You’ve likely observed a deluge of headlines about the announcements and deals reached (and those not reached) at COP28 in Dubai, which wrapped up last week. The final text encouragingly mentions the projection of peak global emissions between 2020-2025 and calls on parties to “transition away from fossil fuels in energy systems, in a just, orderly and equitable manner, accelerating action in this critical decade, so as to achieve net zero by 2050 in keeping with the science.” This is the strongest global agreement on a peak in fossil fuel use and the need to transition to new energy sources yet. However, the ‘how’ remains uncertain. Are the foundations strong enough to give investors confidence to finance the accelerating transition?
The outcome reinforced themes for investors such as renewables and nuclear, energy efficiency, nature-based solutions, sustainable food systems and more. All the while reducing funding of polluting fossil fuels, especially non-CO2 emissions such as methane. The text emphasised agreement on the importance of unlocking trillions in investment required for a net-zero economy.
The progress on the Loss and Damage Fund and the Global Goal on Adaptation yet again highlights the need to provide financing for developing countries to adapt to climate change and manage existing losses. How these efforts will be fully financed remains a question. The $700mn committed by richer countries to the Loss and Damage Fund in Dubai is a start, however, it is only c. 0.2% of the estimated $400bn needed. The scale-up of blended finance instruments and other innovative climate financing mechanisms is instrumental to close the financing gap. One announcement aiming to unlock billions for sustainable projects by development banks and other international financial institutions was the UAE’s $30 billion Alterra climate fund announced at the start of the conference. The aim is to drive climate capital and is a partnership between the UAE government and a number of global asset managers, with ambitious plans to scale over time. The fund aims to reduce barriers to investment within developing countries, mobilising $250 billion globally by 2030.
Whilst the text recognises the importance of an enabling policy framework for climate finance, the final wording remained vague. Investors need strong policy interventions and certainty. As policymakers grapple with the complexities of the future, the ambition is that they find private capital primed and ready to work with them.
Other themes emerging from COP included:
- Food and food systems: attention on food has been accelerating since COP26 in Glasgow and was prominent in Dubai. It was the first COP where a whole day was dedicated to the theme. Significantly the Declaration on Sustainable Agriculture, Resilient Food Systems and Climate Action puts food front and centre of global climate action, on par with fossil fuels. More than 134 countries have pledged to set up food-based targets in their Nationally Determined Contributions and National Adaptation Plans by COP30 in 2025. This is a significant and much-needed step in the race to keep 1.5°C alive while also tackling nature restoration and ending hunger and malnutrition.
- Health: COP28 also saw the first-ever health day in COP history, putting lives and livelihoods in focus. This demonstrates the efforts needed to address the impacts of climate on health. The Emirates Declaration on Climate and Health, with 123 signatories, recognises the urgency of acting on climate change for better health outcomes.
- Adaptation and resilience were also recurring themes in the negotiations.
The final agreement doesn’t conclusively determine the next phase of life on this planet but what it does is keep open the possibility that we can bend the curve on emissions towards the future we want. The outcome reinforces an enabling environment for climate action. The IEA warned that even with key energy-related commitments from COP, reduction in energy-related emissions will represent just 30% of what is needed by 2030 to be compatible with 1.5°C. Now the question is whether the will is there to implement the commitment and bring us closer to the goals of the Paris Agreement. The challenge is for the public and private sector to work together to accelerate progress.