Written by Ben Palmer, Head of Responsible Investment at Brooks Macdonald
It’s fair to say that COP27 started with lower expectations than COP26, given the unfavourable macro backdrop of heightened geopolitical tensions, a global energy crisis and an economic downturn tied to soaring inflation, all creating potential excuses for curtailing ambitions.
If accelerating efforts to drive down carbon emissions is used as the key marker for success, then the conference was underwhelming – the Sharm el-Sheikh climate agreement has not brought accelerated emissions reduction plans aligned with 1.5degrees, a pledge to phase down fossil fuels, or mention of efforts for global emissions to peak by 2025. We have not however gone backwards, which looked like a possibility at times, but by failing to drive more meaningful target-setting and details about how countries are expected to fulfil their climate commitments, COP27 has started the debate on whether 1.5degrees is now a practical impossibility.
Where the conference made headway is in creating a tangible outcome for climate justice, with more than 190 countries agreeing to establish a fund for loss and damage. This will assist developing countries that are particularly vulnerable to climate change. Though an important milestone, which is to be viewed positively, we cannot be too self-congratulatory at this stage as much of the work remains to be done and details ironed out. For example, it is unclear how the fund will be set up, where the finance will come from and what defines vulnerability. The need for a more structured, scalable financing pathway between developed and developing countries is pivotal in our ability to mitigate and adapt to global warming in an inclusive and just way. Hopefully, we can look back on COP27 as the conference that made that possible.
Although it is perhaps unrealistic to expect every annual climate conference to be filled with blockbuster announcements, the lack of ambition displayed this year risks reducing the perceived incentives for companies to set and deliver on robust net zero goals. Therefore, it becomes increasingly important that all stakeholders, including investors, work even more closely together to help drive real progress on tackling the climate crisis.