The good, bad and ugly in the COP27 agreement

And so, after two increasingly frenetic weeks, COP27 finally drew to a close in the small hours of Sunday morning, with a hard-fought deal that encouraged some, gravely disappointed others and satisfied none. The FT’s news story on the final agreement is here, and you’ll find my take on it below.

I’ve also been reflecting on the festival of lobbying and branding that has grown around these intergovernmental negotiations. Wandering through the Blue Zone that is the central hub of every COP, I encountered everything from a person in a polar bear suit giving hugs to promote nuclear power, to a large installation by Canadian IT company CGI offering delegates the inspiring message: “Our world is changing, welcome to the Metaverse.”

Time for a rethink? One option, suggested by Ghanaian activist Joshua Amponsem, could be to separate the “funfair” from the negotiations — to hold a public climate discussion and networking event a couple of weeks before the COP talks get under way. That would enable a wide range of stakeholders to help frame the context of the negotiations, without distracting from them.

Assuming this change is not made in time for COP28, we could at least reconsider the current “pay to play” model that massively privileges the voices of wealthy countries and businesses over low-income nations.

Vast stretches of the Blue Zone were given over to branded “pavilions” where countries, companies and large non-profit groups pushed their respective agendas. Put together by Global Conference Management of Egypt and GL Events of France, the pavilions — which you can see in this floor map — did not come cheap. One organisation, whose pavilion was on the smaller side, told me it cost them about $200,000.

So I can only imagine how much Saudi Arabia, the world’s biggest oil exporter, paid for its space – the largest national pavilion, at 1,008m². Other big fossil fuel producers also went large: the United Arab Emirates got 1,001m², while liquefied natural gas leader Qatar had 416m² to promote the interests of its 2.9mn citizens. CGI got 240m² to celebrate the metaverse.

Meanwhile Pakistan and Bangladesh, two countries direly exposed to climate impacts, with 390mn people between them, got 100m² each. Malawi got 9m², the same as the University of Plymouth pavilion next to it. Other countries desperately vulnerable to climate impacts, from Afghanistan to Nepal to Bolivia, didn’t have a pavilion at all.

Is this really the best we can do? One alternative option, mentioned to me by UN climate champion Nigel Topping, would be to dispense with national pavilions altogether. Each country could be allocated a modestly (and equally) sized booth, with the larger “pavilions“ becoming shared discussion spaces organised by theme. That sounds like a good idea to me. (Simon Mundy)

COP27 final text: not all bad, but not good enough

By the standards of COP agreements, which require unanimous consensus among nearly 200 countries, this was a creditable result. Set against the worsening tragedy of the climate crisis, it was a colossal failure.

The positives first, starting with loss and damage finance. I was a small child when, in 1991, a group of small island states started pushing for formal talks on how wealthy, heavily emitting countries would help poorer, vulnerable ones to cover the cost of climate disasters.

Getting it on to this year’s COP agenda, for the first time, was a big achievement after three decades of effort – and we got more than just empty talk. Countries have now agreed that a dedicated fund should be established and that this should be done before COP28 begins next year. Nearly all the details remain to be decided; it is unclear how much money will be committed to the fund, and by whom. But Pakistan climate minister Sherry Rehman is right to hail this as an “investment in climate justice”.

There were positive developments, too, around blended finance. It is clear that there is a huge need for more proactive measures from multilateral development banks (MDBs), especially the World Bank, to drive capital flows for climate change mitigation and adaptation. As concern on this front has grown, the bank has often taken a defiant approach, insisting it is already doing fine. The unanimously agreed COP27 closing text will significantly increase the pressure on it and other MDBs, calling for them to “reform [their] practices and priorities” and “define a new vision…fit for the purpose of adequately addressing the global climate emergency”.

The closing text had little to say explicitly about the role of private sector companies. But it welcomed a UN report on the net zero commitments of non-state actors, published during the summit, which (as we’ve written) has set a powerful new benchmark for corporate climate plans.

Some important steps forward, then. And yet there are ample grounds for profound disappointment, most obviously the bizarre and toxic squeamishness about explicit references to fossil fuels.

Last year’s COP26 cover text was incredibly the first to include such references, when it called for a “phasedown of unabated coal power and phase-out of inefficient fossil fuel subsidies”. That was it. “Abated” coal power (with carbon capture) and efficient fossil fuel subsidies (whatever this might mean) passed without mention, along with all forms of oil and gas.

Some hoped the COP26 text would be a precursor to tougher language this year. India proposed that the COP27 cover text should call for a phase-down of all fossil fuels, not just coal – a suggestion that won the public support of more than 80 countries. Yet the idea was shot down, with some participants and observers blaming the resistance of Saudi Arabia and other big fossil fuel producers, and their close relationship with COP27’s Egyptian presidency.

That may not bode well for next year’s COP, which will take place in the United Arab Emirates, an economy strongly dependent on fossil fuels and a close Saudi ally. Yet this year’s agreement on loss and damage – which looked highly unlikely to some observers before the summit — showed that a concerted push for more ambition can yet bear fruit.

For those working towards an accelerated energy transition — and for those trying to slow it down — the preparations for COP28 begin today. (Simon Mundy)

Esma plans rules for ESG fund labels

It has been a draining two weeks in Sharm el-Sheikh. But as government officials hashed out emissions targets, the global effort to write rules for environmental, social and governance investing continued away from the spotlight.

On Friday, the European Securities and Markets Authority (Esma) proposed to regulate how funds use “ESG”, “sustainable” and other green terms in an investment product’s name. Funds that use “ESG” in the name would need to prove to Esma that at least 80 per cent of the fund is focused on ESG criteria.

“The objective is to ensure that investors are protected against unsubstantiated or exaggerated sustainability claims,” said Esma chair Verena Ross.

The 80 per cent threshold aligns with the Securities and Exchange Commission’s rule for fund names. Earlier this year, the SEC proposed its own regulations to rein in fund names. While not specifically targeting ESG funds, the SEC said sustainable and green fund names needed more scrutiny.

The mutual fund industry has opposed the SEC’s rule changes for names, arguing it would hit asset managers with increased costs. But now that Esma has launched its own regulatory effort, will mutual funds have the leverage to fight the rules? (Patrick Temple-West)

Smart read

Simon Stiell, the head of the UN Framework Convention on Climate Change — which organises the annual COP climate summit — told the FT’s Camilla Hodgson that he will be looking at “areas of improvement” for next year’s event. Asked about the heavy fossil fuel industry presence at COP27, he said: “You can’t ignore them . . . The question is how do you engage them and where do they fit within the process.”