What does business want from COP28? And is it getting it?

Michael Watson, Head of Climate & Sustainability Advisory at Pinsent Masons discusses the need for a shift in the pace of change and the necessity for a supportive policy framework that encourages climate ambition. 

At the first COP there were seven attendees representing business or the private sector. This trickle of private sector engagement is now a tidal wave at COP28.

All major industries and sectors are now represented – and in the first few days of COP28 world leaders were joined by over 1300 CEOs. Many CEOs were attending events either at the Business and Philanthropy Forum (in collaboration with the King Charles led Sustainable Markets Initiative) or more widely across the venues in Dubai (which are plentiful of course).

The clear message from those attending and not directly involved in the intergovernmental negotiations is that two things are critical:

Firstly, clearer and more consistent regulation (to implement NDCs) and a Carbon Price and Market.  Whether or not they are achieved at this COP, undoubtedly the voices of business are being heard loud and clear in the negotiation and at governmental level.

Secondly, the level of cross industry collaboration increasing ambition and sharing experience in the private sector is evident.  Business is increasingly asking: what more can I or should I do in the absence of clear guidance from the government policy and direction?

But a yawning implementation gap means that business and government are going to have to find ways to work together even more effectively on the challenges. From the meetings we attended, we heard five issues on this theme raised consistently:

1. Accelerating the energy transition immediately is critical: renewable power is now or should be the “default choice of the rational actor” but not all projects and technologies are at the same stage (whether due to technological readiness or political risk for example).  This often requires new forms of public-private partnerships supported by regulation or standardisation.  We saw for example the launch of the FAST infrastructure label which seeks to assist with standardisation and investability.
2. Blended finance is having a renaissance: this is definitely the winner of word bingo at COP28 – the need to combine philanthropic, the Multinational Development Bank, grant and commercial finance and investment to enable the much touted wall of capital to be deployed at pace. Bill Gates made a significant intervention on this subject, but moving beyond words to get finance moving is going to require radically greater levels of collaboration and more basic scalable templates, not project by project solutions.
3. Climate-ambitious companies want a ‘first mover friendly’ policy environment: there was considerable handwringing from business over the challenges of aligning value creation with sustainability. We heard numerous times that policy frameworks punish rather than encourage companies to be ambitious on climate. Policymakers have a role in encouraging a race to the top rather than a race to the bottom, but government is often lagging behind the private sector. This needs to change.
4. Transition plans are critical: widely viewed as the key to turning targets into action, we heard again and again that transition plans are going to be heavily relied on by lenders and investors when making lending/investment decisions in future. The UK’s Transition Plan Taskforce recommendations look likely to be adopted globally and standardised transition planning is going to be critical to closing the ambition gap.  It has a lot of coverage and engagement.
5. Corporate climate leadership matters: the scale of change implied by what has already been agreed at COP suggests a radically different regulatory environment in future. Businesses must start shaping these new rules and are well advised to start collaborating with similar minded organisations on voluntary standards which regulators can adopt in future.

In summary, there have been some important announcements and businesses are present and engaged. The scale of the challenge is very significant, however, and the stocktake reminds us that we are a long way off track.  The key issues of fossil fuel phase down/out, carbon price and clearer regulatory frameworks all remain on the table and the outcome of those negotiations will determine if this will be considered a successful COP.

A related observation that has been raised is whether the COP UNFCCC is still fit for purpose – it requires unanimity to make decisions and the time may have come to start the process to move to a “super majority” decision making process.  This may be a step to delivering the key outcomes above and in turn unlocking more of the private finance which is essential to address the shortfall identified in the global stocktake.

But as the great Nelson Mandela said “it always seems impossible until it’s done” or in the more recent words of Al Gore: Get moving.