On the way to COP28 - the journey to Net Zero continues

The COP28 conference is a global climate change summit and this year it takes place from 30 November to 12 December 2023 in Expo City Dubai, United Arab Emirates (UAE). It will bring together the Parties to the UNFCCC to advance the climate talks and drive action toward preserving our planet. The summit will focus on climate change and solutions, with the Middle East leading the climate conversations honing in on delivering a transformational COP for both the private and public sectors, to tackle the climate crises. A fundamental shift is needed to put the world on a more sustainable path to Net Zero.

Key outcomes and successes following COP27

COP27 discussions went beyond the focus of previous COPs on mitigating greenhouse gas (GHG) emissions. They took account of the need for adaptation to climate change and announced measures to assist developing countries that are particularly vulnerable to the adverse impacts of climate change to respond to loss and damage. While the substantive agreements at COP27 were limited (with no further commitment to the fossil-fuel phase-down announced at COP26 and few changes to nationally determined contributions (NDCs)), a key theme to the discussions was the significant role of the private sector in accelerating decarbonisation through cross-business collaboration and the need for both the private and public sectors to deploy capital at scale and invest in new green technologies including carbon capture and sustainable agriculture. There were several announcements that were significant for the private sector. These included:

The publication the Integrity Matters: Net Zero Commitments by Businesses, Financial Institutions, Cities and Regions report by the UN High-Level Expert Group on the Net-Zero Emissions Commitments of Non-State Entities (HLEG). This highlighted the need for companies to set credible net-zero-aligned Transition Plans (TPs) and set out a roadmap and recommendations for business, cities, regions and financial institutions to achieve their net zero commitments and avoid greenwashing.

• The publication of the Net Zero Playbook for Consumer Industries, which provides practical solutions for consumer goods and retail companies to address emissions challenges.
• The extension of the Breakthrough Agenda, which is a package of collaborative actions to be delivered by COP28 that will speed up the decarbonisation of the power, road transport, steel, hydrogen and agriculture sectors, to include the buildings and cement sectors.
• The publication of consultation drafts on the Transition Plan Taskforce's Disclosure Framework (more on 'The importance of Transition Plans' below).
• The launch of the Food & Agriculture for Sustainable Transformation (FAST) initiative to scale up private investment in sustainable agriculture systems as well as publication of a roadmap by leading commodity traders on achieving deforestation goals.

Since COP27, significant successes that will impact the private sector include the coalescing of global sustainability reporting standards with the publication of the International Sustainability Standards Board's (ISSB's) first Sustainability Disclosure Standards (SDSs). Another relevant development is the ambitious programme of work that has been agreed to operationalise the Article 6 bilateral trading and carbon credit markets.

Implications of COP28 for the private sector

There is a wide-ranging agenda for the 13 days of COP28. Each day is devoted to a specific theme although the cross-cutting themes of technology and innovation, finance, frontline communities and inclusion are woven throughout the entire programme. Themes that are particularly relevant to the private sector include:

• Finance and Trade on Day 5, which will consider the systemic changes needed to finance and trade systems to deliver the significant deployment of capital required to rapidly decarbonise;
• Energy, industry and just transition on Day 6, which will focus on the levers and pathways to achieve a rapid decarbonisation while achieving a just transition. As noted at COP27, Africa will be key to the energy transition;
• Urbanisation, built environment and transport on Day 7, which will focus on transitioning to a low carbon and climate-resilient built environment with more circular waste systems and more people and planet-friendly transport;
• Nature, land use and oceans on Day 10, which will focus on how climate and nature co-benefits can be delivered through financing mechanisms and other packages that will help sustainably manage and conserve natural carbon sinks and biodiversity hotspots; and
• Food, Agriculture and Water on Day 11, which will focus on financing regenerative agriculture, infrastructure for urban resilience and integrating the governance and management of food and water systems.

2023 has seen extreme weather events of increasing ferocity, from wildfires in Canada that affected air quality globally, to flooding throughout Central Europe and deadly temperatures in Asia that affected a third of the world's population. The need for the global transition to a decarbonised economy is underlined by each new event.

