UN Climate Change Conference (COP27) 2022
The UN Climate Change Conference, popularly referred to as COP27, held in Sharm el-Sheikh, Egypt, concluded on 20th November. The conference will be remembered for the landmark breakthrough of creating a climate “loss and damage” fund to protect the most vulnerable communities on the planet bearing the brunt of climate change.
The ambitious goal of limiting global warming to 1.5 degrees celsius as compared to pre-industrial levels and curbing emissions with a plan to implement fossil fuel phase-out, however, remains unachievable.
Let’s take a closer look at some of the goals that were set for the conference.
Goals of The 2022 United Nations Climate Change Conference
Most of the goals of COP27, not unlike its predecessors, are a rollover from the previous year’s objectives. Reduced emissions, adaption efforts, climate finance, and just transitions were some of the underlying themes the conference aimed to achieve.
Mitigation – The conference aimed to carry forward and strengthen the Paris Agreement of 2015, signed by 196 parties to keep the global warming limit to 1.5 Degrees Celsius. The conference aimed to arrive at sustainable outcomes regarding the commitments and pledges of the Glasgow Pact and review Nationally Determined Contributions to emissions.
Adaptation– A renewed commitment towards the Global Goal of Adaptation to initiate necessary actions in response to extreme weather events like heatwaves, floods, forest fires, etc.
Finance– The conference had climate finance as a crucial agenda to increase transparency in financial flows and ensure adequacy and predictability. The climate finance structure needs to be designed in a manner that safeguards the interests of developing countries and the vulnerable communities of the world.
Collaboration – Ensuring representation from all stakeholders and facilitating consensus-based negotiations and agreements were other important goal of the conference. The resulting effort is to be directed toward finding new solutions and innovations to address the challenges of climate change.
So how did COP27 fare against these goals?
Let’s take a look at some of the key takeaways from the UN Climate Change conference.
Key Takeaways from COP27 Egypt
Loss and Damage Reparations – COP27 has been remarkable in its effort to reach a consensus regarding the cost of climate change historically borne by the most vulnerable communities of the world. The extreme weather conditions have not just displaced people and have also resulted in the loss of lives, livelihood, and infrastructure. The loss and damage fund aims to ease this disproportionate burden on developing countries and put the financial accountability on the wealthy nations to share in the cost of climate change.
So far, the climate funding has mostly focused on reducing greenhouse emissions and contributing to projects to help communities rebuild their lives. The Loss and Damage fund is different as it will cover the cost of climate change which countries cannot avoid or adapt. About 50 vulnerable countries impacted by the climate crisis reported $525 billion, or 20% of their collective GDP, as climate-linked losses.
A ‘Global Shield’ – This initiative is to mitigate the effects of climate change by strengthening social protection schemes and bringing in climate risk insurance. This in turn will accelerate the process of rebuilding communities affected by natural calamities caused by climate change. While the experts have pointed out the difficulties of insurance claims and payouts, it is viewed favorably by a few countries that look at it as an extension of loss and damage financing. A deeper holistic understanding of how climate change affects communities can help in better planning for the future.
The Rainforest Alliance – The rainforest alliance was formed between Brazil, the Democratic Republic of Congo, and Indonesia to protect more than 50% of the world’s endangered rainforests. The alliance aims to discover nature-based solutions and work towards forest conservation; effective land management to protect the carbon sinks and restore natural ecosystems.
Renewed Pledges to Cut Carbon Emissions Further- In line with one of the key goals of the COP27 conference, Mitigation, or reduction in carbon emissions, significant stakeholders like the EU made an important announcement. They updated their climate commitment to further reduce their GHG emissions by 2% in addition to the previous commitment of 55% by 2030. The conference, however, lost in its efforts to implement further actions to reduce global emissions.
The GHG emissions and the fossil fuel phase-out agenda were a carry forward from the Glasgow Conference or the COP26 held last year in Glasgow. These aspects are critical to meet the 1.5 degrees celsius ambition goal of the 2015 Paris Agreement but saw fewer commitments or concrete actions from significant stakeholders and participating parties.
Early Warning Systems for All – An early warning system can help communities cut short the damage. UN data reports that a 24-hour warning can help communities damage by 30%. Access to early warning systems can empower nations with less capacity to mitigate the effects of natural disasters caused by climate change.
Key Takeaways for Businesses From COP27 Egypt
1. The International Sustainability Standards Board or ISSB was established during COP26 to create a baseline for sustainability disclosures. ISSB announced its new partnership framework at COP27, which will help international investors to make better economic and investment decisions.
2. The carbon Disclosure Project CDP, the global environmental disclosure platform for corporations, is set to adopt ISSB IFRS S2 climate-related disclosure standards. Once incorporated into CSRD’s questionnaire, it will go out to member companies on behalf of 680 financial institutions.
And with this step, over 18700 companies, or half of the world’s capital market economy, will have to provide corporate environmental information which will be consistent, comprehensive, and comparable across geographies.
3. With increased inflation, the ongoing Russia-Ukraine War, and increased scrutiny around ESG investment, banks, and financial institutions are on tenter hooks regarding their climate transition pledges and commitments.
The UN Race to Zero campaign, of which banks are participating members, has introduced stricter rules leaving banks worried about exposing themselves to legal risks in meeting the pledges and risk reputational damage if they don’t.
4. Climate financing needs a transformed financial structure, systems, and instruments to aid energy transition and requires an investment of about 3.5 trillion dollars to reach the target of net zero emissions by 2050. An investment in low-emission products and services is an opportunity that will see significant growth in the coming times.
5. Climate-related technological solutions and services are projected to generate sales close to 12 trillion $ in worth and potential value pools are transport, power, and hydrogen. Investment in Capex-intensive investment, and R&D can alleviate the risk often associated with net zero solutions and open new opportunities in the green energy business.
6. With no concrete decisions around phasing out fossil fuels, the oil and gas sector can pursue further expansion and continue to augment its oil production capacities. However, the consensus around the “Loss and Damage” fund was an outcome many didn’t see getting implemented. In the future, it may have some bearing on the oil and gas industry in the form of a windfall tax on profits.
The Way Forward
While the UN Climate Change Conference 2022 can boast a few small wins and one major victory towards attaining Just Climate Transition. However, key stakeholders displaying little commitment towards tackling GHG emissions take away from the smaller wins. Not to mention leaving the most vulnerable communities exposed to the risks of climate change.
For businesses, new regulatory guidelines and compliances mean cultivating a deeper understanding of the changes and accelerating adoption within their context to meet the mandates.