Takeaways From COP28

I have been reflecting on my trip to Dubai over the past week for COP28, and I am growing more optimistic by the day about our prospects for progress on real-world efforts to accelerate decarbonisation.??

Here are my takeaways from our conversations at the summit — informed by the scorecard of our expectations for climate finance at COP28 penned by my colleague Huw van Steenis .

1. While the uncertainty of the diplomatic talks hung over the first two weeks, greater engagement of, and pace of innovation in, the private sector was tangible. More than 1,300 CEOs were present from over 80 countries, showcasing the pace of technological change in hard-to-abate sectors like steelmaking, mining and aluminium, in renewables and fusion,? through the use of AI to add substantially to yields, and in mitigation technologies. There remain challenges, including on whether supply chains will truly pay the green premium, but progress is encouraging.
2. The agreement to get to near-zero methane emissions is a major step forward. The pledge of 50 oil and gas companies to meet this target by 2030, and the growing tally of nations that have now agreed to slash methane emissions by that year (more than 150 countries in total), underscore the spirit of cooperation at the summit. I am intrigued to see if banks will start putting these stipulations into underwriting terms for firms going forward.
3. I was encouraged by the funneling of catalytic money to support climate finance in the global South and also through the “Industrial Transition Accelerator”.? Making progress and supporting innovation, for instance, in cement and roads are essential over time, as is aviation and shipping fuel.? ? For projects to flourish in the private sector it is helpful to try to de-risk projects and help lower the cost of capital — and the large buyers clubs to be co-chaired by Mark Carney could potentially help on these.??
4. I was also encouraged by the attempt to enable finance to flow where emissions are through credible transition plans. As Huw wrote before COP about what he calls khaki finance, “Realistic brown-to-green transition plans can help de-stigmatise investments and financing. Some firms feel stuck in an ‘emissions trap’ as emissions are likely to go up before going down, even for renewables. Institutional efforts to destigmatise khaki finance are therefore key”. In our conversations, we heard good progress focused around supporting the GFANZ and UK TPT work on transition plans, although the proof will be in the pudding when policymakers and financiers get home as that’s when the real work begins.

I heard some positive steps forward around the ISSB’s initiatives on disclosures, the GCFC’s plan on climate data and discussions about furthering voluntary carbon markets. To be sure, I also heard plenty about the challenges from higher interest rates, planning and permitting for the buildout of green infrastructure — which need to be addressed in the context of the commitment to triple clean energy by 2030. Equally important, each government legitimately takes different tradeoffs around energy security, energy affordability and the environment.

To declare the “beginning of the end” of the fossil fuel era is a profound statement indeed.There are many complex interconnected issues to untangle. But climate change continues to move faster than the mobilisation of climate finance. That leaves firms and financial institutions with much to do and a ticking clock. But the focus on innovation this year also left me more upbeat than when I arrived. On further reflection after COP clients and others that I met with have a deeper and growing appreciation of the complexities and hurdles that business, finance and policymakers face as they work together to tackle this historic challenge.?