What started in controversy with reports that the UAE COP presidency had lobbied for support of fossil fuel deals did, however, turn into something more positive by the official start. Notably, an agreement of more than US$725m for the Loss & Damage fund, which was proposed at COP26 and initiated at COP27, lifted the mood. The key slogan of COP28 of Unite, Act, Deliver, definitely set the tone.

Perhaps this shouldn’t have been a surprise. In the build-up, the COP28 Presidency participated in more than 160 events, met with more than 100 global leaders and held more than 1,000 discussions with climate community partners, which led to a concerted flow of commitments. While the media reports were alarming, there was cause for optimism in the event’s substance. And during the initial four days, delegates made US$57bn of commitments towards the climate, based on four strategic pillars:

1. Fast track a just and orderly energy transition by urging countries to triple global renewable energy capacity and double energy capacity efficiency by 2030, while rapidly decarbonising the system.

2. Fix climate finance, including by rebuilding trust and accessibility through a new Global Climate Finance Framework (Declaration), which entails additional climate finance to be channelled through the Multilateral Development Banks (MDBs) in the form of concessional capital to help unlock private sector financing through innovative funding models. It has been reiterated that banks have a critical role to play in accelerating the transition to a net‐zero economy.

3. Focus on people, nature, lives and livelihoods by increasing focus on food, water and health, best encapsulated by 134 countries (including the UK) signing up to the COP28 UAE Declaration on Sustainable Agriculture, Resilient Food Systems and Climate Action. This includes financial support to vulnerable communities to protect and restore ecosystems.

4. Foster inclusivity by listening to global stakeholders who benefit from diversity of thought and solutions while ‘turbo charging’ climate action through sustainable cities and supporting climate start-ups.

How the transition is financed has underpinned many discussions, with the phrase ‘from billions to trillions’ on delegates’ lips. A significant amount of this increased financing will go on renewable energy, owing to the tripling of supply by 2030, a commitment made by 119 countries. Doubling energy efficiency initiatives to drive decarbonisation will also demand much of this finance.

But away from these big challenges, we’ve noted encouraging progress in detailed areas. Here’s what’s caught the NatWest team’s attention so far:

Some 27 countries made a Declaration of Intent to endorse a global certification standard to increase the tradability of low-carbon hydrogen. Furthermore, 52 countries signed the Global Cooling Pledge to reduce methane emissions by 68% by 2050 (ca 7% of the total global emissions) given the expected trajectory that air-conditioning is expected to triple. Associated abatement projects are valued US$1.2bn.

Transition plan mobilisation within corporates and financial institutions focused on their decarbonisation trajectories. Glasgow Financial Alliance for Net Zero (GFANZ) published a technical note on Scaling Transition Finance and Real Economy Decarbonisation. Of note was also the Monetary Authority of Singapore’s (MAS) Taxonomy for Sustainable Finance, which explicitly accounts for transition finance activities across sectors. Corporates from Oil & Gas through to IT spoke about introducing a charging mechanism for emissions. The mechanism would include a carbon price designed to force business lines into innovating new products to reduce emissions, while re-thinking climate finance tools and instruments. 

The Network of Central Banks and Supervisors for Greening the Financial System (NGFS), including the central bank members and the likes of concessional finance operators are enhancing blended finance levers. Further evidence for this approach includes a report by Lord Stern, NatWest’s independent climate advisor. Multilateral Development Banks (MDBs) are being asked to allow the private sector to take on bankable projects, while partnering with philanthropy, public sector and the private sector ­- institutional investors (pensions funds, alternative credit) including banks - across the more challenging projects. A key question is who will convene and orchestrate initiatives from the pre-project phase through to inception. As Andrew Steer, President and CEO of the Bezos Foundation put it, “the transition needs a ‘deal team’”. To this end, the Net-Zero Banking Alliance (NZBA) published a report on transition finance in the banking sector, Developing Metrics for Transition Finance.

