COP 27 preview: regaining momentum
COP 27 (The UN Climate Change Conference) takes place in Egypt in November, providing a check-in on global progress towards net zero in a year dominated by economic and geopolitical pressures. There are reasons to be optimistic.
Key takeaways
- The focus of this year’s COP 27 is on “delivery” after an eventful year that has also revealed the flaws in our existing energy mix
- The financial sector will be in the spotlight, including an update on the Climate Finance Delivery plan that aims to mobilise climate finance for developing countries
- In a year of geopolitical upheavals, severe weather events have emphasised the need to stay focused on climate and the biodiversity topics with which it is closely connected
In November 2022, the world’s attention will be drawn to Egypt and COP 27, the global climate summit. Whereas last year’s conference slogan was Uniting the world to tackle climate change, this year the focus is on Delivering for people and the planet. This shift underscores the sense of urgency around implementation, especially after an eventful 12 months. At last year’s summit, I ended my panel by asking what it would take for climate to be taken seriously by the financial services sector – 2022 demonstrated how much we still need to evolve the wiring of the modern economy.
COP 27 will seek to achieve the right balance of optimism and realism required to renew the solidarity between nations, and the agenda aims to achieve this through a more explicit reach into biodiversity and social factors. It is only through a coherent and collaborative interplay of climate, planet and people that we can reclaim any momentum lost in 2022.
Conference priorities
What do we expect to be the key talking points of the conference? Let’s start with the elephant in the room – how economic and geopolitical events are impacting the 1.5 degree-trajectory. The risk is that the political mission of ensuring energy security, access and affordability in the very near term decelerates a transition to a cleaner energy transition and a phasing-out of coal.
On the other hand, the opportunity relates to the recognition of the flaws in our existing energy mix, major high-profile initiatives like the US Inflation Reduction Act, and the fact that twice as many companies joined the Science Based Targets initiative this year compared with 2021. A key area of optimism is the significant progress being made on renewables in China, Europe, India and the US – renewable capacity is expected to pass the 300GW market for the first time this year. The Science and Solutions Days of COP 27 will capture the spectrum of climate risk and opportunities.
The first priority of last year’s COP 26 summit was to raise pledges to keep the 1.5-degree-target alive. The pledges were significant – phasing out coal, reducing methane, stopping deforestation, and accelerating electric vehicle adoption – but these only lowered projected global warming from 2.2 to 1.8°C. Interest in additional pledges or nationally determined contribution (NDC) upgrades is likely to be replaced by execution of current NDCs, evidence of climate mitigation action, and adaptation strategies.Progress by the financial sector
COP 27 starts with Finance Day, and the Glasgow Financial Alliance for Net Zero (GFANZ) initiative – which was proudly launched ahead of last year’s event – will be in the limelight. The financial sector has faced several challenges including achieving a common approach to financed emissions and making progress on coal financing and regional policy and priorities. GFANZ published a consultation on net-zero transition planning guidelines by financial institutions in June, with a final report expected ahead of the conference. It remains a voluntary initiative: perhaps we need regulation and formal public policies to overcome limitations as well as a tighter alignment with public financing.
Staying on the finance theme, just transition and the Climate Finance Delivery plan will come back into focus. The latter aims to mobilise USD 100 billion per year in climate finance to support developing countries – this year’s report made clear that we were still short in 2020 and any mobilisation was concentrated in middleincome and lower-risk profile countries. We should take a leaf out of Denmark’s book, whose direct and indirect commitments have risen significantly, reminding us of the key role of public-private initiatives, especially for adaptation. But as well as reaching a USD 100 billion threshold, perhaps the conference will consider the recent IMF climate note and how we can ensure that funds are being directed effectively at lower-income and higher-risk sovereigns.
Role of biodiversity
Last year, we expected biodiversity to start receiving equal billing to the climate topic in 2022. While we are not there yet, having three separate thematic days for Adaptation and Agriculture, Water, and Biodiversity is significant. The rising frequency and severity of weather events continues, contrasting the worst European drought in centuries along with the floods in Pakistan. From clean water needed to sustain life through to significant disruption risks from drought or flood events, the role biodiversity plays in protecting welfare and climate change is becoming clear. December will see the UN COP 15 Biodiversity Conference in Montreal, where governments will convene to agree on a Global Biodiversity Framework for the coming decade – COP 27 could lay the ground perfectly.
