My COP experience as the head of Aviva’s Global Responsible Investment team

Steve Waygood is a COP veteran, so we asked him to reflect on his time in Glasgow. Here is his assessment of his COP26 experience.

Steve Waygood has worked for Aviva Investors for 15 years and founded its Global Responsible Investment team. He has advised the UK Government, the European Commission, the Financial Stability Board and the UN on the creation of sustainable capital markets.

Why is the head of Aviva’s Global Investment arm at a climate conference?

I have been attending UN COP meetings since the 1990s. In the early days, I was hard-pressed to find another finance professional to talk to. This has changed – which is hugely positive. The financial system is the lifeblood of our economic system and, though not without its faults, directs large swathes of capital around the world, funding key infrastructure projects, innovative start-ups and provides capital to businesses of all sizes – as well as fuelling investment and pension returns.

It is therefore absolutely right that finance should take part in the debate on climate change and help shape discussions. As long-term owners and lenders of capital we must push for the change in the system that is required to build a more sustainable planet and future.

Global Canopy has set out a roadmap offering guidance for financial institutions to show them how to reach deforestation free portfolios by 2025. What are the barriers that make that difficult, what stops you becoming deforestation free tomorrow?

There are significant practical difficulties in delivering deforestation-free portfolios: to date, no public company with any significant involvement in high-risk forest commodities like palm oil or soy has been able to guarantee there is no deforestation in its supply chain. Despite a substantial number of consumer goods companies making this commitment in 2010, by 2020 none had succeeded. Food and consumer goods companies are making slow progress in ensuring 100 per cent traceability in their high-risk commodity supply chains, and many companies still don’t even have zero deforestation policies. Therefore, it’s almost impossible for an investor like us to guarantee that by 2025 none of the thousands of companies we own will have cases of deforestation in their supply chain by 2025.

However, we are determined to play our part in driving change by encouraging the companies we own to do more to eliminate deforestation. We have been engaging with companies on this issue already for several years, including Minerva, Maybank and Viterra more recently. We were pleased to be part of the newly launched ‘Financial Sector Commitment on Eliminating Commodity Driven Deforestation’, which means that we will use our best efforts via engagement and stewardship to eliminate forest-risk agricultural commodity-driven deforestation activities at the companies in our investment portfolio by 2025.

Our first step will be to carry out a formal assessment of our portfolios for deforestation risk and to prioritise direct commodity driven deforestation. Our focus remains on engagement with high-risk companies to deliver real world impact, rather than avoidance or divestment.

Biggest ah ha moment – is there one stat or story that stuck with you?

My most spine-tingling moment in Glasgow came in the Marrakech Partnership event on finance day in the action zone, when Al Gore, Mark Carney, David Blood and many others assembled. It was here that Nigel Topping, the UK’s High-Level Climate Action Champion, stated that the $130 trillion firepower of the Glasgow Financial Alliance for Net Zero (GFANZ) and mandatory corporate transition plans were “not only the mic drop moments of the morning, but will likely be seen as among the most historic achievements of COP26”.

It is almost surreal. We have been seeking a net-zero financial alliance and mandatory transitions plans for such a long time now. I am extremely proud to have been part of a team, an organisation, and many formal and informal coalitions pushing these ideas forward. Some of this progress and detail may seem arcane and few outside the world of policy and finance will appreciate just how massive they are – but these milestones are huge.

Equally inspiring was hearing Ashley Alder, the International Organization of Securities Commission (IOSCO) head, say that “Jurisdictions are going to need standards that can be independently audited so strengthening the assurance framework is critical. The IOSCO endorsement is the catalyst for getting this done and getting it done quickly. I am confident that we are going to get this done quickly.” I paraphrased a little here from memory, but he went on to welcome the formation of the international accounting standards board sustainability sub-committee.

Most frustrating moment?

There is a very strong creative tension between activists and NGOs on one side and system-wide reformers on the other. It is hugely important that both exist.

The idealism and anger coming through from campaigners is spurring the system to change itself faster than ever before and with real intent and purpose. But some want the old system to be completely overthrown but they are not clear on what should replace it. Insiders can see how much is changing and have faith that the current system can be bent into a shape that can deliver the Paris Agreement. Ensuring a just and smooth transition to an economy fuelled by clean energy and that protects people and nature should be everyone’s priority. It is a point of agreement, not dispute. How we get there is where the tension lies.

Will COP26 change anything that Aviva does going forward?

Every COP changes what we do in some way, shape or form. It either validates and endorses what we were hoping for in terms of market and system reform – allowing us to enact and drive forward initiatives that we were preparing for. Or, where less encouraging progress is made, it means we have to work harder on our macro stewardship agenda and/or find other avenues to influence change.

This time around we have been pleased to see and are already considering the implications of Glasgow Financial Alliance for Net Zero (GFANZ) gain momentum to the tune of $130 trillion and the UK demand for mandatory transition plans for companies (both things we have been pushing for).

We will now work on implementing these across our business and portfolios, as well as refining our asks for Indonesia G20 and COP27. If previous COPs have taught us anything it is that the work is never finished. There is literally no room for complacency.

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Find out what else Global Canopy got up to in Glasgow on our COP26 Hub.