Published: December 15, 2023
While language in the first-ever global stocktake agreed at COP28 was not as strong as some negotiators pushed for, it is the first time a conference of the parties has resulted in a formal agreement among all Paris Agreement signatories to take action on fossil fuels.
The stocktake estimates that about $4.3 trillion per year needs to be invested in clean energy until 2030.
Finance, capacity-building and technology are critical to enabling climate action. This includes scaling existing technologies and developing new ones.
Nature was on the agenda in a much bigger way at this climate gathering than in the past as understanding grows about the links between the climate and nature crises.
The UN’s annual climate change conference known as COP28 just ended in Dubai, United Arab Emirates. Regarded as the most important climate event of the year, the gathering brought together more than 80,000 people, including world leaders, civil society, Indigenous Peoples, youth, philanthropy, international organizations and the private sector. In 2023, there was record turnout from the business community, including a delegation from S&P Global.
Over the course of COP28, S&P Global hosted a series of in-person events, participated in many panel discussions and meetings, and conducted interviews for the ESG Insider podcast. The conversations at COP have implications beyond just the two weeks this event takes place each year because they provide insight into the direction of travel for global conversations about sustainability.
Below, we outline four key takeaways from our conversations at COP28.
What was agreed: COP28 was notable because it brought the first-ever global stocktake — a process for countries and stakeholders to assess progress toward meeting the goals of the 2015 Paris Agreement on climate change. Delegates ultimately agreed on stocktake text after days of heated debate, in particular over whether the text would include an explicit “phaseout” of fossil fuels.
The stocktake outcome includes language about “transitioning away” from fossil fuels and working “toward the phasedown” of unabated coal. While this was not as strong as some negotiators pushed for, it is the first time a COP has resulted in a formal agreement among all Paris Agreement signatories to take action on fossil fuels.
What we heard: Frustration that the incremental pace of change doesn’t meet the urgency of the climate crisis, mixed with huge energy and optimism.
On the ground, there was a sense that stakeholders are beginning to implement plans and take action to advance the energy transition. An informal audience poll during S&P Global’s Dec. 3 event “Advancing the Transition” in Dubai asked: “Who is optimistic that this COP gathering is going to result in meaningful progress toward the energy transition?” Almost everyone in the room of a few hundred people raised their hand.
Key quote: “We’re past the point where we’re all making these big bold goals and announcements. Now it’s about: what are the building blocks and the steps that we can take toward making progress?” —Kristen Siemen, General Motors Chief Sustainability Officer, speaking to the ESG Insider podcast.
What was agreed: The stocktake includes sections on mitigation, adaptation, and loss and damage. It recognizes the need for deep, rapid and sustained reductions in greenhouse gas emissions and calls on countries to contribute to several different mitigation efforts (see the chart below). COP’s updated global goal for adaptation, which is part of the Paris agreement, calls for Parties to update their assessments of climate risks and exposure by 2030 to inform national adaptation plans and ask them to have made progress on their adaptation plans by 2030.
What we heard: Widespread recognition about the physical risks that climate change poses and the costs to companies and countries absent adaptation; we quantify some of these costs in new research published in the COP28 Special Edition of the S&P Global Sustainability Quarterly.
There was also wide recognition of the staggering costs of blunting the damage caused by climate change — in particular for developing countries. The stocktake highlights that the adaptation finance needs of developing countries are estimated between $215 billion and $387 billion annually up until 2030. About $4.3 trillion per year needs to be invested in clean energy until 2030, and that number rises to $5 trillion per year thereafter to reach net-zero emissions by 2050.
We heard repeatedly at COP28 that the public and private sector will play a pivotal role in addressing the massive climate financing gap. For example, S&P Global Commodity Insights data shows that the US Inflation Reduction Act, a comprehensive energy and climate law passed in 2022, has already prompted more than $267 billion in new investments as well as another $400 billion in announced commitments from the private sector.
Key quote: "There is a huge pool of funding that's waiting from the private sector, and it's a function of trying to figure out how we can help them overcome the hurdles." —Hong Paterson, CFO and COO of the Green Climate Fund (GCF), speaking to the ESG Insider podcast.
What was agreed: The stocktake emphasizes that finance, capacity-building and technology are critical to enabling climate action. The text also urges cooperative action between governments and the private sector to rapidly scale up deployment of existing technologies and development of new ones.
What we heard: Creative, hybrid solutions have a role to play in getting finance flowing to climate solutions.
We also heard that many of the technologies to reach net-zero already exist. The stocktake points to renewables including nuclear, low-carbon hydrogen, solar and wind, as well as carbon capture, storage and utilization and storage in hard-to-abate sectors, as technologies to prioritize. COP28 parties agreed to triple renewable energy capacity globally, a tall but achievable order as more countries work to smooth out permitting processes and use policy to incentivize low-carbon energy.
Key quotes:
"If you’re an investor, if you're a banker, you don't understand the risk, you can't monetize the risk, and you become cautious and don’t put the money in. So what I would love to see is really creative but sound, prudent finance." —Dame Susan Rice, speaking to the ESG Insider podcast; Dame Susan chairs the Global Steering Group of the Global Ethical Finance Initiative (GEFI), a nonprofit focused on working with the financial sector to deliver finance for the UN’s Sustainable Development Goals.
“There is no excuse for any company not to go to net-zero. There is no time to lose because the reality that’s a bit frustrating is that 70% of the technologies to go net-zero are already existing; 70% of the carbon emissions which we are having today in the world can be eliminated with existing technology.” —Schneider Electric Chairman Jean-Pascal Tricoire, during a keynote address at the “Advancing the Transition” event S&P Global hosted in Dubai Dec. 3.
What was agreed: The stocktake underlines the urgent need to address the interlinked global crises of climate change and biodiversity loss. And it underlines the vital importance of protecting, conserving, restoring and sustainably using nature and ecosystems for effective and sustainable climate action.
While there was general agreement on the intersection of nature and climate, one area where negotiators were unable to reach consensus at COP28 was on several important technical aspects for implementing Article 6 of the Paris Agreement. Article 6 sets out the rules for global trade in greenhouse gas emissions reductions, i.e. carbon markets, and for funding nature-based carbon offsets.
What we heard: Nature was on the agenda in a much bigger way at this climate COP than in the past.
We heard that the Taskforce on Nature-related Financial Disclosures (TNFD) has gone a long way toward helping companies ask the right questions about nature, and that nature-related data has advanced significantly in one year. But there is still a long way to go to build understanding of how nature is embedded into companies' value chains and to put a financial value on nature in a way that speaks to the business community.
Another key theme was that discussions about nature impacts and dependencies are more effective when we can move them from the abstract to the concrete — specifically, tying them to how they affect people and communities. This is a theme we will continue watching as we gear up for the next biodiversity-focused COP, taking place in 2024.
Key quote: “There's been a real shift over the years of the discussions being very much focused on energy and on technological solutions towards much more transformational systems discussions. Nature is much more central now.”
—Eva Zabey, CEO of Business for Nature, a global coalition of business and conservation organizations working to achieve a nature-positive economy by 2030, speaking to the ESG Insider podcast.
