COP27: Were Investor Expectations Met?

COP27 talks in Egypt have now drawn to a close. GAM Investments’ Stephanie Maier examines whether the conference billed as “implementation COP” met investors’ expectations.

05 December 2022

Tackling historic emissions

Unlike COP26, where the focus was on climate change mitigation and net zero plans, including specific pledges on methane and deforestation, “loss and damage” was the principal issue on the agenda in Sharm El-Sheikh. After days of discussions, 200 countries eventually agreed on a breakthrough fund to assist vulnerable nations currently paying the price through climate disasters. The calls from small island states for climate support began three decades ago, so the fund represents a meaningful milestone.

The finer details are yet to be agreed, including whether China should be considered a contributor or recipient, but funding for adaptation and resilience was firmly on the agenda.

Accelerating the clean energy transition in emerging economies

Closing the financing gap for the transition in emerging economies is also rising on the agenda. At the G7, taking place in parallel, the joint statement between Indonesia and the International Partner Group (comprising among others Japan, the US, EU and UK) on the Indonesia Just Energy Transition Plan committed to mobilising USD 20 billion of public and private finance to phasedown coal power plants as well as to accelerate the country’s projected power sector peak emissions by seven years. There is significant potential for the ‘Just Transition Energy Partnership’ model of ‘blended finance’ to help de-risk investments and unlock private capital in less developed economies. Similar plans are in train for Vietnam, India and Senegal.

Investors also welcomed the focus on increasing renewables in the wider agreement – the “Sharm el-Sheikh implementation plan” – which will help pave the way for cleaner, more secure energy systems. Despite calls from India, the UK and EU for the text to include a commitment to phase down “all fossil fuels”, not just coal as referenced in the COP26 agreement, this was not agreed in the final text.

Future COPs to carry the load

Despite modest positive developments, a general sentiment of disappointment looms over COP27 as there was little progress towards curbing current and future emissions. This means that the stakes have been raised for future COP talks. We should see climate ambition summits before then to ensure COP28, due to take place in the UAE next year, delivers real progress. In the near term, the upcoming COP15 in Montreal provides an opportunity to progress the protection of biodiversity, strongly aligned with the climate goals. What is clear is that the role of investors will remain critical.

Important legal information
The information in this document is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained in this document may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information. Past performance is not a reliable indicator of future results or current or future trends. The mentioned financial instruments are provided for illustrative purposes only and shall not be considered as a direct offering, investment recommendation or investment advice. There is no guarantee that forecasts will be realised.

Stephanie Maier

Global Head of Sustainable and Impact Investment
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