On the Path to COP28: how we got here, and what to expect for finance

Our Path to COP28 campaign is building momentum for climate action from finance at COP28, and we will launch the campaign on 24 October in Dubai.

While COP27 in Sharm El-Sheikh is just a month away, COP28, taking place in Dubai in 2023, will see many financial institutions make major progress reports on and updates to their COP26 commitments. Our campaign builds upon the success of the prior Path to COP26 campaign to coordinate the finance sector ahead of this crucial summit.

In this blog, we take a look at what COP is, the role of finance, some of the key milestones along the path to Glasgow, and what to expect in Sharm El-Sheikh and Dubai.

What is COP?

COP stands for Conference of the Parties to the United Nations Committee on Climate Change. COPs are where the world comes together to agree on climate action, on how to mitigate climate change and adapt to it. As Manuel Pulgar Vidal, the COP20 President from Peru told us at our 2021 summit, this is no mean feat, as COP is “a multilateral process, with almost 200 countries: so everybody counts”.

Finance at COP

But what does all this mean for the financial industry? The early COPs like Kyoto were focused mainly on getting governments to agree on the basics of climate science, and what the targets for carbon emissions reduction should be in order to prevent or minimise.

Since then, attention has shifted increasingly towards action, looking at how we actually achieve the targets that the political process produces. One core component of this is finance. Most agree that addressing climate change requires significant transformation of our economies, particularly around the energy sector. Creating new industries and reshaping existing ones requires investment; while governments can provide some of the funding, the sheer scale of the challenge means that private finance must play a significant role. Since COP21, finance has been playing an increasingly important role at the summit.

The history of COP

COP1

The first summit, COP1, took place in Berlin in 1995. The foundation for the summit, and for the UN’s climate work, came from the Earth Summit in Rio in 1992. Presiding over the summit was Angela Merkel, Germany’s Environment Minister at the time.

COP3

A landmark early achievement of the COP process was the signing of the Kyoto Protocol at COP3 in 1997. The agreement set the groundwork for climate diplomacy, and was refined at subsequent COPs. However, key emitters such as the US withdrew from the treaty, and it took until 2005 to come into force.

COP6

COP6 at the Hague in the Netherlands saw a crucial issue come to the fore: paying for climate mitigation and adaptation in developing countries. Lack of agreement over this central question led to the collapse of the talks.

COP15

In 2009, COP15 in Copenhagen saw massive protests and was generally regarded as a failure. Many criticised the summit for not producing an ambitious, legally binding agreement in line with scientific recommendations. Others felt this was never a likely outcome given political considerations.

COP16

A solution to the “who pays for climate action?” question was agreed at COP16 in Mexico: the $100bn Green Climate Fund for developing countries. More than 10 years on, this has still yet to be delivered: the failure to do so has harmed trust in the process. There has been disagreement over how much public and private finance should contribute, and the recipients of funding.

COP21

In 2015 in Paris, COP21 saw the signing of the Paris Agreement, and the first real participation of private finance. The agreement represented a consensus that addressing climate change requires significant economic transition, particularly in the energy sector.

As finance is key to economic transition, the agreement included international mechanisms to promote climate-friendly finance, carbon trading, technology transfer and adaptation to climate change impacts. It also set the stage for the Taskforce on Climate-related Financial Disclosures, or TCFD, which has made its way into law in several countries in the years since, and significantly boosted climate bonds.

A notable contribution from private finance was a major petition to governments to commit to climate action: prior to that it was “assumed that capital markets opposed such regulation”, according to David Pitt-Watson, Chair of UNEP FI during the summit.

COP26

COP26 in Glasgow, saw the most significant progress since Paris, with the signing of the Glasgow Climate Pact. It still received a mixed reception from climate advocates, many of whom felt the agreement did not go far enough on securing binding targets, such as the last-minute amendment to “phase down”, rather than “phase out” coal. Arguably the most significant commitment was that made by all nations to come back before COP27 with enhanced emission-cutting pledges.

Nonetheless, the summit did see greater recognition than ever, from all across society, of the perils of climate change. One aspect of this was more involvement from financial institutions. The Glasgow Finance Alliance for Net Zero, or GFANZ, was launched, aiming to unite many existing initiatives, while individual financial institutions from around the world made net zero commitments of their own.

The future of COP

COP27

At COP27, in Sharm El-Sheikh, success is likely to be judged on four core areas: Mitigation, Adaption, Climate Finance and Loss and Damage. A key focus across the summit is likely to be issues for developing countries – as the COP process is driven by the host country’s diplomatic service, key themes often reflect that country’s priorities. On the finance side, we expect to see updates on potentially strengthening GFANZ, progress reports from financial institutions and a focus on nature and the need for nature-based solutions to climate change.

COP28

COP28 in Dubai will see the results of the first major stocktaking on the Paris Agreement. The process began at COP26, and will conclude in Dubai. This process is likely to be mirrored in the private finance side, as financial institutions provide results on their COP26 commitments, and update them.

Our Path to COP28 campaign will drive action from finance at COP28, and launches on 24 October in Dubai.

by Sam