The COP 28 Conference: A pivotal event for the global investor community
The Conference of the Parties, or COP, is an annual gathering of nations from around the world to address the urgent issue of climate change. These conferences have become significant milestones in the global effort to combat climate change and transition to a more sustainable future. As we approach COP 28 it is crucial to recognise its importance for the global investor community.
COP 28, scheduled for 2023, arrives at a critical juncture in the global climate movement. With the Paris Agreement’s goals to limit global warming to well below 2 degrees Celsius above pre-industrial levels and the increasingly urgent need to keep the global temperature rise to 1.5 degrees, this upcoming conference in November carries enormous weight for both governments and the investment sector.
Why COP 28 matters
First and foremost, COP 28 represents an opportunity for nations to strengthen their climate commitments. The Paris Agreement requires nations to enhance their climate targets every five years. These national commitments influence the direction of global policy and provide a roadmap for investment strategies.
Investors need clarity and consistency in climate policies to make informed decisions. The conference will assess the progress of individual nations in meeting their climate targets and set the stage for even more ambitious goals. This will help guide investors towards industries and companies with sustainable practices, while diverting from those that lag behind in climate action.
The global investor community is increasingly recognising the financial risks associated with climate change[1]. COP 28 will be a platform for addressing these risks. It is where governments will discuss and potentially implement policies that mitigate climate-related financial instability.
Investors are beginning to factor in climate risks when making investment decisions. For instance, they have to consider the impact of rising temperatures on industries like agriculture, insurance and real estate[2]. By making climate-risk disclosure mandatory, COP 28 can help investors assess and mitigate these financial perils more effectively.
Green finance and sustainable investment opportunities
COP 28 will also facilitate discussions on green finance and sustainable investment opportunities. As the world shifts towards renewable energy, sustainable transportation and environmentally friendly technologies, investors have a growing array of options for green investments.
The conference can offer guidance on aligning investment portfolios with climate goals. Furthermore, COP 28 can foster the creation of innovative financial instruments that encourage green investments and accelerate the transition to a low-carbon economy[3].
Another pivotal element of COP 28 for the global investor community is the commitment to phasing out fossil fuel subsidies. Fossil fuel subsidies have long been a point of contention as they artificially lower the cost of fossil fuels and inhibit the transition to cleaner energy sources. The phase-out of these subsidies, if successfully negotiated, can level the playing field for renewable energy investments. This will create a more favourable climate for investors in the clean energy sector which is vital for both environmental sustainability and economic growth.
International co-operation on climate finance
Moreover, COP 28 can pave the way for international co-operation on climate finance. Developed nations have committed to providing financial support to developing countries to help them adapt to and mitigate the effects of climate change.
Investors are keen to see these financial commitments materialise as they can stimulate sustainable development in emerging markets and create investment opportunities. This, in turn, fosters global economic stability and increased financial returns for investors[4].
In conclusion, COP 28 is of paramount importance for the global investor community. The conference will shape the global climate policy landscape, provide guidance on climate risk management, offer opportunities for green investments and potentially usher in policies that facilitate the transition to a low-carbon economy.
As climate change becomes an increasingly urgent issue, the decisions made at COP 28 will have profound implications for investors, businesses and economies worldwide. It is an event that investors should closely monitor and engage with to ensure they are prepared for the challenges and opportunities of a rapidly changing climate-conscious world.
[1] Climate-related risks – Financial Stability Board (fsb.org)
[2] Climate-related risks to financial stability (europa.eu) Financial Stability Review, May 2022 (European Central Bank)
[3] COP28_Publish_Letter_October_2023_EN (unfccc.int) Letter from Dr Sultan Ahmed Al Jaber, COP 28 President-Designate
[4] Why investors are putting sustainability at the top of the agenda | EY UK