What is COP27?
COP stands for Conference of the Parties. COP is the decision-making body of the United Nations Framework Convention on Climate Change (UNFCCC), which is an international environmental treaty designed to mitigate climate change. The parties of the COP are the governments that attend the meetings and that are signatories to the UNFCCC. Corporations, NGOs and activists attend COPs as well.
COP meetings are held on an annual basis. COP26 was held last November in Glasgow, Scotland. Many are familiar with 2015’s COP21, which resulted in the Paris Agreement (the first legally binding global treaty on climate change).1
COP27 is the 27th meeting, taking place November 6-18 in Sharm El Sheikh, Egypt, and will bring together global politicians, business leaders, scientists and activists to discuss climate-related issues, solutions and goals.
How COP27 Builds on COP26
In the year that has passed since COP26 in Glasgow, there has been a seismic shift in the global geopolitical agenda for climate and sustainability. Russia’s invasion of Ukraine has resulted in soaring energy and crop prices, sending energy and food security to the top of the global agenda.2 The U.S. and China have suspended climate talks amidst rising political tensions.3
Meanwhile, natural disasters and other extreme climate events have devastated communities around the world, from Europe’s worst drought in 500 years4 to the floods in Pakistan to the destruction left in the wake of Hurricane Ian in the U.S.
A report from UN Climate Change reveals that countries are mitigating their greenhouse gas (GHG) emissions, but that these efforts remain insufficient to limit the global temperature rise to 1.5 degrees Celsius by the end of the century (which is the ultimate goal of the Paris Agreement). According to the report, only 24 out of 193 countries have increased their climate ambitions this year to work towards their climate pledges, which still puts the world on track for 2.5 degrees of warming in this time period.5
COP27 has not received nearly as much press or anticipation compared to COP26 in Glasgow a year ago and isn’t regarded as high priority by many top-level executives. While last year’s meeting had many prominent corporate heads in attendance, many of those notable individuals will not be present at the meeting this November, including BlackRock CEO Larry Fink, Citi Group CEO Jane Fraser and Standard Chartered CEO Bill Winters.6 The newly appointed UK prime minister Rishi Sunak will also be absent.7
The COP26 summit marked a deadline for countries to set new GHG emissions reductions targets, also known as Nationally Determined Contributions (NDCs), under the Paris Agreement. It also finalized the Paris Agreement rulebook, which lays out how countries can be held accountable for their climate pledges. COP27 will focus largely on implementing these emissions reductions in order to operationalize the Paris Agreement.8
On the Agenda: Action, Adaptation and Natural Capital
“Mo Commitments, Less Problems?” Commitments and Credibility
Countries will report on their progress towards meeting the goals set out in their NDCs. Countries, alongside companies, financial institutions and other private sector actors are expected to announce how they will continue to work towards, and in some cases step up, their climate ambitions. Countries will be expected to demonstrate progress on legislation and policies in operationalizing the Paris Agreement.
The summit with also convene financial industry groups that have made climate commitments, at a time when the credibility of these groups is faltering. COP26 resulted in the formation of a number of industry groups committed to meeting net zero GHG emissions, including the Glasgow Financial Alliance for Net Zero (GFANZ). GFANZ members represent over 500 financial sector members that have pledged to reach net zero emissions by 2050 and represent $135T in assets under management (AUM).9 While these groups have the potential to mainstream and institutionalize more climate-friendly finance, recent coverage has suggested that some banks and other financial actors are considering “quiet quitting” their pledges due to the possibility of legal risks10 and as traditional energy has experienced a market resurgence this year.11 The conference will reveal the credibility of these industry groups.
Adaptation Is the New Mitigation
While previous COPs have focused mostly on climate change mitigation, or reducing emissions, COP27 will spotlight climate change adaptation like never before. Climate change adaptation covers how countries and communities will adapt to the current and future impacts of climate change—such as, updating water infrastructure and making agriculture more climate resilient.
At COP26, developed countries agreed to at least double finance for adaptation, and many stakeholders are calling for even greater levels of adaptation funding to match the amounts that are now being spent on mitigation.12
The 2022 Annual Report from the Intergovernmental Panel on Climate Change (IPCC) found that climate impacts are more widespread and severe than expected. The report also detailed that there is a large gap between current adaptation levels and those needed, which is mostly due to a lack of financing.13 Mobilizing capital into climate change adaptation projects will be a major focus of COP27 negotiations.
Climate Finance and Loss and Damage
Developing countries can be expected to call on wealthier nations to provide more financing for climate change mitigating and adaptation projects in their respective countries. At COP21 in Paris, developed countries pledged $100B per year for climate action in developing countries from 2020 to 2025, a goal which has not been met.14 Developing countries will also look for funding to address the costs of loss and damage, which refers to the destructive impacts of climate change that cannot be avoided by mitigation and adaptation.15
Biodiversity and Natural Capital
COP26 was the first of the meetings to focus extensively on the crucial role that nature-based solutions will play in drawing down emissions and helping countries adapt to the impacts of our changing climate.16 The summit this year can be expected to build on this focus and call for financing for natural capital and biodiversity projects, including allowing forests to regrow, restoring coastal wetlands and switching to restorative agricultural practices.17
The Jury Is Out
While COP27 has received far less attention and will not deliver on stricter climate action, it will hold countries accountable for their progress (or lack thereof) towards emissions reductions and will focus largely on implementing and operationalizing the goals of the Paris Agreement. The summit will take a special focus on climate change adaptation, climate finance and nature-based solutions that were not considered at previous summits. While it is a less important COP, it provides an opportunity for continued accountability and dialogue as the global community attempts to limit the global temperature rise to 1.5 degrees Celsius by the end of the century.
Originally published by VanEck on November 4, 2022.
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