With the highly anticipated COP 28 just around the corner, we wanted to take the time to review some key themes and share our thoughts. COP 28 represents another monumental chance to collectively change the way our economic and political systems work, in order to help us to meet our global targets around climate mitigation and adaptation.
The latest edition of the Conference of the Parties (COP) to the UN Framework Convention on Climate Change (UNFCCC) kicks off on 30th November and will take place in the United Arab Emirates, during which time it is hoped that global leaders can collaborate to assess climate strategies, agree on and define goals, and establish next steps. We will be following the negotiations closely, considering the implications for our clients and the financial sector more widely.
Time for Action
There is a rising consensus that action is key during the upcoming COP, with previous conferences facing criticism for failing to recognise the scale of the climate crisis, and for a lack of commitment shown in working towards mutually agreed targets. A joint statement from EU Climate Commissioner Wopke Hoekstra and COP28 President Sultan Al Jaber stated that COP28 “must accelerate practical action on mitigation, adaptation loss and damage and climate finance and build a fully inclusive COP28 that leaves no one behind”.
Climate Finance is one of the areas set to be high on the agenda at COP28. Climate finance refers to all investment and financing that is assigned to addressing climate issues, covering all funds that contribute to mitigation and adaptation. Climate finance targets were set during COP15 in 2009, when developed nations agreed on a goal to mobilise $100bn per year for climate action in developing countries. The target was supposed to be delivered by 2020 and was extended to 2025 at COP21, but as we rapidly approach 2024 it has still not been met.
As well as the $100bn target, the long-awaited Loss and Damage Fund will be an unavoidable item on the agenda during COP28, after the future of the fund has been endangered amidst a breakdown in talks.
Article 9 of the Paris Agreement stipulates that “Developed country Parties shall provide financial resources to assist developing country Parties with respect to both mitigation and adaptation in continuation of their existing obligations under the Convention”.
In response to years of pressure from developing countries, arrangements were put in place during COP27 negotiations to create the fund aimed at supporting the most vulnerable communities around the world. However, disagreements over governance, who contributes what, and where and how funds should be allocated, have put the brakes on discussions.
COP28 represents a crucial chance to rectify this breakdown, and to build better relationships between the developed and developing nations. On the 13th November, the EU Commission declared that a substantial contribution will be made by the Union to the Loss and Damage Fund, raising hopes that COP28 will represent genuine action rather than purely rhetoric.
For effective, material progress in climate finance following COP28, it is also important that relevant global stakeholders commit to setting boundaries for what nations can include under the title of climate finance, and what they cannot. An array of establishments and projects have been included by nations as ‘climate finance’, despite having little connection to broad climate goals.
A study by the Center for Global Development and the Breakthrough Institute found that hundreds of climate projects listed by the World Bank had no discernable link to climate adaptation or mitigation, and included a broad array of projects across Healthcare, Education, Infrastructure Development and more. The lack of clarity over what is included in climate finance creates greater wiggle room for unproductive activities such as Greenwashing, misrepresenting activities to make them appear inline with climate objectives and obscuring negative environmental impacts. COP28 gives stakeholders the chance to decide in clear terms what defines genuine climate impact in the private sector, simplifying the field for ESG-conscious investors.
The results of the first Global Stocktake may be the catalyst that nations need to get serious on climate change. The results should allow political and corporate stakeholders to assess where collective progress has been made towards goals outlined in the 2015 Paris Agreement, enhancing possibilities for identifying gaps and room for improvement. The stakes are particularly high, with many believing this to be the COP that can make or break our efforts at achieving 1.5⁰C globally.
Implications for ESG
The lead up to COP28 is the perfect time to reflect on your organisational strategies around climate action. With countries around the world allocating budgets for climate finance and huge potential for public-private collaboration on climate projects, now is the time to shine for positive climate impact from the private sector. ESG-conscious investors will be paying particularly close attention to the environmental impact of entities at this time. Get in touch to see how we can help you on your ESG journey, so your organisation can remain competitive and environmentally-conscious.