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What to look for at COP28

November 27, 2023

Global government representatives, climate activists and business leaders will meet at COP28 Nov 30 through Dec 12. Read on to find out what ESG topics we anticipate will be front and centre at the event.

What is COP28, and why is it important?

Global government representatives, climate activists and business leaders will meet later this month at the United Nations’ 28th annual Conference of the Parties, also known as COP28. There they will take stock of progress in the fight to reduce the impacts of climate change and will negotiate further action.

Every inhabited continent in 2023 experienced extreme weather events driven or exacerbated by climate change. Flooding in Libya took the lives of an estimated 4,000 people and displaced another 40,000.1 The world’s hottest July on record2 brought deadly heatwaves to parts of North America, Southern Europe and China.3 Wildfires burned more than 45 million acres in Canada alone.4
These events and others underscore the threat of climate change and the urgency of efforts to limit global warming to 1.5 degrees Celsius above preindustrial temperatures. Such efforts got a boost in mid-November, when the United States and China agreed to work toward tripling global renewable energy capacity by 2030, using the increase to displace fossil fuels and setting reduction targets for all greenhouse gases, not just carbon dioxide. Yet headwinds remain, including COP countries’ ongoing incentivization of fossil fuel extraction and the rollback of some energy transition policies.5 The discussions at COP28 will demonstrate whether participants’ commitment to addressing climate change and vision for the path forward match the urgency of the moment.
This conference comes at a key moment for Canada, as our country looks to accelerate the decarbonization of its industrial- and materials-heavy economy. Along with other investors, we will be watching closely to see how similar developed countries are approaching the challenge and the implications for policy in Canada.

Many heads of government who previously attended the annual conference will be sitting out COP28, including Canadian Prime Minister Justin Trudeau. While their absence may lower the profile of this year’s meeting, it also may afford participants greater opportunity to hash out solutions without the distraction of photo ops and political performances.

COP28 will cover a lot of ground in two weeks. Here are the topics we’re keeping an eye on:

The first Global Stocktake

COP28 represents an opportunity to hold countries accountable for their progress (or lack of progress) addressing the climate crisis. The conference will host a discussion of the findings of the first-ever Global Stocktake—a process established by the 2015 Paris Agreement to evaluate the world’s climate-related actions, including efforts to cut greenhouse gas emissions, improve resilience and secure financing. The Global Stocktake occurs every five years; the first installation began in 2022 and will conclude with a discussion of its findings at COP28. For the first time, countries participating in COP will be on display for what they have and haven’t done to honour their commitments.

A technical report on the Stocktake released in September revealed that progress on mitigation and adaptation has fallen far short of what’s needed. In an understated tone, the report calls for drastic action: redoubling efforts to cut emissions and transition to renewables, curbing deforestation, cutting subsidies to fossil fuels, and dramatically increasing financing for developing countries. The report acknowledges that meeting developing countries’ financing needs—which the UN estimates at $5.9 trillion by 20306—will require the participation of the private sector.
We’ll be watching to see how countries respond to the results of the Global Stocktake and the potential implications for policy and investment. A recent audit of Canada’s emissions reduction efforts found that they will not meet Canada’s 2030 target. Minister of Environment Steven Guilbeault acknowledged the results and promised that the government would take new measures in short order.7 We expect to hear several policy announcements that will clarify how Canada will achieve its goals moving forward.

Progress toward a new collective quantified goal (NCQG)

In 2009, developed nations committed to financing developing nations’ climate efforts with $100 billion per year by 2020. The Paris Agreement in 2015 reaffirmed this commitment and called for a new collective quantified goal (NCQG) on climate finance, with $100 billion as the floor, to be agreed on before 2025.
The original $100 billion goal was chosen arbitrarily, as the result of a political process, and it has never been met. The new target is expected to be based on developing countries’ actual financing needs, which total in the trillions.8

While we don’t expect COP countries to agree on the NCQG until next year, we would like to see participants use this year’s conference to begin the difficult process of identifying why they failed to hit the previous goal. And we hope to see them forge agreements, structures and incentives that provide a realistic path to meeting a much more ambitious and reality-based target.

Plans and policies for decarbonization

UN states have long acknowledged that decarbonization is essential to combat climate change. The world has made great strides developing and implementing low- and no-carbon energy sources over the past decade, to the point that the International Energy Agency (IEA) recently projected that global demand for fossil fuels would peak by 2030.9
Yet the energy sector has continued to further invest in fossil fuels. Both Exxon and Chevron recently announced major acquisitions of exploration and production companies (Pioneer Natural Resources and Hess, respectively), suggesting they see a bright future in oil and gas.10 11 Meanwhile, many countries continue to offer subsidies and other incentives that support fossil fuel production, undermining their own energy transition goals. Progress reworking such policies has slowed: For example, UK Prime Minister Rishi Sunak made headlines in September when he extended the deadline for phasing out new gasoline- and diesel-powered cars and gas boilers.12

For COP28 to accelerate decarbonization, its participants need to reckon with the economic forces and vested interests at odds with the transition to a lower-carbon economy. The conference’s location in an OPEC member country puts this issue front and center. Energy-sector leaders are expected to attend; we look forward to hearing them explain what they need from governments to move forward on decarbonization. We also are keen to see the Canadian government put forward more credible decarbonization policies.