In summary, despite the near-term headwinds presented by 2022, the need and desire to develop climate solutions remains. As with emissions, the agenda was unlikely to move linearly, but if we seize the progress on renewables, finance has an integral role in being part of the solution to scale up the ingenuity and collectivity of a global economy. Both the public and private sectors have a critical role to play in innovating around climate finance to develop solutions for our economies and societies.
Matt Christensen joins Günther Thalliger, Member of the Board of Management, Allianz SE during COP 27 on Wednesday 9 November at the EIB & Benelux Pavilion to discuss 'Private sector mobilisation - new instruments and new ideas"
-
Investing involves risk. The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Past performance is not indicative of future performance. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice or a recommendation to buy, sell or hold any security and shall not be deemed an offer to sell or a solicitation of an offer to buy any security.
The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. Certain data used are derived from various sources believed to be reliable, but the accuracy or completeness of the data is not guaranteed and no liability is assumed for any direct or consequential losses arising from their use. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted.
This material has not been reviewed by any regulatory authorities. In mainland China, it is for Qualified Domestic Institutional Investors scheme pursuant to applicable rules and regulations and is for information purpose only. This document does not constitute a public offer by virtue of Act Number 26.831 of the Argentine Republic and General Resolution No. 622/2013 of the NSC. This communication's sole purpose is to inform and does not under any circumstance constitute promotion or publicity of Allianz Global Investors products and/or services in Colombia or to Colombian residents pursuant to part 4 of Decree 2555 of 2010. This communication does not in any way aim to directly or indirectly initiate the purchase of a product or the provision of a service offered by Allianz Global Investors. Via reception of his document, each resident in Colombia acknowledges and accepts to have contacted Allianz Global Investors via their own initiative and that the communication under no circumstances does not arise from any promotional or marketing activities carried out by Allianz Global Investors. Colombian residents accept that accessing any type of social network page of Allianz Global Investors is done under their own responsibility and initiative and are aware that they may access specific information on the products and services of Allianz Global Investors. This communication is strictly private and confidential and may not be reproduced. This communication does not constitute a public offer of securities in Colombia pursuant to the public offer regulation set forth in Decree 2555 of 2010. This communication and the information provided herein should not be considered a solicitation or an offer by Allianz Global Investors or its affiliates to provide any financial products in Brazil, Panama, Peru, and Uruguay. In Australia, this material is presented by Allianz Global Investors Asia Pacific Limited (“AllianzGI AP”) and is intended for the use of investment consultants and other institutional/professional investors only, and is not directed to the public or individual retail investors. AllianzGI AP is not licensed to provide financial services to retail clients in Australia. AllianzGI AP is exempt from the requirement to hold an Australian Foreign Financial Service License under the Corporations Act 2001 (Cth) pursuant to ASIC Class Order (CO 03/1103) with respect to the provision of financial services to wholesale clients only. AllianzGI AP is licensed and regulated by Hong Kong Securities and Futures Commission under Hong Kong laws, which differ from Australian laws.
This document is being distributed by the following Allianz Global Investors companies: Allianz Global Investors U.S. LLC, an investment adviser registered with the U.S. Securities and Exchange Commission; Allianz Global Investors Distributors LLC, distributor registered with FINRA, is affiliated with Allianz Global Investors U.S. LLC; Allianz Global Investors GmbH, an investment company in Germany, authorized by the German Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin); Allianz Global Investors (Schweiz) AG; in HK, by Allianz Global Investors Asia Pacific Ltd., licensed by the Hong Kong Securities and Futures Commission; ; in Singapore, by Allianz Global Investors Singapore Ltd., regulated by the Monetary Authority of Singapore [Company Registration No. 199907169Z]; in Japan, by Allianz Global Investors Japan Co., Ltd., registered in Japan as a Financial Instruments Business Operator [Registered No. The Director of Kanto Local Finance Bureau (Financial Instruments Business Operator), No. 424], Member of Japan Investment Advisers Association, the Investment Trust Association, Japan and Type II Financial Instruments Firms Association; in Taiwan, by Allianz Global Investors Taiwan Ltd., licensed by Financial Supervisory Commission in Taiwan; and in Indonesia, by PT. Allianz Global Investors Asset Management Indonesia licensed by Indonesia Financial Services Authority (OJK).
2477020
