A historic deal at COP28: Nations agree to transition away from fossil fuels

04 January 2024 


Now that COP28 negotiations have drawn to a close, it is a good time to reflect on the outcomes and determine the next steps for policymakers, investors, businesses and communities around the world. Much like past editions of COP, the latest climate talks have involved hope and despair in nearly equal measures, with the concluding agreements and commitments being a source of severe contention amongst stakeholders across the globe.

Transition away

In the last few days of negotiations, parties were locked in a debate over ‘phasing down’ or ‘phasing out’ fossil fuels. The final announcement to ‘transition away’ from fossil fuels seems to be a compromise sitting somewhere in the middle. It demonstrates that parties have recognised a need to end reliance on fossil fuels, and at some point in the future, stop using them entirely. Conversely, the commitment to transition away does not hold parties to a strict timeline for doing so and assumes a continued extraction and use of fossil fuels in some capacity without a set end date. 

It is an agreement that received both criticism and praise but is unarguably significant, as the first outcome of global climate talks that has explicitly referenced fossil fuels and linked them to climate change. 

Different experiences for different nations

COP highlighted the different experiences of nations around the world when it comes to climate change and climate commitments:


During negotiations, many African countries argued for the ‘phase down’ of fossil fuels as opposed to ‘phase out’. This can be explained by the reliance that many African economies still have on fossil fuels. Whereas, some developed countries will have the capacity to supply their economy and cater for their populations without fossil fuels in the foreseeable future.

Some African nations fought for opportunities to pursue increased fossil fuel production, to finance their green transitions at a later date. They argue that in the developed world, the industrial era that built capacity and wealth was a prerequisite which allowed them to start decarbonising today.

Climate experts and economists have problematised this path, including those in the continent, claiming that there is little evidence that new capacity and wealth will be used to generate sustainable development. Climate finance will likely be the difference as to whether Africa can afford to start the renewable transition sooner rather than later. Despite a multitude of financial commitments at COP28, time will tell as to whether these materialise. 


Indigenous communities and small island developing states (SIDS) have long been voices of pressure on the global community to enact more radical climate action. They are often the first to experience the consequences of climate change. Small island states have been a key driving force behind the loss and damage fund which received its first financial commitments during this year’s negotiations. 

The Alliance of Small Island States (AOSIS) have expressed disappointment at the agreement to transition away from fossil fuels, claiming that it does not go far enough and fails to adequately challenge highly polluting nations and corporations. The alliance highlighted that a complete phase out of fossil fuels would be a primary driving force behind preventing further sea-level rise, desertification and climate migration – major climate externalities experienced by SIDS.  

Western and developed 

Whilst the developed Western nations of the world may be leading in terms of commitments and financing, this is often because they are in a better position to do so without detriment to their economies. However, leading countries still made several key deals at the latest climate talks.

The EU upped their cooperation with other bodies on key climate issues such as deforestation-free supply chains and renewable energy transition and the US made significant commitments to reduce methane levels and coal production.  

Key takeaways for ESG 

ESG analysts have noted some key takeaways following the closing of COP28 negotiations. 

  • 50 of the biggest oil and gas companies at the climate talks pledged near-zero methane emissions by 2030, and net zero carbon emissions in their energy use and production by 2050. However, ESG investors have problematised this pledge, pointing to the fact that the pledge does not address Scope 3 emissions caused by the use of the fuels the companies produce, which account for 85% of total emissions. 
  • ESG has rapidly grown in the Middle East before COP28. PwC reported that nearly two-thirds of organisations in the region have adopted an ESG strategy in the last year.
  • Ultimately, fossil fuels remain the primary focus. Whilst most recognise the need to drastically reduce fossil fuel use, the main producers are still intent on increased production. Finding solutions that work for all stakeholders in the value chain is the next big challenge for ESG. 

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