A successful COP? Depends on your starting point

COP28 concluded in early December. Was any tangible progress made this time? Stephanie Maier, Chief Sustainability Officer at GAM Investments, looks at what came out of it and what the implications are for the energy transition, biodiversity and the future.

20 December 2023

The stakes were higher than ever at the United Nations Conference of the Parties (COP)28, as they are every year insufficient progress is made. Expectations coming out of COP27 and going into COP28 were relatively low– not least because of the strong oil and gas interests of the host nation, COP28 President and early reports that the UAE planned to use its role as an opportunity to discuss further oil and gas deals.

If we measure the starting point from here, then COP28 delivered beyond expectations. But the reality of the first Global Stocktake clearly highlighted how far we need to go. COP president Dr Sultan al-Jaber committed in his opening plenary remarks to delivery, ambition and urgency. Here we look at key announcements from COP28, but the real measure of success will be seen in the concrete actions in the months and years to come.

Fuelling the transition

The final day witnessed a historic agreement and delivered a hard fought reference to “transitioning away from fossil fuels in energy systems… accelerating action in this critical decade, so as to achieve net zero by 2050 in keeping with the science.” The first such reference, beyond coal, to the need to radically shift our dependency. Importantly, the agreement called for transformation “in a just, orderly and equitable manner” to ensure the transition is fair for developing nations who continue to bear the brunt of the damage. But, as with previous COPs, the practical details, and the issue of financing, only inched forward.

To transform global energy systems, leaders also agreed on a commitment to triple renewable energy, and additional countries committed to phase out coal, with the US, Czech Republic and Morocco joining the now 60 nations participating in the Powering Past Coal Alliance. It was clear that nuclear energy, which is supported by both the IEA and IPCC, is set to play a larger role in decarbonising the economy. More than 20 countries, including the US, UK, Sweden, France, and Japan launched the Declaration to Triple Nuclear Energy during COP28, aiming to achieve this by 2050.

Agreements were also made to accelerate and substantially reduce non-carbon-dioxide emissions globally, including methane emissions by 2030 – with around 50 oil and natural gas producers along with 29 other national oil companies having signed an agreement to “zero-out” upstream methane emissions and to end routine flaring (a major source of greenhouse gas emissions) by 2030.

These announcements present a continued positive trajectory for the low carbon energy transition, with indications of continued investment to realise these goals and stronger support from governments to achieve them.

Nature climbs the climate agenda

Acknowledging the strong interdependency between nature loss and climate change, COP28 showcased a heightened focus on the natural world. Critical challenges relating to agriculture and health were addressed through well supported declarations, including the COP28 UAE Declaration on Sustainable Agriculture, Resilient Food Systems, and Climate Action signed by 134 country leaders accounting for approximately 70% of food production and 123 countries signed the Declaration on Climate and Health on the inaugural ‘Health Day’, endorsing the need for governments to protect communities and prepare healthcare systems to respond to increasing climate-related health impacts.

This year was the first climate COP following the landmark Kunming-Montreal Global Biodiversity Framework, which included an agreement to preserve 30% of the planet for nature by 2030, restore 30% of the planet’s degraded ecosystems and reform USD 500 billion on environmentally damaging subsidies.

The importance of holistically addressing climate change, nature and biodiversity loss and land degradation was underscored with the presidencies of biodiversity COP15 and climate COP28 releasing a Joint Statement on Climate, Nature and People. Under the agreement, governments are required to consider the natural world in their Nationally Determined Contributions (NDCs), as well as scale finance and investments for climate and nature. This recognition marks a crucial step in addressing the interconnected challenges.

Financing a sustainable future

Investment is the lynchpin for a climate-resilient and nature-positive economy. Developed countries pledged critical support to low-income and vulnerable nations through the COP28 UAE Declaration of Leaders on a Global Climate Finance Framework, aiming to mobilise USD 100 billion collectively by 2025. An operationalised loss and damage fund, a significant achievement announced on Day 1 of COP28, with nearly USD 800 million pledged, is a major step forward, though still a far cry from the USD 400 billion required annually for irreversible damages. Adaptation finance also remains far from the USD 194–366 billion per year financing gap identified by the United Nations Environment Programme (UNEP).

For investors, the language on fossil fuels sends a strong signal that policymakers are now recognising the need to transition to lower carbon energy sources and the prominence of nature and adaptation emphasises the need to look at climate risk and impacts more broadly in portfolios.

While we wait on next year’s NDCs, all eyes are on the present for investors – finance is needed now, and implementation and deployment at speed is non-negotiable.

As we recognise some significant achievements and more granular commitments at COP28, global agreements such as those highlighted, are words on the page, which now need to be translated into action in the real world by policymakers, investors and the companies they invest in.