Looking ahead to COP28

Article published in Le Temps, 20 November 2023

As the world faces the growing urgency of the climate crisis, and with 2023 likely to be the hottest year on record, COP28 looms with higher stakes than ever. Published a few months ago, the UN Global Stocktake report, which examines progress towards the objectives of the Paris agreement, is alarming and unequivocal: current government policies and commitments put us on track for a global temperature increase of around 2.6 degrees Celsius above pre-industrial levels. Countries must be more ambitious in their actions to reduce emissions as per the IPCC target by 43% by 2030 and 60% by 2035, compared to 2019 levels.¹ The window of opportunity to limit this increase to 1.5 degrees Celsius, the aim of the Paris Agreement, is therefore closing fast. However, we believe that the transition in the private sector is unfolding at a faster speed and scale than policy. While policies remain key, they are only a part of the picture; we foresee a new economic system emerging that will outperform the old one.

Nature’s central role in mitigating global warming

It is clear that nature must play a central role in mitigating climate change: nature-based solutions have the potential to contribute to more than a third of the emissions reductions needed by 2030 to limit warming to below 2 degrees Celsius. However, less than 2% of climate adaptation funding is currently allocated to these solutions. Our research actually shows that nature is likely to be one of the most undervalued assets in our economy today.

Investing in nature is admittedly complex, but we believe this new asset class will quickly become mainstream and investor interest will grow. In particular, we believe that it is possible to deploy capital at scale in food commodity supply chains such as coffee and cocoa, in order to transform them using regenerative agriculture practices. We anticipate that corporate demand for regenerative commodities (those produced in harmony with, and powered by, nature) and resilient value chains will drive a major revaluation over the coming decades.

Food resilience, and the transformation of food systems more broadly, is a key topic we expect to be discussed at COP28, which should lead to greater inclusion of nature-specific targets in countries’ nationally determined contributions (NDCs). This inclusion will resonate with the private sector, where many frameworks for setting decarbonisation targets now allow for accounting negative emissions within the value chain (carbon removals), but do not allow carbon offsetting. Sourcing commodities associated with negative emissions will therefore enable these companies to meet their climate objectives while making their supply chains more resilient.

Nature is not the only priority at COP28. Our attention will also be on the energy transition and the financing of not only the transition, but also of adaptation.

The acceleration of the energy transition is likely to centre around three areas of discussion: the reduction of fossil fuel emissions, the tripling of the world’s renewable energy capacity and sustained, international collaboration on the development of green hydrogen.

Decarbonising oil companies: a double-edged sword

According to the IEA, oil and gas operations (Scope 1 and 2) account for around 15% of total energy-related emissions worldwide, equivalent to 5.1 billion tonnes of greenhouse gas emissions, while the use of oil and gas, also known as the industry’s Scope 3 emissions, accounts for 40% of energy-related emissions accounts for 40% of energy-related emissions. Setting a global decarbonisation target for oil and gas companies would therefore be a decisive success for COP28, but the scope and level of ambition are still up for discussion.

Ignoring Scope 3 emissions would be to sidestep the bulk of oil and gas contributions to the climate crisis, yet we should equally not forget about Scope 1 and 2.² The expected target is likely to cover methane emissions, a potent greenhouse gas emitted by oil and gas infrastructure, as well as pollution caused by oil and gas companies’ own operations. The ambition could go as far as halving the industry’s Scope 1 and 2 emissions, including reaching near-zero methane emissions by 2030. Initial investment of USD 600 billion would be required to halve these emissions globally by 2030 – just a fraction of the windfall revenues accumulated by the oil industry in 2022, between soaring energy prices and a global energy crisis.