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What Happened at COP27: Exploring the Key Outcomes
In November, the world’s most preeminent leaders and policymakers gathered in Sharm el-Sheikh, Egypt to take action toward achieving the world’s collective climate goals at the 27th UN Conference of the Parties on Climate Change (COP27). This year’s Conference of Parties aimed to provide clarity on a variety of topics such as climate finance, mitigation, emissions targets, industry solutions, methane, plastics, climate adaptation, and resilience with each day focused on a specific theme.
Countless initiatives were advanced or kicked off at this year’s climate conference, however, many are expressing concern at the lack of action-oriented consensus on fossil fuel emissions mitigation. Commitments needed to hold warming to less than 1.5 degrees C were largely absent, in favor of discussions that centered around paying for loss & damages, and adaptation, as well as more niche philanthropic initiatives.
Despite a lack of concrete progress or bold commitments on the part of government entities and global bodies, businesses and corporations were able to demonstrate their key role in addressing climate change at scale during the conference with new technology taking center stage. In this article, we will consolidate some relevant events and takeaways that came out of COP27.
Main Concepts & Takeaways:
“Loss & Damage” financing
- The headline accomplishment of COP27 was new funding arrangements for countries most vulnerable to climate change disasters. The unanimously approved deal calls for a committee of 24 countries to work over the next year to figure out exactly what form the loss & damage financial assistance fund should take, which countries should contribute, and where the money should go. This however is still not a guarantee on funding sources and how it will be allocated.
- How do we create markets and mechanisms that incentivize green investing? What are the challenges and opportunities that lie ahead in financing the global transition to net zero? Finance discussions and negotiations attempted to address these crucial questions with issues ranging from blended finance and de-risking of investable clean energy projects to carbon markets to technologies and adoption in developed and developing countries.
- The Bridgetown Initiative was proposed by Barbadian Prime Minister Mia Motley and her climate finance envoy, Avinash Persaud. The plan is a strong step in attempting to harness trillions in private finance to help tackle climate change by providing money for resilience and response, changing the terms for debt in countries hit with climate disasters, and leveraging private sector capital to help developing countries wean themselves off of fossil fuels. There was strong support at COP27 by representatives of the International Monetary Fund (IMF) and the World Bank for expanding their climate finance programs. Kristalina Georgieva, managing director of the IMF, suggested that countries use carbon credits to pay off sovereign debts. The IMF also heavily emphasized the need for carbon prices to reflect inflation and stated that the price must go up to at least $75/ton by 2030 for global climate goals to succeed. Given the focus on carbon markets at COP27 and the demonstration of international financial leaders’ trust in countries’ carbon credits, companies should keep a close eye on changes to carbon pricing and how this may affect business operations. Businesses that do not track or manage carbon emissions will feel the financial consequences as more regions implement globally connected carbon pricing systems able to connect with private sector investment.
Renewable energy financing
- U.S. climate envoy, John F Kerry, outlined the “Energy Transition Accelerator”, a voluntary carbon trading scheme that aims to expand the sale of carbon credits globally to help boost renewable energy implementation in developing countries. Its implementation could expand opportunities for U.S. companies to focus on clean energy as a means to offset emissions of their operations.
- Accountability for the rise of unchecked greenwashing was a notable action item at COP27. The UNs new report outlines 5 principles and 10 recommendations to help businesses, investors, cities, and regions develop and deliver net-zero targets in a way that minimizes greenwashing and elevates attention to the role of the capital markets.
Launch of the Breakthrough Agenda
- This agenda, launched by a coalition of 45 world leaders, provides a framework for countries and businesses to join up and strengthen their actions every year in key emitting sectors, through a coalition of leading public, private and public-private global initiatives. A package of 25 new collaborative actions was launched to be delivered by COP28 to speed up the decarbonization of five major sectors: power, road transport, steel, hydrogen, and agriculture.
First Movers Coalition expansion
- This coalition is a collection of global companies committing 12b to decarbonize the heavy industry and long-distance transport sectors by scaling up green technologies and cutting emissions. Launched by President Biden at COP26, it has now grown from 25 to 65 members in a year, which includes companies and governments. It has also expanded to include cement and concrete industries within its scope of influence at COP27. The U.S. inflation reduction act creates a strong backdrop and support in the U.S. tax code for investments within this coalition, whether you’re talking about clean power, carbon capture, green hydrogen, or clean manufacturing.
A focus on biodiversity
- Nature and biodiversity are becoming key sustainability issues of attention on par with the importance of climate change, particularly when it comes to businesses’ role in protecting and maintaining ecosystem health. COP27 discussions affirmed that companies are increasingly beginning to report on standards and frameworks beyond climate. For example, in 2021 the Task Force on Climate-related Financial Disclosures (TCFD) announced a new initiative called the Taskforce on Nature-related Financial Disclosures (TNFD)
Regardless of your perspective on the relevance of its impact, COP27, like all of the COPs before, will push companies and governments in specific areas they hadn’t previously intended. COP27 was another step in highlighting the crucial need for the delivery of climate action. To stay competitive and aid in advancing climate progress organizations must consider new business models of sustainability and adoption of new technologies to accelerate and adapt– all while balancing this innovation with risk, regulatory and legal shifts, and market considerations in 2023.
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