Urgency and honesty on the road to COP28

The United Arab Emirates, host of the next UN climate change summit, is in no doubt about the challenge of building a global consensus for more ambitious climate action.

HE Dr Sultan bin Ahmed Al Jaber, COP28 President-Designate and UAE Minister of Industry and Advanced Technology, made an impassioned plea at the Petersberg Climate Dialogue in May.

“Let’s please put an end to delays and let’s start delivering real results. Let’s turn passion into pragmatic solutions. Let’s end polarisation and empower partnership,” he said.¹

It’s a message that recognises that the full transition to a low-carbon future is still many years away, and one that speaks to the challenge of building consensus between the 196 parties to the UN climate change framework in an increasingly fractious and divided world.

Yet there is also an unmistakable sense of urgency.

After a three-year process, COP28 will present the first ‘Global Stocktake’ on progress towards implementing the 2015 Paris Agreement, which set a target of keeping global warming to 2ºC or below – and ideally 1.5ºC.²

“It is time for all of us to get real,” said Al Jaber. “We have no choice but to unite and seize the moment of the Global Stocktake to put the world on the right track.”

So, what can we expect from COP28?

With global carbon emissions still rising, the Global Stocktake is likely to be another sobering report, says Zoe Knight, Group Head of the Centre of Sustainable Finance and Head of Climate Change for Middle East, North Africa and Türkiye (MENAT) at HSBC.

In the seven years since the Paris Agreement was signed, global carbon emissions have been on an upward trend - despite COVID– even though climate science makes it clear that emissions must fall by roughly 50% by 2030 to limit temperature increases to 1.5ºC.

But recognising the reality of the situation may also create an opportunity.

“The UAE presidency is taking a pragmatic stance, by acknowledging that global net-zero progress is behind where it needs to be,” says Dubai-based Knight. “That kind of honest assessment is what’s needed so that we can focus on what needs to happen to get emissions under control and declining in the next seven years.”

As the second summit to be held in the MENA region, COP28 underlines the growing engagement of a region that derives much of its prosperity from fossil fuels but also has the capital and determination to lead the energy transition.

The UAE, the first MENA nation to set a target to hit net-zero emissions by 2050, is setting the pace. It aims to generate 44% of its power from clean energy such as solar and wind by 2050, up from around 25% currently.³ But it also sees the transition as a means to accelerate growth: the UAE plans to capture a quarter of the clean hydrogen market.

While COP28 does not come with a hard deadline for governments to update their emissions targets, or nationally determined contributions (NDCs), Knight expects a growing focus on problem-solving at the national policy level. The conversation about climate, she says, has been focused on global goals, when the obstacles to action are mainly local.

“It's down to regulations on buildings or land,” she says. “It's down to the feasibility of renewables and power generation regulations in specific countries. By understanding those barriers better, we can move together more effectively to solve them.”

The Indonesia Just Energy Transition Partnership (JETP), launched in November 2022, is one example of this intensifying local focus. Indonesia and the G7 nations aim to mobilise USD20 billion over the next three to five years with at least USD10bn of private finance to be mobilised by members of a new Glasgow Financial Alliance for Net Zero (GFANZ) Working Group, including HSBC.⁴

Vietnam agreed a similar JETP deal in December 2022, and negotiations are underway with other governments, including India and Senegal.

Knight also argues that governments, financial institutions and corporates are working more closely together on the roadmaps of projects and investments that will guide countries to their NDC emissions targets.

“These three groups have been moving forward with quite different workstreams,” she says. “But COP28 could be the moment where they actually start to converge, catalysed by the global stocktake.”

Ahead of COP28, governments are under pressure to deliver on a number of existing climate finance commitments – including the “loss and damage” fund announced at last year’s summit and the USD100 billion that was pledged to developing economies starting in 2020.

Climate finance remains a contentious issue. Knight, however, notes that more capital is flowing from a growing range of sources. One prominent example is the new generation of philanthropic financiers such as Amazon founder Jeff Bezos, whose Earth Fund has pledged to donate USD10 billion to environmental projects by 2030.

“In the last couple of years there has been a philanthropic push on climate finance from entrepreneurs,” says Knight. “That brings with it a different, more commercial mindset than traditional concessional lending or grants.”

Sovereign wealth funds (SWFs) have also been ramping up their focus on climate.

According to an Invesco study in July last year, 75% of SWFs had a formal ESG policy in place, up from 47% in 2017. In addition, the One Planet SWF Network – founded by six funds, four of which are based in the Middle East – has launched climate disclosure guidance for private markets to help implement recommendations by the Task Force on Climate-related Financial Disclosures.⁵

Despite signs of progress, the Global Stocktake at COP28 will make it clear that the world is not yet on track to meet the goals of the Paris Agreement.

To make the upcoming summit the “solutions COP” that the UAE has talked about, governments, industry and the financial community will need to converge around projects that will deliver transformative results for the climate – before it is too late.