Just transition

The topic of a just transition is on the formal agenda for COP28—a recognition that any policy changes will have implications for vulnerable communities, particularly Indigenous people and workers in energy and other sectors traditionally reliant on fossil fuels. Such considerations are particularly relevant to Canada, which has relatively large representation from these groups.

We believe communities that are vulnerable to changes brought about by decarbonization must have a seat at the table and benefit alongside other parties from amelioration efforts. Canada has made some progress in this area. The federal government’s Sustainable Jobs Plan lays out a framework for transparency and proactive collaboration between public, private and civil society as well as Indigenous communities to mitigate adverse impacts and help ensure equitable distribution of economic benefits generated by the energy transition. We will be watching to see the degree of commitment other countries demonstrate towards a just transition and what form policies supporting it will take.

Loose ends from COP27

Participants at the last Conference of the Parties left a number of key matters unresolved. They included:

Loss and damage fund specifics. One of the key developments at COP27 was an agreement to establish a fund to help developing nations cope with losses and damages caused by climate change. The discussion since then has focused on where the funds will come from and how developing nations will gain access to them. Talks grew increasingly contentious this year, as countries disagreed vehemently about details such as the role of the World Bank in administering the fund, whether contributions would be voluntary and developing countries’ representation on the fund’s board. Intense negotiations in Abu Dhabi in early November led to agreement on a blueprint that lays out basic goals and parameters but leaves key details unresolved. The blueprint requires formal adoption at COP28.13
Canada has come out in full support of the loss and damage fund. Minister Guilbeault actively pushed for its inclusion in the COP27 agenda and has consulted on the blueprint in anticipation of COP28.14

Provisions for adaptation. Countries in 2017 committed to providing funding to help developing countries adapt to the effects of climate change. At COP27, they agreed to double the funding promised by 2025. Yet key details remain cloudy. Countries have yet to set measurable targets for global adaptation, and although there is widespread consensus that global finance will need to play a key role in funding adaptation efforts, the specifics remain undefined.

Adaptation efforts have the potential to produce a wide range of compelling investment opportunities. Working together, investors and governments can build solutions that unleash global private capital to accelerate and scale essential adaptation projects. We will be watching to see whether leaders in the public and private sectors begin to formalize structures that make such investment possible.

We expect this year’s conference in Dubai to provide a sobering but necessary exercise in evaluation and accountability. In addition to the results of the Global Stocktake, participants will be digesting emerging guidance from an independent consultation commissioned by the United Nations Framework Convention on Climate Change (UNFCCC). The consultation is expected to release guideposts at or around COP28 that establish much-needed direction and expectations for net-zero claims.15

We are looking for participants to rise to the moment: to recommit to climate change mitigation, adaption and justice, and to start making the hard choices necessary for rapid progress in each sphere. We hope that COP28 will prove to be a turning point in the global response to climate change—a moment of clarity in which COP countries back up their ambitious goals with equally ambitious actions.

Footnotes

1 https://apnews.com/article/libya-derna-dams-collapse-survivors-floods-chaos-1a2e0c06e61360580ab1277fdf3dae76

2 https://www.washingtonpost.com/weather/2023/08/02/july-hottest-month-global-temperatures/

3 https://www.worldweatherattribution.org/extreme-heat-in-north-america-europe-and-china-in-july-2023-made-much-more-likely-by-climate-change/

4 https://www.washingtonpost.com/weather/2023/10/18/canada-historic-2023-wildfire-season-end/

5 https://www.theguardian.com/environment/2023/sep/20/rishi-sunak-confirms-rollback-of-key-green-targets

6 https://unfccc.int/sites/default/files/resource/54307_2%20-%20UNFCCC%20First%20NDR%20technical%20report%20-%20web%20%28004%29.pdf

7 https://www.reuters.com/sustainability/canadas-emissions-reductions-unlikely-meet-2030-target-auditor-general-says-2023-11-07/

8 https://unfccc.int/sites/default/files/resource/54307_2%20-%20UNFCCC%20First%20NDR%20technical%20report%20-%20web%20%28004%29.pdf

9 https://www.iea.org/reports/world-energy-outlook-2023/executive-summary

10 https://corporate.exxonmobil.com/news/news-releases/2023/1011_exxonmobil-announces-merger-with-pioneer-natural-resources-in-an-all-stock-transaction

11 https://www.chevron.com/newsroom/2023/q4/chevron-announces-agreement-to-acquire-hess

12 https://www.theguardian.com/environment/2023/sep/20/rishi-sunak-confirms-rollback-of-key-green-targets

13 https://www.theguardian.com/environment/2023/nov/05/countries-agree-key-measures-to-fund-most-vulnerable-to-climate-breakdown

14 https://www.canada.ca/en/environment-climate-change/news/2023/09/minister-guilbeault-supports-advancing-climate-ambition-in-new-york-city.html

15 https://unfccc.int/climate-action/tracking-and-recognition

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