The upcoming 28th Conference of the Parties (COP28) to the United Nations Framework Convention on Climate Change (UNFCCC) provides a critical platform for climate action. The world stands at a midpoint between the adoption of The Paris Agreement in 2015 and the crucial year 2030, where greenhouse gas (GHG) emissions must decline by 43% to limit global warming to 1.5°C. This international conference provides a key opportunity to drive substantial progress bringing together global political leaders and non-state actors to drive climate action and ensure the world is on track to deliver the goals of the Paris Agreement.
Read more on the Climate Governance Hub here:
Key messages for board directors ahead of COP28
Policy outcomes from COP28 will be important for board-level decision making. Whilst businesses are driving climate action on many fronts, they need certainty and reassurance that governments are also working on policy measures that will support the delivery of a net-zero future. The outcomes of negotiations at COP28 will send important signals to industrial markets which may influence strategic decisions on investment and decarbonisation pathways. Some outcomes may translate into national and regional regulation, which could have implications for corporate governance processes. The following points detail the most relevant policy discussion for board directors.
A significant increase in global climate ambition is needed to close the ‘emissions gap.’ Decarbonising the global energy system is key. Since no agreement on fossil fuel phase out was reached at COP27, these discussions will continue and the scaling up of renewable energy will also be an important topic. COP28 president, Dr Sultan Al Jaber, plans to involve energy companies in the discussions for the first time. Al Jaber is the chief executive of the UAE’s national oil company and has openly supported a fossil fuel ‘phase down’.
Board directors should consider how the energy transition will affect the organisation(s) they represent including how it may influence the net-zero pathway(s).
Board directors may also reflect on whether their organisation(s) could play a more active role, for example by supporting the We Mean Business Coalition’s ‘Fossil to Clean’ campaign launched during Climate Week NYC.
Unlocking finance for climate mitigation and adaptation measures that support a just and equitable transition is a priority. Discussions on voluntary carbon markets, green capital markets and green bonds will be part of the official negotiations, with a significant emphasis on unlocking finance for countries most vulnerable to the impacts of climate change. Discussions to consolidate the ‘Loss and Damage Fund’ established at COP27 are also a priority.
Board directors may consider whether their organisation(s) could contribute towards blended financing solutions in emerging economies, particularly in countries where the organisation has an operational presence.
Board directors may also wish to reflect on how the loss and damage fund will impact communities where the organisation(s) has business operations. Allocation of these funds may have further implications on the associated climate risks and opportunities for the organisation.
Decarbonisation of supply chains is a key topic. Multilevel discussions will include an emphasis on sustainable trade throughout whole supply chains. In particular, this will address large corporations which play an important role in decarbonising supply chains.
Board directors are advised to understand the proportion of Scope 3 (value chain upstream and downstream) emissions in their organisation’s GHG emissions portfolio, to follow, and be ready to act upon, relevant COP28 decisions and progress on the supply chain topic. Scope 3 emissions are explained in our Value Chain briefing.
Transition plans will also be an important topic at COP28. Initial conversations at the Climate Ambition Summit in September focused on transition plans in the context of the UN’s Integrity Matters report. The purpose is to ensure credibility and accountability of climate commitments by non-state actors. Transition planning falls within the remit of the board as it involves assessing and shaping the business strategy to achieve climate targets. The purpose is to ensure credibility and accountability of climate commitments by non-state actors. Transition planning falls within the remit of the board as it involves assessing and shaping the business strategy to achieve climate targets.
COP28 updates on transition plans will be highly relevant for board directors, alongside progress of the Transition Plan Taskforce, and may include new disclosure requirements.