Beside the G7 seaside
Last week, Cornwall hosted its first ever G7 summit. Our investment stewardship team welcomed the decidedly ‘green’ tone.
Think of Cornwall and you may conjure up pictures of beautiful sandy beaches, rolling countryside and rather tasty pasties. But last week, this part of South West England shook off its holiday image and played host to some of the most powerful leaders of the world’s seven largest advanced economies (known collectively as the G7 meeting).
While many of the details from the summit have already emerged, we also have some insights on some of the early discussions, courtesy of a statement issued by the G7 finance ministers on 05 June. Our view is that while the content wasn’t perfect, it did include some positive commitments – from vaccine financing through to supporting heavily indebted low-income countries.
A sustainable and resilient recovery
Not unexpectedly, the ministers reiterated their strong commitment to a sustainable, resilient, and critically, green recovery. COVID-19 recovery packages are an opportunity for G7 members to speed up the transition to net zero across their economies (we reach net zero when the amount of carbon we add is no more than the amount of carbon we emit).
Commitment to climate change appears to have been strengthened. While COVID-19 was at the forefront of minds last year (and rightly so), the G7 finance ministers didn’t mention ‘climate change’ once in 2020. It was slightly better in 2019 when climate was mentioned five times in their correspondence. It appears we’ve gone from the ‘why’ discussion, to the ‘how do we do this’ discussion. As ever, the key will be whether this stays at the top of the G7 agenda. Having said that, with President Biden insisting that, ‘it’s the number-one issue facing humanity and it’s the number-one issue for me’, we have hope.
A more commonly discussed point has been the commitment to set a global minimum corporate tax (a tax on company profits) of at least 15%. In our view, this is another significant step in ensuring large, international companies pay their fair share of tax in the country where their earnings are generated.
Emerging markets (covering those countries such as Brazil and India)
Again, there is a welcome re-commitment to international climate finance. We note this point only as a reminder that climate change is not limited to specific markets, so international coordination and investment is much needed.
In short, the finance ministers’ statement included aspects that we believe are very positive for the broader environment, although further detail and expansion in some areas would have been welcome.
We hope the next few months will support this ambition further and encourage countries (in and outside of the G7) to produce clear plans with the aim of achieving net zero by 2050. As the countdown begins to the climate change meeting in Glasgow this November, we’ll look forward to this agenda gaining momentum.
Remember, the value of any investment is not guaranteed. The value of investments and any income received from can go down as well as up and you may not get back as much as you had originally invested.