio will be a mechanism for individual investors to take immediate action to further combat climate change with their pensions and investments. It seems logical that investment in this way will not only be good for people and planet, but should be well to perform well. 

Regardless of whether this is a good COP or a bad COP, we can all act decisively and dynamically whilst we wait for the global leaders to figure out what they are actually going to do.