7 key takeaways from the first 7 days of COP27

‘Loss and damage’ a key focus driving finance to the Developing Countries?

World leaders have called for urgent action on the climate crisis, with many referencing the issue of loss and damage; the funding demanded by poorer nations to rebuild after accelerating climate disasters. As a result, several initiatives, and national commitments, were announced to support this objective.

The Independent High-Level Expert Group on Climate Finance, published a report on “Finance for Climate Action: scaling up investment for climate and development ” at the request of the Egyptian presidency of COP27 and UK presidency of COP26. Lord Stern, NatWest’s Climate Change Advisor was part of the independent group, where the key message focused on the transformation of global economies, particularly the energy systems. An investment of $1 trillion is needed from external finance each year until 2030 for the emerging markets (excl. China). The report calls out the just transition and considers the full ecosystem: net zero, adaptation, resilience, and natural capital.

The Network for Greening the Financial System (NGFS) also launched a blended climate finance initiative, where the focus is on unlocking more capital for green and transition projects in the emerging markets. Ravi Menon, from the Monetary Authority of Singapore, who chairs the NGFS, said that key deliverables will be to publish a blended finance handbook and facilitate a few demonstrative projects, which will be led by the International Monetary Fund (IMF) and completed by COP28 in November 2023.

Countries step up commitments to fight climate change cross borders

• Xie Zhenhua, China’s Special Envoy on Climate Change, confirmed China is willing to support a mechanism for compensating poorer countries for losses and damage caused by climate change. He did add China has no obligation to participate but stressed his solidarity with those calling for more action from wealthy nations on the issue.
• ?The UK announced that it will triple its commitment to climate adaptation projects across Africa to ￡1.5bn, making it one of the biggest contributors to the Africa Adaptation Acceleration Program.
• France and Germany extend €600 million in financing to support South Africa’s transition from coal. The financing agreements were acknowledged and welcomed by Cyril Ramaphosa, President of the Republic of South Africa.
• Austria pledged $50m over the next four years to developing countries facing unavoidable damage and losses caused by climate change. Belgium, Denmark, Germany, and Scotland also committed small amounts of loss and damage funding.?

US climate envoy Kerry launches carbon offset plan

John Kerry, the US Special Presidential Envoy for Climate, announced last Wednesday the creation of a carbon offset plan meant to help developing countries quicken their transition away from fossil fuels, while providing additional finance to support climate change adaptation and mitigation tools and infrastructure.

Kerry announced, “Our intention is to put the carbon market to work to deploy capital to speed the transition from dirty to clean power specifically, to retire unabated coal-fired power and accelerate the buildout of renewables”. He also added that carbon credits would be “high quality” and meet “strong safeguards”.?

A growing focus on credible transition plans

The UK’s Transition Plan Taskforce has launched a new framework and toolbox providing strategic and rounded guidance preparing the real economy for its transition. This is very much seen as a build from the Task Force on Climate-Related Financial Disclosures (TCFD) which is gaining regulatory focus globally, as well as support from the financial industry through Glasgow Financial Alliance for Net Zero (GFANZ).

The UK and other key nations join global alliance for offshore wind

Belgium, Colombia, Germany, Ireland, Japan, the Netherlands, Norway, the UK, and the US joined the Global Offshore Wind Alliance (GOWA) at COP27 to tackle the energy and climate crisis, and remove barriers to the development of offshore wind. The UK also claimed that it would be tripling funding for climate adaptation from ￡500m in 2019 to ￡1.5bn in 2025, as part of a broader commitment to spend ￡11.6bn on international climate finance.

Natural Capital and Biodiversity called out and supported by TNFD’s publication

The Taskforce on Nature-related Financial Disclosures (TNFD) published its report on nature-related scenario analysis, designed to help support corporates and financial intuitions assess nature-related risks and opportunities. One of the challenges faced in the sustainable finance market is the lack of available and actionable ESG data. There is however, a lot of nature-based data available (obtained by satellites), but the challenge lies in making the information ‘decision-making’ friendly. While risk management tools are being developed, there is a growing focus on highlighting the opportunities through financing solutions, such as conservation and blue bonds.

The Importance of Agriculture supported by the SMI Agribusiness Task Force

In cooperation with NatWest, the Sustainable Markets Initiative (SMI) Agribusiness Task Force released its Scaling Regenerative Farming Report . The report focuses on the need to scale regenerative farming three times faster, to address the threat to a resilient and sustainable food supply presented by climate change and biodiversity loss. The action plan sets out to identify what can be done by the private sector to accelerate the adoption of regenerative farming, recognising this is imperative to achieving net-zero commitments and preventing future supply disruption.

Thank you to Caroline Haas , our Head of Climate and ESG Capital Markets, for providing these takeaways.?