More than 130 signatories of the COP28 UAE Declaration on Sustainable Agriculture, Resilient Food Systems, and Climate Action committed to strengthening integration of agriculture and food systems into national climate plans, to revisit or orient policies and public support related to agriculture and food systems, to accelerate science and evidence-based innovation, and to strengthen an open, fair and transparent multilateral trading system with the World Trade Organisation at its core. Collectively, these countries represent more than 5.7bn people, 70% of the food we eat, nearly 500m farmers and 76% of total emissions from the global food system. The global community has mobilised more than $2.5bn to support the food-climate agenda, with the UAE and the Bill & Melinda Gates Foundation launching a $200m partnership for Food Systems, Agriculture Innovation and Climate Action. This is key in helping global food companies work with governments on ambitious food policies and achieve their science-based targets.

In scaling carbon markets, the Integrity Council for Voluntary Carbon Markets (ICVCM), Voluntary Carbon Markets Integrity Initiative (VCMI), Science Based Target Initiative (SBTI) and Greenhouse Gas (GHG) Protocol are to establish an end-to-end integrity framework, which provides consistent guidance on decarbonisation and the role of carbon credits. This will be enhanced by the agreement of six carbon credit programs to align certification mechanisms with common principles. Ultimately, the carbon market will gain credibility once the compliance and voluntary carbon markets converge – incorporating both natural and technical carbon credits.

Technology, data and measurement continue to play an ever-growing role, with multiple third-party firms launching new products which were displayed in the active Innovation and Technology Hub. President Macron and Bloomberg launched NZPDU alongside CDP which aims to establish interconnectivity and data integration mechanisms with third-party climate data and platforms, globally. One point of debate was around when is data ‘good enough’ to start developing views ranging from ‘directionally right’ to ‘accurately measured’ for trajectory decision-making. In general, the smart money was in not allowing “the best to be the enemy of the good”.

A platform for start-ups was evident in the Green Zone’s ‘Start Up Village’ where both new and scaling companies could meet with potential users and financers – resulting in more than 100 climate tech solutions, from agriculture to heavy industry. It was also the debut for nature positive companies, such as avant, a biotechnology company and developer of an end-to-end platform for cell-cultivated fish and seafood.

Redefining international trade may drive global standards in respect of carbon measurement and pricing, with mechanisms like the Carbon Border Adjustment Mechanism (CBAM) forcing the debate how carbon is measured and priced for exported goods. In a world of transparent carbon emissions prices, there is potential for ‘re-globalisation’ of trade whereby comparative advantage in green energy of production and shipping becomes an important factor, potentially increasing demand for non-exported goods. There were notable discussions and panels highlighting the need to incorporate nature positive and negative elements into risk management tools, and to build out investment opportunities therein. Given regulatory focus in the EU, but more broadly considering the interlinkage between climate and nature was continually spotlighted, particularly in relation to adaptation and physical climate risk. Similar to climate, there were a number of data and technology innovations that focused on nature and biodiversity to enhance the measurability and materiality on organisations.

Perseus was launched in the UK Pavilion to create a protocol that will automate SME emissions reporting, starting with the carbon footprint of electricity consumption. This will accelerate other metrics that will inform investment decisions, enable targeted decarbonisation interventions, reduce reporting burdens and unlock green finance.

• COP28 Presidency and IEA deliver call-to-action on accelerating the energy transition and keeping 1.5 degrees within reach, ahead of final landmark Dialogue at COP28
• COP28 Presidency puts food systems transformation on global climate agenda as more than 130 world leaders endorse Food and Agriculture Declaration
• World Bank Group Doubles Down on Financial Ambition to Drive Climate Action and Build Resilience
• UAE commits US$30bn in catalytic capital to launch landmark climate-focused investment vehicle at COP28
• COP28 Presidency and Bloomberg Philanthropies kick off historic Local Climate Action Summit to celebrate and scale multi-level climate partnership
• COP28 Galvanizes Finance and Global Unity for Forests and the Ocean
• Over 120 countries back COP28 UAE Climate and Health Declaration delivering breakthrough moment for health in climate talks
• Perseus: automating SME emissions reporting

In the run-up to COP28, the NatWest team hosted a webinar with investors and customers to reflect on progress post COP27 and on the expectations for this year’s COP. Specialists from Abrdn, BNP Paribas AM, the World Bank and NatWest highlighted the growing investor focus on adaptation finance, following financing for climate mitigation. They also emphasised the need to channel help and funding towards developing countries most affected by climate change. You can watch the replay of the webinar here.