Decarbonization Front and Center at COP27

COP27, the 27th U.N. Climate Change Conference of the Parties to the Paris Agreement on climate, is now underway in Sharm El Sheikh, Egypt — and the mood going in is less hopeful than it was coming out of COP26.

At COP26 last year, a coalition of nearly 200 countries and companies had agreed to “phase down” coal power and end support for new plants. More than 100 countries, representing around 85% of the world’s forests, pledged to halt deforestation by 2030.

But some of the optimism gained from last year’s summit has since fizzled. Of the 193 countries that pledged to put forward more ambitious emission-reduction targets, only 24 have submitted updated Nationally Determined Contributions (NDCs) since COP26, all of which make only a limited contribution to closing the 2030 emissions gap.

Plus, the recent emissions gap report from the U.N. Environment Programme suggests that the G20 is not on track to achieve its NDCs to emission reduction, and that the nations of the world have reduced their projected greenhouse gas emissions for 2030 by just 1%, when a 45% reduction is needed to keep only a 1.5°C rise in global temperature a reality. The report also suggests that even with implementing formally submitted NDC targets, the world could be on course for 2.4°C of warming.

Despite these massive headwinds, Sarah Peasey, senior vice president and director of European ESG investing at Neuberger Berman, argues that there still could be progress at COP27. And the fight against climate change also provides a huge opportunity for the pragmatic investor.

“Climate legislation and initiatives like COP27 put investors at the center of the energy transition,” Peasey wrote. “After all, according to Bloomberg New Energy Finance, average annual investment in the transition between 2026 and 2030 needs to be six times greater than it was in 2021.”

Investors wanting to invest in this growing megatrend of energy transition infrastructure may want to consider the actively managed Neuberger Berman Carbon Transition & Infrastructure ETF (NBCT)Launched in April, NBCT seeks to invest in companies that are focused on or are transitioning their business to focus on one or more of the following themes:

  1. Low-carbon resources: issuers focused on producing renewable energy, such as solar, wind, geothermal, and green hydrogen, and the related storage and transport of these energies.
  2. Electrification: issuers that help enable the replacement of technologies that use higher carbon-emitting fuels with those that use low-carbon resources as a source of energy, including those that support smart grid and electric vehicle-charging solutions, as well as electricity transmission and distribution that helps expand usage of low-carbon solutions.
  3. Carbon reduction solutions: issuers that directly facilitate the carbon reduction goals of infrastructure owners, including innovative raw materials, industrial gases, engineering and construction service providers, environmental services providers, and environmental technology providers.

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