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At the end of 2021, policymakers around the world emerged from the United Nations Climate Change Conference in Glasgow (COP26) full of hope. Countries promised enhanced Nationally Determined Contributions (NDCs) which signalled a watershed moment for private sector action on climate change. In the finance sector, the Glasgow Financial Alliance for Net Zero (GFANZ) brought together more than 550 financial institutions committing to net zero greenhouse gas emissions by 2050.  

However, a tumultuous 2022 has seen economies emerge from a global pandemic, only to be confronted with the economic fallout from Russia’s invasion of Ukraine, triggering a worldwide energy and commodity price crunch. Though macroeconomic shocks may have overtaken climate action as a priority for policymakers in the short term, 2023 offers a golden opportunity to catalyse a transformative shift away from fossil fuels to build a more resilient clean energy system over the long term. 

Through 2022, policymakers and businesses around the globe have aimed through their climate action to deliver transformative changes to our carbon-intensive economy. In the United States, the Inflation Reduction Act (IRA), the largest federal investment in climate action in history, became law in August 2022. The European Union’s Green New Deal, launched in 2020, is rolling out legislation to tackle emissions in energy generation, industry, agriculture and construction, while also tackling pollution and threats to biodiversity. At the global level, the International Sustainability Standards Board (ISSB) released its first exposure draft of reporting standards on sustainability and climate, with a final draft expected to be published in 2023. 

However, we also saw some less successful outcomes at the global level. Few countries submitted more ambitious NDCs at COP27 in Egypt, and the global expected temperature rise, based on current policies, has barely shifted from November 2021 (COP26). With these weak outcomes and the dangers and damages of the climate crisis ever more present in our lives, the Founding Partners of the Investor Agenda have advocated for greater action on NDCs through the Global Investor Statement launched in November 2022 and have advocated for strong policy outcomes in key countries and regions around the world.  

The Founding Partners of the Investor Agenda have highlighted some of the key policy takeaways from 2022 in the Country Policy Groups (CPGs) below: 

Australia (CDP, IGCC, PRI) 

Australia emits more greenhouse gasses per capita than most countries in the OECD. The Labor government aims to deliver a reduction in fossil fuel dependence, centred on the flagship National Energy Transition Authority Bill. The Australia CPG has shown its support for this legislation, which aims to address a clear policy gap in national planning, coordination and funding, through the creation of a national statutory authority. IGCC has also responded to a consultation on reform of the currently ineffective Safeguard Mechanism (SM), which requires Australia’s largest greenhouse gas emitters to keep their net emissions below an emissions limit (a baseline). 

The Australia CPG are supportive of mandatory climate risk disclosures and will be responding to a consultation by the Australian Treasurer, as well as engaging with the government directly on this topic. IGCC has also responded to a proposal to empower the AASB to deliver sustainability standards. It was developed in coordination with other ESG investor groups (ACSI, RIAA, PRI and ASFI). 

Europe (CDP, IIGCC, PRI) 

In April 2022, the Europe CPG convened an online roundtable with EU policymakers and approximately 100 investors to discuss recommendations on green economic recovery plans.  The roundtable focused on scaling up green investment as part of the economic recovery and allowed for an open dialogue with policymakers so that investors could factor in developments to their decision-making. 

Subsequently, the CPG published an in-depth report looking at how EU recovery funds can support investors and the European Green Deal. Outreach based on the report is currently underway with EU member states, a number of third countries, and international bodies. 

In parallel, the CPG has been following the EU’s negotiations on key elements of its “Fit for 55” legislative package, which seeks to implement the EU’s 55% emissions reduction target for 2030 across a number of critical sectors. The CPG wrote to negotiators in September, underscoring investor asks for ambitious outcomes in relation to renewables, energy efficiency and carbon pricing. 

Japan (AIGCC, CDP, PRI) 

In December 2022, the Japan CPG hosted a roundtable to facilitate discussions among Japanese investors and partners on policy to drive greater investment in the country’s energy transition. The roundtable featured presentations from GR Japan and Climate Integrate who set the scene on Japan’s finance and energy sector policies. The discussions honed in on policy actions needed to accelerate the phase out of unabated coal energy. Momentum from this roundtable will help to drive ambitious outcomes on climate finance and the energy transition at the 2023 G7 summit in Hiroshima. 

US (CDP, Ceres, PRI) 

The US CPG joined the chorus of support for federal climate legislation with multiple letters in 2021 that came to fruition with the passage of the Inflation Reduction Act (IRA) in August 2022. The enactment of the most significant climate legislation in U.S. history came on the heels of the Infrastructure Investment and Jobs Act of 2021 and the CHIPS Act of 2022, which also included climate-related measures. 

The CPG collaborated in support of the U.S. Securities and Exchange Commission’s proposed climate-related disclosure rule, hosting a joint webinar in March 2022 for 145 attendees. The Investor Agenda also published a blog post welcoming the SEC rule and submitted a comment letter featuring quotes from large international investors arguing for harmonisation of global disclosure standards. Collective efforts spurred 320 investor letters which overwhelmingly supported (95%+) key provisions of the rule including TCFD alignment, location in the 10-K, and Scopes 1 to 3 emissions. 

Investors have called for and supported the suite of climate and ESG related regulatory proposals released by the Biden Administration. For instance, the majority of investors supported the SEC’s ESG and Fund Names proposal, as well as the Department of Labor’s ERISA (Employee Retirement Income Security Act of 1974) rule on ESG in 401(k) funds, finalized in November.  

Over 2022, the Investor Agenda Founding Partners have been leading on climate policy advocacy both globally and within focal regions. Despite notable successes, current policies and NDCs are still not ambitious enough to prevent global temperature rise from exceeding the 1.5ºC tipping point that scientists say could unleash irreversible and catastrophic climate impacts. Instead, current policies and NDCs are projected to lead to an estimated global temperature rise of +2.4°C by 2100, according to Climate Action Tracker (see here).  

The objectives of the Paris Agreement are within reach, but as the Secretary-General of the United Nations, Antonio Guterres, said at COP27, the goal of limiting temperature rise to 1.5°C is on ‘life support’. Much more needs to be done, and climate policy advocacy will remain a critical tool for investors in driving the net zero transition.