COP 28: The good and the bad

As the dust settles on yet another COP meeting, with pronouncements having been made and targets set, what does this mean for sustainability and in particular for corporations? Unlike some recent COP meetings, there was at least something tangible agreed at the end of COP28. The final text was filled with words like “contribute to”, “calls on”, and “transition away”, rather than the hoped for “require” and “phase out”, but it was widely seen as a landmark deal, which in the words of the United Nations Framework Convention on Climate Change Secretariat signals the “beginning of the end” of the fossil fuel era. As John Scott, head of sustainability risk for the Zurich Insurance Group, told ESG Risk Review: “The biggest surprise was the final agreement, which until the last minutes was very unclear as to whether it would contain any language regarding fossil fuel phase out or phase down. The commitment to transitioning away from fossil fuels by 2050 was important. While not referencing a phase out/down of fossil fuels, there was an explicit mention of what phase out covers and that a (just and equitable) transition away from fossil fuels is required – finally acknowledging the role fossil fuels play in climate change.” The final announcement was historic, but has left many experts somewhat disappointed. For example, Prof Gulcin Ozkan, professor of finance at King’s College London, said: “While it is encouraging that there is a call for a global move away from fossil fuels for the first time, the final declaration falls short on many levels. First, it is vague with no timeframe, hence the process can potentially take a very long time. Second, there is no clear commitment regarding financial support to the less-developed countries in their transition. Finally, and surprisingly, there is no mention of a net-zero target for methane emissions which, during the first week’s discussions, looked like it was definitely going to happen.” Dr Lisa Schipper, professor of development geography at the University of Bonn, said: “The COP started with a bang when the loss and damage fund was agreed, but over the course of the meeting, the lack of funding flowing into it became a major source of disappointment. If anything, this continues to be the big weakness… Calling the COP a failure suggests that there is an alternative pathway for a global plan to address climate change, but there is no other format than the UNFCCC that gives every country in the world a seat at the table.” And Kaisa Kosonen, head of delegation, Greenpeace International, said: “This isn’t yet the decision that the world needs or deserves but there are some improvements in the call to transition away from fossil fuels. The signal that the fossil industry has been afraid of is here: ending the fossil fuel era, along with a call to massively scale up renewables and efficiency this decade, but it’s buried under many dangerous distractions and without sufficient means to achieve it in a fair and fast manner. What we need now is a final outcome on the fossil fuel phase out without all these dangerous distractions and loopholes.” Zurich’s John Scott noted that COP28 also saw an emphasis on the global commitment to sustainable energy sources through the tripling of renewables and introducing an explicit timeframe to achieve net zero (2050) that had not been previously included. He said each country was still left with flexibility on how to achieve net zero, including with carbon credits, but added that, in the words of International Energy Agency chief executive Fatih Birol: “It is good, but not good enough”. Scott said the lack of progress on climate finance, especially in developing countries and those countries in the V20 group (the most climate vulnerable countries) is concerning, but set against this is the initial financing of the loss & damage fund, supported by financial pledges of over $700m by different countries, although the voluntary nature of contributions remains. “More progress on finance commitments and operationalisation is needed, in particular for the global goal on adaptation (GGA) and the implementation of ‘loss & damage’,” said Scott. But he noted that COP28 saw an emphasis on strategies for adapting to the impacts of climate change, with a significant number of events highlighting how locally led adaptation initiatives have been developed and implemented across sectors and industries, many through public private partnerships. In addition, he said text was included to set targets on water security, biodiversity and health. “For the first time, we saw food, water, health and biodiversity explicitly included in the agenda, underlining the importance of reviewing the impact of climate change on these themes. The extreme heat/global cooling pledge was also a first,” he said. The impact on corporates Amy Barnes, head of climate and sustainability strategy, Marsh, said in a recent article: “From de-risking innovation to boosting adaptation and resilience, COP28 sent a clear message to risk managers… Overall, COP28 was a clear signal for businesses on the global direction of travel. However, this doesn’t change the fact that the world needs to focus on resilience and adapt to the changing climate.” Scott said the fact that there were over 100,000 attendees in Dubai tells you that the outcomes of COP discussions do matter for corporates. “There were many examples of implemented projects with real impact from various industries on the energy transition, adaptation and climate resilience (including collaborations with public sector and/or humanitarian agencies on climate resilience). The private sector will need clarity around government actions and a supportive regulatory framework to take effective action, and governments need input from the private sector to be able to define their own approach to transition,” he said. Scott noted that there is likely to be more scrutiny of corporates on their actions to reduce emissions across scopes 1, 2 and 3, with new tools like the Net-Zero Data Public Utility – backed by the UN, International Sustainability Standards Board and International Energy Agency. So what do the risk management and insurance sectors take from COP28? For Scott, insurance as a key partner for climate resilience solutions is gaining ground and recognition. “For the first time, the role of insurance in strengthening resilience and adaptation featured prominently and the discussions were robust and nuanced. These ranged from the discussions convened in the negotiation halls to numerous roundtables across the blue and green zones, to the demanding schedule of bilateral meetings which pointed to keen interest in this topic.” According to Scott, the GGA is an important one for insurers, with the final text of the agreement calling for a doubling in adaptation finance and plans for adaptation finance and monitoring, and more clarity on this will be required from COP 29 to be held in Baku. “The speed and scale of adaptation unquestionably needs to increase to keep risks manageable. While the importance of doubling adaptation finance was reiterated in the Global Stocktake and the GGA, adaptation finance still lags behind. Developed countries need to create a report to focus on doubling adaptation finance by the end of next year (though it was not called a roadmap),” he explained. Barnes added: “New technologies create additional demands for the insurance industry to understand and insure innovative solutions, helping to de-risk them so that investment can flow. While the insurance industry is making progress, there is more to do to support technologies and materials that can help with decarbonisation. Now that business has the signal it needs to invest, the insurance industry needs to make it easier for climate action to be the default choice for rational actors.”

COP 28: The good and the bad

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