06 NOV


SRI , Asset Class , Wim Van Hyfte

COP 23: between pledge and reality?

Sustainability is at the heart of Candriam’s investment philosophy, and we are convinced that sustainability trends such as climate change provide long-term investment opportunities. At the moment the need for climate financing, adaptation or mitigation, is daunting.  As a responsible asset manager, and committed to climate financing, we are hoping that the negotiations will bring concrete outcomes, such as the development of new market mechanisms, and policies making climate investment even more attractive. As the consensus for energy transition gets stronger, amongst all stakeholders including the investors community, Candriam is committed to deliver investment solutions which address its clients’ concerns.  Whether measuring investment portfolios’ carbon footprint, assessing carbon risks or identifying investment opportunities related to energy transition, we have strong in-house expertise to develop solutions for our clients.

The 23rd annual international meeting on climate change, ‘Conference of the Parties’,  will take place in November. COP23 will be presided by the Prime Minister of Fiji, Pacific islands which have already been impacted by climate change induced temperature and sea level rises. This represents an opportunity for most vulnerable developing countries to make their voice heard in the climate change negotiations.

What can we expect from this round of negotiations in the current environment?  

This year’s Atlantic hurricane season has reminded the world of the urgency to implement ambitious climate policies. Indeed climate change has increased the frequency of extreme weather events.  Despite this well-known fact, the US (which were impacted by the two strongest tropical storms) have challenged  the legitimacy of global climate policies.  But one should not read too much into the position of the Paris Agreement’s detractors.  Candriam believes there is stronger international support for climate change policies than ever, equally driven by public and private stakeholders.

Two major topics which are key to the agreement implementation

We are now entering the implementation phase of the Agreement.  For COP 23 to be a success, Candriam sees two main practical things negotiators should make progress on :


  1. Continuing discussion on national decarbonisation objectives

    Current pledges added together are not enough to achieve the ‘well-below 2°C’ goal of the ParisAgreement. The 2016 Gap report shows that current pledges would lead to a temperature rise between 2.9°C and 3.4°C, therefore ambitions need to be raised. Periodic reviews will take place to assess existing objectives and  increase the pledges ambition overtime: the Facilitative Dialogue taking place in 2018 is the first step of this 5-yearly dialogue process. It will need to be ready by the end of this year

  2. Defining ‘transparency rules’ applicable to all parties

    Countries need to agree on common rules with regard to decarbonisation. The idea of building a book of strict and transparent rules of emission reporting and monitoring, to assess decarbonisation paths accurately, was raised during COP22 negotiations.  For this transparency framework to be completed  at the end of 2018 (COP24), sufficient progress should be made this year.

Climate finance at an international level, the key to success

Green finance is needed to support the development of clean technologies and deliver on the treaty’s goal. But making finance flow to developing countries, which have historically little contributed to global emissions, is also essential to help them mitigate and adapt to climate change.

There is a risk that countries do not make sufficient progress.  By failing to agree on carbon accounting and monitoring systems, and not agreeing on how to set decarbonisation objectives, negotiators could threaten the success of the Paris Agreement.  And because the agreement objective is ambitious, it needs high levels of international cooperation, which may be lacking at a time of mounting nationalism. Large nations, which aggregated emissions overweigh the size of the US’, have been acting jointly in favour of climate change policies. It is striking how Asian and other developing countries have remained firmly committed to climate change policies, taking over the leadership from the US.  . The US do not weigh enough to stop the momentum we have seen since 2015.

This should reassure investors that the consensus in favour of climate investing remains intact.

Through its large SRI fund range, CANDRIAM actively promotes responsible corporate behaviours and companies’ exposure to sustainability trends such as climate change, energy transition and  resource scarcity.

By Wim Van Hyfte, Ph.D, Global Head of Responsible Investments and Research and Solange Le Jeune, Senior SRI Analyst