Risking a COP-out: should investors care about the COP28 climate summit?

$6.3 trillion. That’s the investment the global business community will need every year through 2030 for climate mitigation to stay aligned with the goals of the Paris Agreement, namely to limit a temperature rise to 1.5 degrees Celsius by the end of this century.

In other words, that’s 7% of global GDP in 2022, according to World Bank figures.

Getting investors on board and pulling in billions in fresh climate investments is exactly what the United Nations Framework Convention on Climate Change's (UNFCCC)'s annual COP summit aims to do: bring signatories together to raise funds and resources to the scale of the climate crisis.

In fact, this year's COP presidency, the United Arab Emirates, boldly declared it will lure global investors to its summit in November to 'supercharge' the global climate finance space.

'Mobilising' private investors and introducing reforms within finance powerhouses will be COP28's key priorities, with the aim to hit $100 billion for a long-promised fund to assist poorer countries in their journeys to net zero, the president-designate of COP28, Sultan Al Jaber, has said.

“We must supercharge climate finance, making it more available, more accessible and more affordable to drive delivery across every climate pillar,” according to the Dubai-based royal.

Part of Al Jaber's preparative work has been a 'listening tour' around the world in recent months, as he has met with movers and shakers within the global climate finance community, as well as ambassadors and ministers in Washington, Delhi, London, Paris, Berlin and Beijing.

Although it was recently reported that the UAE plans to avoid bothering investors with "sensitive topics" such as fossil fuel burning, the COP28 presidency did stress that “we need to reduce emissions in the systems we depend on today."

The task is clear: reduce emissions by 43% by 2030 from 2025 levels, and 84% by 2050. At present, however, the global community is less than halfway there.

Therefore, this year’s COP28 has been touted to become the most critical climate conference since Paris in 2015 to achieve these goals, with green investments to take centre stage.

“There was a strong wind in the sails from COP27, where the ‘loss and damage’ fund was agreed to finance mitigation for the worst-impacted countries,” recalled Singapore-based Shivin Kohli, a senior manager for economics strategy at Access Partnership.

“Buoyed by a rising tide from COP26, where the global finance community took centre stage, a slew of investment vehicles and reporting initiatives to mainstream climate in finance were announced,” Kohli told Net Zero Investor.

However, the growing consensus is that the UAE presidency of COP28 may have dropped the ball at a most crucial time.

Some argue the host has "bowed" to fossil fuel interests, sparking outrage within both the UN and in member nations since it was reported that a number of sensitive issues will not be discussed at the summit, such as fossil fuel burning.

Because of this, Eurasia Group vice chairman Gerald Michael Butts said he can only hope “the whole [COP28] thing doesn’t blow up” ahead of this year’s conference.

"COP has almost become a parody of itself," New York City-based Butts commented.

Meanwhile, negotiations at other multilateral avenues, such as the Bonn Climate Change Conference in June 2023 and G20 meetings in late July, may have featured intense debates but without much progress.

"Investors that believe in net zero and nature-positive investments should be worried," Kohli said.

“If the UAE fails to make COP28 a success and issue a rallying cry to improve and deliver multilateral climate action, ever-stormier waters lie ahead for meaningful green investment,” he stated.

It is not too late to turn things around, however.

Kohli said that “negotiators at past conferences have rightly been praised for their ability to get nearly every country in the world on board with the decarbonisation agenda through the Paris Agreement and subsequent updates."

"By and large, the trajectory of human progress has always been furthered by multilateralism – whether it be to protect human rights, the ozone layer, or diplomatic relations."

So how can net zero foster investor support?

Butts is optimistic when it comes to renewables and the clean energy sector being placed high on the COP agenda.

"The most important thing is that renewables are being proven to investors as an economic replacement for fossil energy."

He went on to say that "this is not happening at the scale or the speed that it needs to, but since I started working on this, you know, many moons ago, renewables have come down in price by 90%, and there's every indication that that price curve will continue to go down."

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COP28 to ‘supercharge’ climate finance by ‘mobilising’ private investors

Recent efforts

Despite the criticism and low expectations ahead of COP28, the active involvement of the finance sector has somewhat accelerated multilateral action ahead of the summit, Kohli noted.

For example, he singled out the new sustainability reporting standards from the International Sustainability Standards Board (ISSB), the Taskforce on Nature-Based Financial Disclosures (TNFD) as well as the Science-Based Targets for Nature (SBTN).

COP28 plans to exploit this momentum with plans to create 'two zones' - for state and non-state actors - to be located directly next to each other, paving the way for the global finance community to meaningfully engage.

So what should the finance community engage on at COP28?

“Enhancing the role of finance and investment in maximising green outcomes,” said Kohli. “There have been major questions about carbon markets and ESG investing writ large. COP28 could platform and problem-solve these challenges.”

In particular, “ESG investing presently increases capital allocation towards firms that are already green while depriving polluting firms of the capital they need to get greener," he continued.

One key question at COP28 will be how do investors and other net zero actors turn this around?

"This has important parallels with the 'additionality' concept in carbon credit markets that needs greater clarity," Kohli continued.

"What are the projects and methodologies that help us measure real, additional carbon sequestration and avoided emissions, and how can we mainstream them to achieve transparent meaningful carbon markets?"

“An ambitious COP28 of innovation on finance could help answer both,” Kohli concluded.

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COP28: host UAE will not discuss ‘sensitive’ fossil fuel burning