ESG Investor is out with a sober and removed take on the outcomes of COP28 as relevant for us as investors and overseers of investment assets in an article, Take-off for the Net Zero Transition.
Important to note that one of the main official tasks of COP 28 was to review and respond to the first Paris Agreement required 'Global Stocktake' (a 45 page 'synthesis' of which can be found here). The formal response contained a first-time key phrase, calling for the world to be ‘transitioning away from fossil fuels’, but what does this - or other COP 28 outcomes - mean for investors? The article captures two overall takeaways, with more interesting nuances further in.
'From a concrete policy perspective, the language is irrelevant to investors, even though it does matter for the ‘vibe’ of COP' – Jakob Thomae, Project Director at Inevitable Policy Response
'…the outcome was disappointing for investors, relative to expectations for greater certainty from policymakers on the pace, scale and nature of their decarbonisation commitments' – Reverend Kirsten Snow Spalding, Vice President, Investor Network, Ceres
Several commenters noted that despite the lack of specificity for investors, COP28 set in motion a process for establishing the financial and economic costs of the transition to make them ‘more tangible for investors…’, though as we highlighted in an October ’23 post, many organisations are publishing these estimates already, and they’re significant.
Others noted that this COP formally ‘recognised the importance of scaling up renewable energy capacity’, though the article notes that many countries are already individually making efforts here, and therefore ‘A key question over the next 12 months will be how many governments take COP28’s pledges and texts as a trigger to join those already taking steps’.
ESG Investor did find specific areas that may see increased investment focus as a result of the COP:
Food and Agriculture: with the first-time inclusion of food and agriculture into the Nationally Determined Contributions (NDCs) of the Paris Agreement, ‘It signals to investors that the speed and scale of the transition in the food sector is likely to increase rapidly…[and] is no longer something you can dedicate a small part of your portfolio to; it’s happening across different sectors. There will be a shift in practices and consumption patterns, as well as innovations and opportunities’.
Blue economy: ‘The role of oceans and coastal regions in both climate mitigation and adaptation was referenced for the first time in a climate COP closing text…’, with organizations like Ocean Risk and Resilience Action Alliance (ORRAA) expecting new approaches / funds for investing in sustainable ocean and coastal-related investments.
Overall, the COP may have signaled it’s time, as investors, to look beyond measuring and targeting portfolio carbon / emission exposures ---
‘…explicit references to renewable energy, energy efficiency, deforestation etc, will help asset owners to look at their exposures to various sectors through those lenses. Where they were once more focused on emissions, now they will take a more multi-dimensional approach’ – Remco Fischer, Head of Climate Change, UN Environment Programme Finance Initiative
Others noted that this COP formally ‘recognised the importance of scaling up renewable energy capacity’, though the article notes that many countries are already individually making efforts here, and therefore ‘A key question over the next 12 months will be how many governments take COP 28’s pledges and texts as a trigger to join those already taking steps’.
ESG Investor did find specific areas that may see increased investment focus as a result of the COP:
Food and Agriculture: with the first-time inclusion of food and agriculture into the Nationally Determined Contributions (NDCs) of the Paris Agreement, ‘It signals to investors that the speed and scale of the transition in the food sector is likely to increase rapidly…[and] is no longer something you can dedicate a small part of your portfolio to; it’s happening across different sectors. There will be a shift in practices and consumption patterns, as well as innovations and opportunities’.
Blue economy: ‘The role of oceans and coastal regions in both climate mitigation and adaptation was referenced for the first time in a climate COP closing text…’, with organizations like Ocean Risk and Resilience Action Alliance (ORRAA) expecting new approaches / funds for investing in sustainable ocean and coastal-related investments.
Overall, the COP may have signaled it’s time, as investors, to look beyond measuring and targeting portfolio carbon / emission exposures ---
‘…explicit references to renewable energy, energy efficiency, deforestation etc, will help asset owners to look at their exposures to various sectors through those lenses. Where they were once more focused on emissions, now they will take a more multi-dimensional approach’. - Remco Fischer, Head of Climate Change, UN Environment Programme Finance Initiative