Was COP27 a cop-out?

Siobhan Archer, Sustainable Investing Specialist

With war continuing in Ukraine, consequent energy dynamics as well as a cost-of-living crisis, governments have plenty on their minds to keep them busy. The United Nations Climate Change Conference or Conference of the Parties of the UNFCCC, otherwise known as COP27, was dubbed by the media as the "implementation" COP. However, it is difficult to say, coming out of the last two weeks, despite the hordes of announcements, that progress on meeting 1.5⁰C has been successfully achieved. Whilst the twenty-seventh conference of parties was a success in bringing together over 45,000 people – from academics and activists to investor and politicians – in the words UK Prime Minister Rishi Sunak: "More must be done". We look at the wins and the disappointments of the key annual climate conference:

The wins

While expectations were low, arguably these expectations were exceeded through a number of announcements:

• The breakthrough establishment of a loss and damage fund to compensate developing countries for the impacts of climate change. This is a major step forward and was not something that was predicted before leaders arrived in Sharm El Sheikh, despite it being requested by developing countries for over 30 years. Now comes the tough part: filling the fund with money. Currently there is no agreement on how the fund will be funded and who will contribute to it.
• The inclusion of a paragraph in the conference text which acknowledged the need for structural reforms in financial markets to better serve both climate and development goals.
• Agriculture finally made it on to the agenda. Despite the key role farming plays in food security and as a proportion of global greenhouse gas emissions, responsible for nearly a third of global emissions, it has taken 27 annual climate meetings to make it onto the main stage at COP. Granting this time to farming led to some exciting announcements on lowering the emissions of food production, as well as commitments to reducing the proportion of harmful chemicals in these processes, recognising the role they have had on greater biodiversity.
• Just Transition energy partnerships. During the G20 meeting in Indonesia, which happened at the same time as the second week of COP27, members of the 20 largest nations agreed to put together $20bn to help the host country phase out their reliance on coal for energy. Coal is the most polluting of all fossil fuels but equally a resource Indonesia is rich in. By deploying this money, Indonesia will be able to build the infrastructure needed to supply their citizens will safe, affordable and clean energy. Further agreements are in the pipeline for Vietnam, India and Senegal.

The disappointments

• No progress on fossil fuel phase-outs. There was unfortunately no mention of a potential phasing out of fossil fuels. In fact, in the negotiation rooms, certain countries made rather backward arguments that oil doesn’t cause climate change, but emissions do.
• A potential loophole? Whilst the conference text initially promoted the investment and scaling up of renewable energies, the final versions referred to "low-emission" energies creating a potential for more investment into natural gas. Whilst natural gas combustion releases half the carbon dioxide of coal, its extraction and composition include methane, a gas 25 times more potent than carbon dioxide.
• The loss of hope for 1.5⁰C. Political lobbying was strongly felt at this year’s conference of parties, with some countries tried to renege on the globally agreed target of 1.5⁰C and even looking to abolish next year’s mandatory ratchet mechanism (the process whereby countries need to up their commitments to lowering emissions). A quote from last’s year COP26 President, Alok Sharma, was particularly impactful on communicating this backtracking: "I said in Glasgow that the pulse of 1.5 degrees was weak. Unfortunately, it remains on life support."

Over 500 scientists signed a letter stating that whilst 1.5⁰C is still in play, we will overshoot for at least several decades and that the impact of this cannot be understated.

Cautious optimism

Doom and gloom aside, the geopolitics are now more favourable: the surprising strength of the Democrats in the US midterms and Lula’s win in Brazil certainly offer great reasons for hope. Biden and Xi Jinping met in Bali opening the way for future bilateral talks between two of the world’s largest economies and emitters.  However, even greater of a reason for hope is the work of the private sector and investors. COP27 was a bit quieter in terms of investor representation this year, however the number of financial players committing to net zero through the Glasgow Financial Alliance for Net Zero (GFANZ) has grown from 160 in April of 2021 to 550 just last week, with more than 160 having set interim targets.

The innovation and opportunities continue to arise every day, with companies discovering new ways to sequester carbon and launching new tools to protect against the impacts of climate change. So, for those reasons and many more, we remain committed to mitigating against the impacts of climate change and hopeful for the future.

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