COP28 deal pledges global transition away from fossil fuel

Historic new deal to move away from using fossil fuels comes alongside launch of key Net-Zero initiatives.

An historic new deal “to move away from using fossil fuels” has been agreed at the UN climate summit in Dubai after days of negotiations. The text recognizes “the need for deep, rapid and sustained reductions if humanity is to limit temperature rises to 1.5C above pre-industrial levels”.

The climate deal approved by almost 200 countries has been hailed by the COP28 president Sultan al-Jaber as an “historic package”. He also cautioned that “an agreement is only as good as its implementation”.

He went on to warn: “We are what we do, not what we say”.

However, some countries, especially small island nations, are unhappy the wording wasn’t stronger, and developing countries, including Bangladesh and Bolivia, say the wording is unfair. Criticisms include:

  • Money: The text only “notes the need” for more finance for poorer nations to transfer away from fossil fuels without any requirement from developed countries to provide more financial support.
  • Fairness: The text only says “transitioning away from fossil fuels” and does not ask developed countries to take the lead on this. Developing nations say it is unfair to expect all countries to move at the same time when developed countries have economically benefited for longer from using oil, gas and coal.

The adaptation text, which outlines how countries will prepare for climate change, is yet to be passed.

Many campaign groups, who had been hoping for a pledge to “phase out fossil fuels”, say that the agreement has not gone far enough; Greenpeace said it won’t be possible to achieve the transition in a “fair and fast manner”.

UK climate minister Graham Stuart admitted that there are “elements here we do not like,” however this is a “historic moment” that should inspire action across the globe.

John Kerry, the USA’s climate envoy, says everyone should be pleased with the deal, considering the challenges posed by the war in Ukraine and the Israel-Gaza conflict.

“Everyone might have said things a bit differently … but I think this is a cause for optimism,” he adds. “I am in awe of the spirit of cooperation.”

COP28 saw the launch of several Net-Zero initiatives aimed at mobilizing financial resources to support the transition to a low carbon economy. Below are some of the key initiatives.

The Net-Zero Data Public Utility

The Net-Zero Data Public Utility (NZDPU) was launched by French President Emmanuel Macron, International Sustainability Standards Board (ISSB) chair Emmanuel Faber, the UN Secretary-General’s special envoy on climate ambition and solutions, Michael Bloomberg, and LSEG (London Stock Exchange Group) chief executive David Schwimmer.

The NZDPU is a proposed open-data platform that would provide a central repository of company-level climate transition-related data. The data would be standardized and freely accessible, allowing investors, policymakers, and other stakeholders to track and compare companies’ climate progress. The NZDPU would help to inform investment decisions, support corporate climate reporting, and promote accountability for climate action.

The platform partners are the Task Force on Climate-related Financial Disclosures (TCFD), which has launched standards for more transparency on companies’ climate risks; and the Taskforce on Nature-related Financial Disclosures (TNFD) which has developed standards for transparency on companies’ nature risks

New climate disclosure standards and jurisdictional requirements are due to be adopted next year including: the European Commission’s European Sustainability Reporting Standards (ESRS) which will be applied by thousands of EU companies from 2024 onwards and the International Sustainability Standards Board (ISSB)’s Climate-related Disclosure Standards which will cover thousands of companies globally.

David Schwimmer, CEO at LSEG said: “Accessible, consistent and reliable climate data is essential for enabling the transition to a Net-Zero economy. The launch of the NZDPU proof of concept, alongside the ISSB’s global baseline reporting standards in June 2023, marks significant progress in addressing climate data gaps.”

French President Emmanuel Macron said a massive scale-up of private financial flows towards investments will be required to contribute to the net zero objective. “It is now already possible to compare climate commitments of 400 companies, and many more will come on board to make it a universal platform, accessible to consumers and investors for free,” said Macron.

Key benefits of NZDPU

  • Increased transparency and comparability of climate data to allow investors, policymakers, and other stakeholders to easily compare and contrast companies’ performance.
  • Enhanced accountability for climate action to encourage companies to take more responsibility for their climate impact and invest in decarbonization efforts.
  • Support for corporate climate reporting: a resource for companies to develop and implement their climate transition plans, and it could also be used to verify and validate corporate climate data.
  • Accelerated mobilization of private finance for climate action: The NZDPU could help to attract more private capital into climate-aligned investments by providing investors with reliable and consistent data on companies’ climate risk and resilience.

The Net-Zero Export Credit Agencies Alliance

The UN-convened Net-Zero Export Credit Agencies Alliance (NZECA) is a coalition of eight leading export credit agencies that have committed to align their financing to deliver net-zero economies by 2050. Together, they support an estimated $120 billion in international trade in 2022.

At COP28, NZECA members have committed to: 

  • Transition all operational and attributable greenhouse gas (GHG) emissions from business activities in alignment with the path to net zero by mid-century, or sooner.
  • Publish GHG emission data and evidence annually to showcase action in line with the commitments. This includes issuing relevant international or national GHG emissions reporting protocols and climate portfolio alignment methodologies, as well as incorporating climate risk considerations into investment decisions.

The Net Zero Banking Alliance

The UN-convened Net Zero Banking Alliance (NZBA) is a group of leading global  banks committed to financing ambitious climate action to transition the real economy to net-zero greenhouse gas emissions by 2050.

At COP28, NZBA launched a new roadmap, Just Transition Finance: Pathways for Banking and Insurance, to help the financial sector to promote a just transition to low-carbon, resource-efficient and resilient economies. The new guidance will support members and the wider financial sector in embedding just transition practices in their products and business operations.

The recommendations aim to help institutions ensure compliance with social performance standards aligned with Human Rights frameworks, while enabling a substantial positive social impact. Amongst them are: 

  • securing a commitment to just transition from senior management and governance entities, and ensure this commitment is embedded into existing organizational strategies;
  • mapping and assessing the social risks and opportunities facing financial institutions as a result of the climate transition;
  • putting people at the heart of institutional strategy and decision-making through social dialogue and stakeholder engagement;  
  • developing an implementation strategy to incorporate just transition principles into institutional policies, processes and capacity building;
  • developing products and solutions to provide financing and insurance coverage for just transition projects and activities;  
  • improving financial inclusion and closing the protection gap to improve client resilience to climate transition;  
  • embedding social and environmental considerations in due diligence, legal agreements and monitoring processes;  
  • fostering behavioral change through informing and engaging clients on committing to a just transition; 
  • engaging in strategic partnerships to provide a catalyst for a just transition through industry initiatives and other stakeholders.