With COP27 having recently taken place, a spotlight has been shone on the impending climate crisis we are facing with regards to global temperature rises and the need for adaptation as a result of the impacts that rising temperatures may have on the planet. In order to combat the rising temperatures, $4-6 trillion per annum of investments are needed this decade to help the push towards the transition to a low-carbon economy with sustainably produced energy. To achieve this, companies and financial institutions must crack down on climate commitments through action and investment. As MSCI has summarised, this includes net-zero pledges that outline targets for reaching net-zero by or before 2050, as well as ending support for fossil fuel companies. Additionally, financial institutions should adopt a policy that avoids investing in businesses linked to deforestation, and regulators should clamp down on the validity of net-zero pledges, transition plans and disclosure, in order to avoid greenwashing.

There has been an agreement from wealthy countries to compensate vulnerable, developing countries for loss or damage caused by global warming. This comes in the form of a new funding arrangement on loss and damage that will be a pooled fund for countries most affected by climate change. Although unclear where exactly this money will come from yet, it is a positive sign for global solidarity in the shared fight against climate change. Despite this, some have viewed COP27 as a potential backwards step due to a lack of mention of phasing out fossil fuels completely. It will only become clear in the coming months if the parameters set out at COP27 will have the intended effects on how companies and financial institutions operate and invest their capital.