Last year, I reflected on investor expectations for COP27 coming at the end of an important year for sustainable investment. One year on, did any of the progress we hoped for come to fruition? What can we expect from COP28 in Dubai?
COP27 – lacklustre progress
Last year’s COP could be characterised as lacking in ambition and progress, despite the long-awaited announcement on the ‘loss and damage’ fund. In light of significant climate policy measures in 2022, notably the US Inflation Reduction Act, we hoped to see greater momentum to scale climate action and financing.
As COP28 approaches, we should remind ourselves what is at stake. We live in a world where climate change impacts are having disastrous consequences for economies and communities. At the end of the hottest year on record, investors are looking for decisive action.
COP28 – a packed agenda
The agenda in the UAE is unsurprisingly full. The global stocktake inevitably shows we are behind on progress. The question is whether this COP presidency can ultimately corral parties to communicate a joint message for strengthening action and a path forward.
There could well be the much-anticipated ‘moment for course correction’ and ramping up of ambition that the UN Climate Change Executive Secretary hopes for. In turn, this could spur greater ambition for the revised nationally determined contributions due in early 2025, along with national adaptation plans and national policy measures to support them. However, the run-up to the conference has not been plain sailing.
Critical role of financing
Sustained climate investment from both public and private sector is still necessary to meet climate goals. Bloomberg New Energy Finance estimates that between $3.1trn (£2.5trn) and $5.8trn in annual climate investments are required to reach net zero, and this need is especially acute in developing economies.
While much of this finance will come from private sources, governing bodies have a critical role to play in helping de-risk climate investment in emerging economies and spur investment. By acting first, either by building up critical infrastructure or providing incentives, private investment could be made more attractive if better risk return ratios were supported by developed economy governments. And nations have yet to fulfil a long-term ongoing promise of $100bn in annual climate investment to developing countries.
Sustainable finance therefore continues to play a key role in the transition to a net-zero economy, but the actions of policymakers at COP28 have the potential to supercharge their ability to effect change.
The energy transition
One anticipated outcome of COP28 is a commitment to triple renewables capacity globally by 2030. The recently updated IEA Net Zero by 2050 Scenario roadmap reflected upward revisions for solar energy but lower wind deployment to 2030.
The socioeconomic dimensions of the energy transition will also be in focus – how to drive a just transition addressing universal energy access and the opportunity for job growth.
New investments must unlock financial flows to support transition, mitigation and adaptation, especially as developing economies drive forwards. Indonesia, for example, is set to release plans for a $20bn energy transition plan this month, while South Africa plans to unveil an implementation plan for its $8.5bn Just Energy Transition Partnership.
The phasing out or phasing down of fossil fuels will once again be on the agenda with a strong ask from the High Ambition Coalition. Against a backdrop of a COP president that runs the state-owned Abu Dhabi National Oil Company, the question is whether this will help or hinder meaningful action from the oil and gas sector, and further progress on the methane pledge made at COP26.
Spotlight on nature and adaptation
Nature will feature more prominently with specific reference to its role in adaptation, food and agriculture, as delegates attempt to progress the agreements made as part of the Sharm-El Sheikh adaptation agenda, as well as the ambitious goals in the Kunming-Montreal Protocol.
Doubling adaptation finance by 2025 is a critical first step but we need to look at addressing a broader array of adaptation responses, including those that focus on nature-based solutions and ecosystem-based adaptation approaches. These will be critical in preserving natural life, as well as those that depend on it.
Driving future policy
The task before policymakers at COP28 looms larger than ever. It is crucial that delegates do not lose sight of the stakes. The extent to which this year’s Dubai summit delivers, or at the minimum, signals renewed commitments to ‘solutions pathways’, will drive the future policy and investment landscape.