Key Takeaways From The COP28 Summit

A commentary from Leon Kamhi, Head of Responsibility at global investment manager Federated Hermes on the 2023 United Nations Climate Change Conference COP28 in Dubai, which came to a close yesterday.

Leon Kamhi, Head of Responsibility Federated Hermes

A central goal of the summit is the publishing of the global stocktake – the process for taking stock of the progress on collective implementation of the Paris Agreement and identifying solutions to fill the gaps.

Big decisions are still to be taken on the crucial negotiation text between countries on the “phasing-out” of fossil fuels An area we are watching closely as negotiations come to a close.

Over the course of the summit, we saw encouraging steps to achieve the transition to net zero. Particularly an increase in announcements and commitments to renewable and climate solutions, which we view as essential if we are to move away from carbon-intensive approaches and maintain the availability of energy and other essential consumer goods and services.

The business case for doing so is becoming clearer, for companies to better mitigate and seize the opportunities presented by the climate transition – something we emphasise through our investor engagement.

We are cautiously encouraged to see the loss and damage fund established on day one of the summit, with to date over US$700m in contributions. However, significantly greater backing is needed to support developing countries with the impacts of climate change. Estimates for the annual cost of loss and damage in developing countries vary from US$100bn-US$580bn and are expected to rise.

Further, for a just transition, we would like to see more from individual countries on how they are going to ensure energy and food security and affordability as well as job security. Unless these social challenges are addressed, an effective and just transition will be difficult to achieve.

A key commitment saw more than 50 oil and gas companies pledge to reach near zero methane emissions by 2030 (with plans by 2025), eliminate flaring by 2030, and achieve net zero by 2050 in their own operations.

Whilst we understand the desire there was for this to have gone further to include Scope 3 emissions, it is a significant step in the right direction which we hope will be echoed by others.

COP28 also presented an opportunity for countries to discuss the progress made since COP15 and focus on effectively integrating nature into the response to climate change.

Many have pledged funding, such as the UK which announced more than £85 million to tackle global deforestation, but there remains a large funding gap for nature-based solutions.

Something we at Federated Hermes Limited are championing through the development of our UK Nature Impact Fund to invest in nature-based solutions, and our partnership with the Global Alliance for a Sustainable Planet to explore the flowing of private capital towards climate and nature-positive economic development.