Flash Report /
Russia

Eco Warrior: COP26 Review

  • COP26, which was the 26th Conference of Parties to the UNFCCC,took place over the first two weeks of November in Glasgow

  • In Russia, the approval of a social and economic development plan coincided with COP26

  • According to Bloomberg, ESG exchange-traded funds tracked by Bloomberg expanded 3.6% in the week of 19 November

Yulia Tolstykh
Yulia Tolstykh

Analyst, Metals & Mining

Boris Krasnozhenov
Boris Krasnozhenov

Head of Research (Managing Director)

Alfa
24 November 2021
Published by

COP26, which was the 26th Conference of Parties to the UNFCCC, took place over the first two weeks of November in Glasgow. This year the event attracted delegates from 150 countries to reassess the current status of efforts to meet the goals of the Paris Agreement and to keep the global temperature rise below 2°C above pre-industrial levels and ideally keep it below 1.5°C. We monitored the COP26 headlines and took part in several dedicated conferences to track any changes in rhetoric or any fiduciary implications arising from the summit. The world is continuing its transition towards net-zero and we highlight the following: 1) Parties to the Paris Agreement were requested to update their commitments by the end of 2022 and to put them in line with the 1.5°C target; 2) For the first time in the history of COP, fossil fuels, mainly coal, were discussed in the context of phasing out. Although after heated discussion the language was changed to phasing down; 3) We should now hear more on the pledge that was made to cut methane emissions by at least 30% by 2030; 4) Article 6 of the Paris Agreement rulebook was outlined to set the framework for international carbon markets, which should not be confused with the CBAM introduced by the EU; 5) It was highlighted that financial pledges for a Developed Countries Fund and an Adaptation Fund remain well below adequate levels. Financing is lagging behind commitments while developing countries account for 60% of GHG emissions.

In Russia, the approval of a social and economic development plan coincided with COP26. Russia's economic growth under an intensive scenario implies reducing GHG emissions by 60% in 2050 vs 2019 and by 80% vs 1990, with the potential remaining to reach net-zero by 2060. Climate projects are expected to start in 2022 which implies the implementation of more environmentally friendly technologies and the development of carbon capture and utilization potential. This also implies the launch of carbon trading. In 2023, it is planned to introduce a mandatory carbon reporting system for enterprises. It is noted, however, that introduction of a carbon regulation system or possible carbon fees may only be considered upon the conclusion of the Sakhalin experiment, the first assessment of which is expected in July 2022.

ESG flows: According to Bloomberg, ESG exchange-traded funds tracked by Bloomberg expanded 3.6% in the week of 19 November to $3.62 bn rising the most since the end of August. Total inflows reached $117 bn YTD (19 November) vs $135 bn of total inflows for 2020.