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With the publication of its ‘Synthesis Report’, the Intergovernmental Panel on Climate Change (IPCC) – the UN-convened body responsible for climate science – closed its “6th Assessment Cycle (AR6)”1. The assessment is the result of nearly a decade of research and collaboration by the world’s leading

climate scientist, economist, and academics. It provides the most comprehensive update on climate science, mitigation, and adaption since the release of AR5 in 2014.

 

The findings from AR6 will form the backbone of climate policy and will inevitably shape the framework that the financial sector operates within. Hence, any investors interested in manoeuvring the complex climate space needs to be cognisant of AR6’s key findings. All the reports are ratified at international plenary negotiations in which governments formally approve the summary for policymakers, ensuring high credibility in national and international policymaking.

 

We provide key messages from the AR6 cycle that are relevant to investment management. The message of urgency is clear; we are not on track to achieve the Paris Agreement goals, climate finance flows need to grow immensely, investors must adequality price climate-risks, and the often-held perception that financial climate risks are a “future”- and not a “now”- problem is firmly dispelled. There is also a clear message of opportunity – that investments in mitigation and adaptation are likely to be a major economic growth area in years to come, opening up new and expanding areas for investment. 

Where are we now?
Where are we heading?
What can we do?
5 April 2023
Albertine Pegrum-Haram
Senior Associate, Responsible Investment
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1Along with three special reports, the IPCC released three major reports as part of AR6: ‘The Physical Science Basis’ (June 2021); In March 2022, “Impacts, Adaptation and Vulnerability” and ‘Mitigation of Climate Change’, released in April 2022. The final “Synthesis Report” summarised the key findings and messages of the complete AR6 assessment cycle.

2The Cross-Working Group Box on page 2507, ‘estimating global economic impacts from climate change’ summarises the work and main findings on aggregate economic damage.

3The IPCC measures sea level rise relative to 1995-2014.

4Defined as degrees of warming relative to preindustrial levels (1850-1900)

5Under B.1 (Possible Climate Futures), see table SPM.1, of the “Physical Science Basis”

6The World Meteorological Organization states that there is a 50:50 chance that temperatures could average 1.5°C or above in one of the next five years. This, however, should not be confused with “exceeding” 1.5°C or “breaching the Paris target”. The IPCC defines the ‘threshold-crossing time’ as the midpoint of the first 20-year period when the global surface air temperature averages higher than that target.

7For a deep dive into the debate and consequences of 1.5C this (16/03) Financial Times editorial is useful.

8Note: the report was published pre COP27, however this should not alter the findings significantly as new targets were scarce.

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© 2022 Columbia Threadneedle Investments

For professional investors.

For marketing purposes. Your capital is at risk. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.
Not all services, products and strategies are offered by all entities of the group. Awards or ratings may not apply to all entities of the group.

This material should not be considered as an offer, solicitation, advice, or an investment recommendation. This communication is valid at the date of publication and may be subject to change without notice. Information from external sources is considered reliable but there is no guarantee as to its accuracy or completeness.

In the UK: Issued by Threadneedle Asset Management Limited, No. 573204 and/or Columbia Threadneedle Management Limited, No. 517895, both registered in England and Wales and authorised and regulated in the UK by the Financial Conduct Authority.

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Important information

© 2022 Columbia Threadneedle Investments

For professional investors.

For marketing purposes. Your capital is at risk. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.
Not all services, products and strategies are offered by all entities of the group. Awards or ratings may not apply to all entities of the group.

This material should not be considered as an offer, solicitation, advice, or an investment recommendation. This communication is valid at the date of publication and may be subject to change without notice. Information from external sources is considered reliable but there is no guarantee as to its accuracy or completeness.

In the UK: Issued by Threadneedle Asset Management Limited, No. 573204 and/or Columbia Threadneedle Management Limited, No. 517895, both registered in England and Wales and authorised and regulated in the UK by the Financial Conduct Authority.

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