COP24: Mind the Gap

The 24th United Nations Conference of the Parties - COP 24 - held during December in Katowice, Poland, delivered some achievements but also a number of disappointments. While parties signed an historical agreement on the Paris Climate Agreement rulebook, this was clouded by a lack of a political declaration on the need to start scaling up Nationally Determined Contributions (NDC) i.e.  countries’ emission reduction commitments to the Paris Agreement. 

In particular, large emitting countries such as the US, Saudi Arabia, Kuwait and Russia rejected calls from the majority of representatives to ‘welcome’ the findings of the Intergovernmental Panel on Climate Change’s (IPCC) report, which highlighted the severe impact of a temperature rise above 1.5°C compared to pre-industrial levels.
As a result, we believe the COP text falls short of demanding increased climate pledges before 2020, and therefore, very few announcements were made about the scaling-up of pledges and ambitions, in terms of countries’ climate change targets.

Don’t gloss over the rule book

The adoption of the Paris Agreement rulebook is nevertheless a noteworthy achievement. While the skeleton of the deal was signed in Paris, delegates had set a deadline of 2018 to set out the guidelines on how the Agreement will be monitored and implemented.

The delegates met this deadline and the resultant rulebook, in our view, gave the Paris Agreement some teeth. In general, the rules agreed are wider than initially expected, but still provide a certain level of transparency and consistency in measuring and assessing country climate ambitions.

Countries are expected to raise their current climate ambitions before 2020, most likely at the UN Sustainable Development summit in September 2019. This summit could indeed speed up the political momentum ahead of 2020 and COP26 that is scheduled to be held in western Europe.

From 2020 onwards, countries will communicate their NDCs and report on their greenhouse gas (GHG) emissions every five years. A Global Stocktake mechanism has also been established by the rulebook to assess countries’ progress against their respective NDCs.1

Top down and bottom-up initiatives

We also welcomed other bottom-up and more local initiatives we consider meaningful from an investor viewpoint. On the sidelines of the conference, a High Ambition Coalition of more than 30 countries and the European Union signed a statement urging other governments to increase their emission reduction targets.

And from a more industry-specific perspective, five commercial banks - BBVA, BNP Paribas, ING, Société Générale and Standard Chartered - committed to measuring the climate alignment of their lending portfolios.

Support shifts in end-use demand

The Katowice Partnership for Electromobility was also announced. Its aim is to provide assistance for e-mobility R&D, construct infrastructure for electric vehicles (EVs), create an incentive system for buyers of vehicles, and set targets related to electric fleets and public procurements.
The Partnership, jointly launched by Poland and the UK, quickly garnered wide support from governments, international organisations, and the private sector – a testament to the importance and economic potential of zero-emission transport solutions. Poland and the World Bank have set up a Mobility Trust Fund dedicated to electromobility which will finance the implementation of the partnership at the local level.

Transport is responsible for about 14% of global GHG emissions2 . Decarbonising transport is supported by a very dynamic passenger EVs market and emerging opportunities - electric buses, hydrogen-fueled vehicles. While still representing a small part of the global light-duty vehicle fleet, at 1%, a record 1.1m electric vehicles were sold worldwide in 2017.3

However, some conditions are still needed for the EV market to really take off. In particular, private R&D and the development of EV infrastructure – namely roads and charging stations to ensure electricity supply will be key. What is also needed is comprehensive planning from policymakers to ensure efficient deployment. The role of public policy is indeed central to the creation of a level playing field and direct investment towards a mix of transport decarbonisation solutions.

Just transition

The choice of Katowice, which lies in the heart of Poland’s coal region, as the host of the event led to a very productive debate across the COP on the question of how to achieve “just transition” i.e. a transition towards a resilient low-carbon economy, accompanied by social programmes to protect affected economic sectors and populations.

The announcement of the Solidarity and Just Transition Silesia Declaration represents a significant step towards mainstreaming this issue into global climate policy and highlighting the importance of a number of issues, including:

  1. Ensuring just transition and a decent future for workers in sectors impacted by the transition away from fossil fuels and high-emission industries
  2. New opportunities created by the transition to a low-greenhouse-gas-emission and climate resilient economy
  3. Building resilience via, for example, climate resilient infrastructure, especially in vulnerable economies.

The less privileged groups of the population are usually the most vulnerable to both the adverse consequences of global warming and the disruptive changes created by climate change policies. As illustrated by recent social events in France, as a necessary condition for the success of energy transition policies, governments will have to provide the necessary safety nets to protect affected economic sectors and populations.

Investors and companies can also play a significant role in implementing the Just Transition Declaration. For example, the social bonds market, which admittedly is still much less mature than green bonds market,  is a way to effectively channel capital to help marginalised and vulnerable populations.

Investors can also enter into a dialogue with companies to ensure that their climate change strategies protect the interests of workers.

AXA IM is strongly committed to finance the energy transition

Given the mixed outcomes and the loss of political momentum at COP24, more than ever AXA Investment Managers is convinced that the investment community and the private sector can take the lead in supporting energy transition.
While AXA IM acknowledges the materiality and negative impacts of climate-related risks on the value of investments, we are also strongly convinced of the value-creation opportunities, the transition to a below 2°C world will generate.

AXA IM is strongly committed to climate-related financial disclosure. Thanks to new partnerships with climate Fintech, Carbon Delta, and credit rating agency, Beyond Ratings, AXA IM will soon be able to test the alignment of its strategies to various warming scenarios. Monitoring the temperature of investments should help improve clients’ and prospects’ understanding of how AXA IM investment strategies support the collective effort to reducing carbon emissions and support a world in which warming is kept well below 2°C above pre-industrial levels.

While measuring and monitoring climate risks through robust and consistent quantitative frameworks is crucial, AXA IM will also constantly strengthen its engagement and stewardship capacity across several, key thematic areas linked to the energy transition: climate preparedness of companies both in terms of technological shifts and changes to their operating model, including the adaptation of employees and any other social stakeholders involved in the value chain.

Last but not least, AXA IM is constantly evolving and improving its assessment and identification of green assets. It has established a robust strategy to finance the low-carbon world, having nearly €10bn of green investments. The capacity to measure the alignment of investments to climate and environment-focused United Nations Sustainable Development Goals, whatever the asset class, will be a necessary condition to route our assets towards new green opportunities and the financing of the energy transition.


1 Article 14 of the Paris Agreement requires the CMA to periodically take stock of the implementation of the Paris Agreement and to assess collective progress towards achieving the purpose of the Agreement and its long-term goals. This process is called the global Stocktake.

2 Intergovernmental Panel on Climate Change (2014). Fifth Assessment Report

3 Bloomberg New Energy Finance (2018). Electric Vehicles Outlook 2018


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