ESG & Geopolitics
If countries have high ambitions, to succeed they must be realized at the global level. For this reason, the results of COP26 were not reassuring. The failure of COP26 on several key issues of international cooperation and the mistrust between countries will increase geopolitical tensions on this issue.
It was a "COP of the rich countries for the rich countries", as several experts stated, and with a large gap between the official declarations of the first week and the concrete concessions put on paper in the second week. The result is an atmosphere of unprecedented mistrust, especially between industrialized and emerging countries, which the next conferences will have to resolve quickly. The war for climate leadership between China and the United States has already caused some geopolitical tensions.
In Europe, the SFDR regulation and the taxonomy in particular have changed the game for ESG investment. Thus, the European taxonomy, among other things, pushes investors to buy securities that will allow them to show the best alignment with the objectives of mitigation and adaptation to climate change, the first two objectives of a series to which four others have been added more recently: Sustainability and protection of water and marine resources; transition to a circular economy; prevention and control of pollution; protection and restoration of biodiversity and ecosystems
We believe this global situation reinforces the need for investors to move from subjective ESG assessments from data providers, to objective raw data directly from companies. The financial world needs adequate, reliable and forward-looking data to make appropriate investment decisions, independently of geopolitical influences.
The announcement by the International Financial Reporting Standards (IFRS) of the creation of the International Sustainability Standards Board (ISSB) was therefore welcomed by the markets. This will develop a comprehensive global baseline on sustainability reporting standards for financial markets, which is a promising development for the future.