This year's global climate conference COP28, recently held in Dubai, United Arab Emirates, assembled government officials from around the world to negotiate national commitments to climate frameworks. The event was also notable as it was held at the halfway point between the 2015 Paris Agreement and 2030, the first substantial interim waypoint on the road to net-zero in 2050. Here's our take on the event and what it could mean for investors going forward.
The future is renewable
A deal which signals the “beginning of the end” for fossil fuels has been agreed at COP28 this week. Whilst the final agreement does not go far enough in committing to the phase out of fossil fuels that so many had called for, it does show significant progress as the first global commitment to transition away from fossil fuels. It is the first time that a UN climate summit has concluded with a call to address the main cause of the climate crisis.
From an investment standpoint, there are some very notable aspects of the COP28 pact, such as a promise to triple the use of renewables by 2030 and double energy efficiency levels. The economics are well in favor now of clean energy and a very positive confirmation for Storebrand's investment strategy which has made a commitment to lock 15% of total AUM to solution companies. The business case is becoming clearer for companies to better mitigate and seize the opportunities presented by the climate transition, something we continue to emphasize through our dialogue with our investees.
The need to escalate funding for nature-based solutions
COP28 also presented an opportunity for countries to discuss the progress made since COP15 and focus on integrating nature into climate change. Many have pledged funding, such as Norway which announced to increase its contribution to both Indonesia and Brazil to promote conversation, but there remains a large funding gap for nature-based solutions.
Storebrand Asset Management has been championing for this through our own commitments as well as through partnership with the Investors Policy Dialogue on Deforestation. Most countries do have some measures in place to combat deforestation, while providing favorable conditions for business and investments.
However, escalating deforestation in recent years in countries rich in such natural resources, combined with concerns about weakening environmental and human rights policies as well as lack of effective enforcement, are creating widespread uncertainty about the conditions for investing in or providing financial services to these countries.
In whose best interest?
The international nature of COP, with representatives from all corners of the world and segments, including from the private sector, also highlights the importance of this for our own sector. COP 28 importantly recognized that policymakers need to create a better enabling environment to support finance flows, acknowledging the critical role of the private sector and stressed the need to enhance policy guidance, incentives, regulations and enabling conditions to attract the necessary investments for a global transition towards low greenhouse gas emissions and climate-resilient development.
Separately, business has a significant role to play in reducing both climate and nature impact, but this role comes with huge responsibility. NGO Global Witness reported that a record 2,456 fossil fuel lobbyists are at COP28 – making them the third biggest delegation at the conference if they were one nation.
Investors are now increasingly vocal about corporate lobbying practices and at Storebrand, there is now a common red line through all our engagements, and that is climate lobbying. Figures published by think tank InfluenceMap indicate that corporate lobbying has been a major driver of the growing political pushback against responsible investment practices, with large companies helping to table laws banning ESG in several jurisdictions.