COP28 will mark the conclusion of the first global stocktake (GST) of progress against the Paris Agreement goals and will highlight the dangerous gap between the action taken so far and what is needed to achieve the 1.5 degrees goal. The UN has already called for a "dramatic course correction" and it is hoped that the GST will inform the next round updates to NDCs due from countries in 2025.

The timeframe for the global transition is exceptionally short, so mobilising finance to fund the technology shifts needed in the energy, built environment, agriculture and transport sectors will be a key and urgent theme of COP28. Against the backdrop of the extreme weather witnessed this year, and agreeing a global goal on adaptation, the need to transform energy and food systems is also likely to be a priority topic.

What to expect from COP28 and for the private sector to achieve their climate goals

Tom Cummins

"One of the headline announcements from COP27 was the decision to establish a "loss and damage fund" - a source of financial assistance to those most affected by the impacts of climate change. COP28 will see the challenge of seeking to deliver on this decision, and find agreement on how to practically implement the funding mechanism. More broadly, discussions around the global stocktake are likely to lead headlines from COP28. The stocktake is a mechanism established by the Paris Agreement, with the aim of assessing progress towards the agreement's objectives, and informing steps to be taken onward. The need for greater and faster progress to be made, will put pressure on COP participants, and businesses around the world, to announce more ambitious steps to decarbonise sectors and industries."

Lorraine Johnston

"Significant progress has been made in the international community with respect to global ESG reporting standards since COP27. The focus for COP28 will be to continue the momentum on ESG reporting and iron out some of the wrinkles that firms are facing and to ensure that the data is being used in the way that is anticipated ie to actually reorientate the capital flows towards sustainable investments." 

Elena Lambros

"The APAC region continues to be exposed to extreme weather events impacting our ability to provide safe and sustainable communities with stable economies. While this risk remains high, our region is also very well placed to be a leader in the energy transition, delivering solutions in a manner that get the balance right between emissions reductions, respecting the traditional owners and communities who have a strong affinity with the land, managing biodiversity and nature risk and incorporating circular economy processes thinking when dealing with end of life assets."

Becky Clissmann

The broad agenda for COP28, sends a clear message that the transition to net zero is the responsibility of all actors. The corporate world has stepped up to the plate in recent years having set net zero targets and, in some cases, published transition plans. But the gap between climate ambition and the reality of increasing global emissions makes it clear that we must all do more to avoid the worst effects of the climate crisis, which we have seen play out in so many severe weather events this year. Businesses and financial institutions have a critical role to play in strengthening climate action by nations so that we can course correct and get the world on track to meet the goals of the Paris Agreement.

Mark Barges

"The Ukraine war combined with a push by OPEC to keep oil prices high together with record temperatures this year, have super-charged the European energy transition efforts. However for COP 28 to be even a moderate success, the rich world will need to firm up its funding of the global south's own energy transition and adaptation needs."

The importance of Transition Plans

One of the most significant developments during 2023 that will affect how companies assess, manage and report on their climate-related risks and opportunities is the development of Transition Plans (TPs). The UK government announced it had set up the Transition Plan Taskforce (TPT) at COP26 in Glasgow. The TPT published a consultation draft of its Disclosure Framework and Implementation Guidance to coincide with COP27. It has now published the final versions of these documents together with a suite of documents including a comparison with other reporting standards. It has also published sector-focused guidance on 40 sectors for consultation.

A TP should set out how a business intends to contribute to and prepare for a rapid global transition to a decarbonised and climate resilient economy. TPs will have a big impact on the global transition as they will allow stakeholders (including shareholders, financing organisations, regulators and the wider public) to assess the climate risks that an organisation could be subject to. This information will help stakeholders make investment and governance decisions as well as contribute more widely to an understanding of the pace and quality of the global transition.

The TPT considers that TPs form a critical component of a company's business strategy and must not be viewed by businesses as merely a compliance exercise. As the TPT has worked with several organisations around the world to develop its Framework it is likely that the Framework will also be used in, and adopted by, other jurisdictions. If companies follow the TPT's advice, use of the Framework will result in a giant leap towards understanding the climate-related risks and opportunities that the corporate world is subject to and thereby help to pave the path to the global transition

Sources:

Climate change: UN calls for radical changes to stem warming - BBC News

What is COP28 and why is it important? | Chatham House – International Affairs Think Tank