The arrival of COP26 brings the issue of climate change into sharp focus. Downing’s Head of Sustainability, Graham Brady, discusses the link between the largest wealth transfer in history and the funding gap in the path to net zero.
When it comes to sustainability, most people are looking for answers. There is hope that COP26 will provide coherent and actionable outcomes, but the pressure is immense. As investors, the answer to one of the most pressing problems is right in front of us, but to see it, we need to understand what sustainability means.
An ancient concept
Sustainability, or the act of being sustainable, is not a new concept. Plato was discussing the human impact on the planet over two thousand years ago - well before 18th-century German lumberjacks proposed nachhaltende nutzung (sustainable use) in response to an insatiable demand for timber from shipwrights, miners and builders.
However, in English, the word sustainability has only really been linked to resource management from 1950 onwards. Somewhere between Plato in the 5th century BC, the German foresters in the 18th century and the creation of the UN’s sustainability development goals, our concept of sustainability has evolved from a responsibility to the natural world into a responsibility to future generations.
In most forms of investment, the future beneficiary is the same person who originally invests. However, the process of estate planning is a distinctly unselfish form of investment; the person investing will, by definition, never be the beneficiary.
The desire to provide a secure future for the next generation is an intrinsically sustainable act, but the future we want to provide for them is disappearing fast.
COP26 aims to address this, but the main headlines from the conference still suggest a policy gap between our current commitments and those required to limit global warming to 1.5˚C compared to pre-industrial levels.
Closing the commitment gap will count for nothing if those commitments can’t be funded.
Climate risk is an existential threat that will play out in parallel with the largest generational wealth transfer in human history – is the solution right in front of us?
One thing is becoming clearer - providing for future generations might have just taken on a whole new meaning.