The 28th Conference of the Parties (COP28) to the United Nations Framework Convention on Climate Change (UNFCCC) is scheduled to take place in the United Arab Emirates from 30 November to 12 December 2023.
Previous COP events have been seen as a critical platform for nations to gather, discuss, and accelerate global climate action.
However, response to COPs are not always positive.
With over 20,000 people regularly travelling to each venue, which have ranged from Chile, South Africa and Qatar, COPs have been accused of hypocrisy, with a more recent focus on the conflicts of interest of the hosting and attending nations.
The events have attracted criticism for a lack of ambition and sense of urgency, for failing to come to any conclusion in some cases, and for making little tangible progress on climate change, and even when an element has been considered a success, for nations not driving through agreed changes.
The Power of Sustainable Finance: A key outcome for COP28
The financial services industry has the ability to play a pivotal role in driving the transition to a low-carbon economy.
COP28 is expected to focus on mobilising finance from both public and private sources to support climate mitigation and adaptation efforts. Key areas of discussion will include:
- Scaling up climate finance: Developed countries have pledged to provide US$100 billion annually to support developing nations in their climate efforts. COP28 will assess progress towards this goal and explore mechanisms to enhance climate finance flows.
- Enhancing climate risk disclosure: COP28 is expected to discuss measures to strengthen climate risk disclosure requirements for financial institutions and corporations. This will help investors make informed decisions and allocate capital towards sustainable investments.
- Promoting green finance instruments: COP28 will explore ways to promote the development and adoption of green finance instruments, such as the Guernsey Green Fund and sustainable loans. These instruments can hurry the assignment of capital towards sustainable projects and businesses.
The Global Energy Transition
The global energy transition is essential for achieving the goals of the Paris Agreement which was the first ever universal, legally binding global climate change agreement, and seen as a notable success among previous COPs.
The agreement aims to limit any global temperature rise to well below two degrees Celsius, targeting the much heard of 1.5 degrees Celsius. To reach the Paris Agreement’s target of 1.5°C by 2030 requires annual global emissions to reduce by 7.6 percent every year from 2020-2030. COP28 will address the following aspects of the energy transition:
- Accelerating renewable energy deployment: COP28 is expected to emphasise the need to rapidly scale up renewable energy deployment to reduce reliance on fossil fuels. This will involve discussions on policies, incentives, and investments to support renewable energy growth.
- Enhancing energy efficiency: Improving energy efficiency across sectors is crucial for reducing greenhouse gas emissions. COP28 will discuss strategies to promote energy-efficient technologies, buildings, and appliances.
- Addressing the just transition: The transition to a low-carbon economy must be equitable and leave no one behind. COP28 will explore ways to support vulnerable communities and ensure a just transition for workers impacted by the shift away from fossil fuels.
To achieve the Paris Agreement targets, rapid action is vital to transform the world economy.
Over US$1 trillion in investment per annum is required (according to IPCC SR15) to transition into a low-carbon economy. This is comparable to aggregate global defence budgets (c.2% of GDP). This means major sustained change to deliver large emission cuts every year in energy, industry, infrastructure and heating.
Specific Actions for Sustainable Finance
To be seen as a success COP28 must lead to a consensus on actions that accelerate the transition to a low-carbon economy. We would expect to see:
- The key goal for COP28 will be around making the new Loss and Damage Fund operational. In past COPs this has been one of the hardest discussion points so making tangible progress on this area will be significant.
- From a sustainable finance perspective, reforming the regulatory environment so there is more harmony particularly around transition finance definitions and disclosures of climate related data.
- Agreeing on the six new concrete deliverables for the energy transition set out in the letter from the COP28 head, which include discussions on tripling renewable energy capacity and decarbonisation of transport systems.
COP28 presents a crucial opportunity for the global community to take decisive action towards achieving the goals of the Paris Agreement.
By mobilising sustainable finance for climate action, accelerating the global energy transition, and implementing specific actions, hopefully COP28 can silence the doubters and provide a more sustainable future for all.
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