COP28: Key updates for asset managers

The 28th Conference of the Parties (COP28), concluding on December 12th, presents a crucial juncture for asset managers in sustainable investing.

As we hit the halfway point, here’s an overview of the key discussions and outcomes so far…

Key points related to sustainable investing

1. Financing the transition: The transition to a sustainable future hinges on closing the $41 trillion mitigation investment gap by 2030. This highlights the critical role of asset managers in channelling investments into emerging markets and adapting strategies.

2. Integrity in carbon markets: A joint framework will ensure the integrity of voluntary carbon markets, emphasising the need for high-integrity standards in this sector.

3. Climate finance commitments: Over $57 billion in climate finance commitments have been announced, involving various private and blended climate-related funds. This marks a significant milestone for sustainable investing.

4. Operationalisation of loss and damage fund: The agreement on the Loss and Damage Fund, directing funds to countries vulnerable to extreme weather events, underscores the importance of responsible investing.

5. Private sector accountability: The COP28 Net Zero Transition Charter aims to establish best practices for the private sector in achieving net-zero targets, highlighting the role of asset managers in driving change.

6. Closing the net-zero finance gap: Discussions led by global finance leaders underscore the need for deploying $55 trillion in low-emissions assets over the next decade, setting a high bar for sustainable investing.

7. Aligned ESG reporting: European Financial Reporting Advisory Group (EFRAG) and the Global Reporting Initiative (GRI) have announced a renewed cooperation agreement, aimed at further enhancing collaboration on sustainability reporting.

Controversies at COP28

But this year’s summit is no exception to the usual paradoxical mix of optimism and controversy…

  • Protests against the fossil fuel industry: The presence of the oil, gas, and coal industry at COP28 have sparked protests. Activists demand an end to fossil fuel usage and criticise the language around the phase-out of “unabated” fossil fuels​. Indeed, the UAE’s hosting of the summit and the inclusion of fossil fuel industry leaders in the discussions raised concerns about the direction of climate negotiations​. More than 2400 fossil fuel lobbyists are attending this year’s COP; some suggest that’s like inviting arsonists to a firefighting convention.
  • Debate over carbon credits: Critics argue that focusing on carbon credits could be a distraction, allowing for the continued use of fossil fuels under the guise of “offsetting” emissions, rather than reducing them outright. This debate highlights the complexities of implementing effective and credible carbon credit systems in sustainable investing strategies.
  • Sultan al-Jaber’s presidency: Al-Jaber was seen as a controversial choice to lead COP28 discussions in Dubai as the head of the state-run Abu Dhabi National Oil Co. The COP28 President faced backlash over a claim that there is “no science” behind calls for a phase-out of fossil fuels, also commenting that a phase-out of fossil fuels would not allow sustainable development “unless you want to take the world back into caves”.
  • Loss and damage fund insufficiency: $700m has been pledged, but it’s estimated developing countries face $400bn in losses each year meaning the fund totals a mere 0.2% of what’s needed.

Record, report, reduce!

The controversies and discussions at COP28 emphasise the complexity of the challenges ahead. The UN and COP processes will hopefully deliver more big wins over the coming days; stay tuned for updates.

But we already know that purpose-driven stewardship is vital in shifting our planet’s trajectory. Platforms like SI Engage are more critical than ever, providing a space for investment and stewardship teams to collaborate, learn, and lead in the transition to a sustainable future.

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