After tense extended negotiations, specific reference to fossil fuels was included in the COP28 text for the first time, marking a historic moment in Dubai. This signals global agreement on a peak in fossil fuel use and the need to transition to new energy sources.
Undoubtedly, a lack of strong language poses a risk to progress, falling short of the ‘phase-out’ we called for ahead of the conference, but this specific reference to fossil fuels does set a new precedent that national governments now need to build on and implement.
The text also highlighted unanimous agreement on the need to unlock the trillions in investment required for a carbon-neutral economy. Though the ‘how’ remains uncertain.
What investors need to see
During official dialogues, IIGCC members outlined what they need to see from countries implementing climate policies. This included stronger signals and more detail in nationally determined contributions, carbon pricing, clearer sectoral pathways and reform of the multilateral development bank model.
Now, the challenge is for the public and private sector to work together to accelerate progress.
In the text itself, investors will be encouraged to see recognition of the importance of an enabling policy framework for climate finance, something which we have long called for. It also referenced climate-related financial risks, encouraging party and non-party stakeholders alike to better understand and assess those risks to improve capital allocation and emphasising the specific role of institutional investors.
Ahead of the conference, I wrote to the President to express IIGCC’s support for ambitious COP28 outcomes including phasing out fossil fuels and speeding up global decarbonisation efforts. While the final language does not go that far, the Presidency delivered against its ambitions to include pledges in the text to triple renewable capacity and double energy efficiency by 2030 - two significant achievements aligned with the International Energy Agency’s (IEA) five pillars for COP28.
Now, the challenge is for the public and private sector to work together to accelerate progress. The IEA warned that even with these achievements, together with the near-zero methane emissions pledged by fossil fuel producers, the reduction in energy-related emissions will represent just 30% of what is needed by 2030 to be compatible with 1.5°C.
Alongside the headline debate, adaptation and resilience were recurring themes in the negotiations as well as across events, panels and roundtables. The international nature of COP includes representatives from all corners of the world, including those already impacted by climate change, and their voice highlights the need for capital to be deployed at much greater speed and scale to support adaptation to the physical impacts of climate change.
We coordinated a call for collaboration to governments on mobilising capital, co-signed by Switzerland, Austria, Guatemala, Colombia and Chile, together with the UN Climate Change High Level Champions and other non-state actors.
The UNFCCC Sharm El Sheikh Adaptation Agenda, which IIGCC has supported, warns policymakers of the large and widening adaptation finance gap, but the official text from COP28 on the Global Goal on Adaptation does not yet provide steps on how to scale up capital nor does it fully acknowledge the outsized role private capital must play.
To demonstrate commitment to addressing this challenge, we coordinated a call for collaboration to governments on mobilising capital, co-signed by Switzerland, Austria, Guatemala, Colombia and Chile, together with the UN Climate Change High Level Champions and other non-state actors.
Our work leading the second stage of the Physical Climate Risk Assessment Methodology and developing a climate resilience investment framework aims to build knowledge and help address this gap in the interim.
Financing the transition
Although financial flows remain stubbornly below where they need to be to align with the goals of the Paris Agreement, investors also reiterated their willingness to support the energy transition, recognising the nuances of doing so in emerging markets and developing economies (EMDEs).
One example of this was a new collaboration between the US and Nordic countries, which aims to mobilise private capital in climate-related investments in EMDEs. The Investment Mobilisation Collaboration Agreement calls for public-private partnerships that will catalyse private capital and is supported by asset owners in Sweden, Denmark and Finland, some of whom are IIGCC members.
The $30 billion Alterra Fund announced by the Presidency in the opening days of the conference will also be managed in part by several asset managers, with ambitious plans to scale over time. The fund aims to multiply private capital and reduce barriers to investment within EMDEs, focused on actionable investments.
Alongside this, investors continue to support the implementation of Just Energy Transition Partnerships to help fast-developing markets like South Africa and Indonesia move away from coal without sacrificing growth.
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