Top 5 Insights from COP27

The United Nations’ annual COP events have historically been filled with deliberations among international governments and other stakeholders, which evolve into major pledges and agreements. This year’s COP27 was no different as member nations reaffirmed their commitment to fight climate change and its negative impacts.

We’ve highlighted some of the news items we thought were among the most unique or impactful to come out of this November’s climate change conference in Sharm el-Sheikh, Egypt. Here are our top five insights from this noteworthy world stage climate-focused summit.

For context: The purpose of the annual COP (short for the Conference of the Parties to the United Nations Framework Convention on Climate Change) is for global leaders to assess the status of climate change, and the status of the global response. Since the Paris Agreement, named for the COP convention in 2015 where the landmark treaty was formed, the benchmark for success has been to limit global temperature increase to 1.5 degrees Celsius above pre-industrial levels.

1. Key Theme is Climate Finance for Developing Nations

During COP27’s final hours, nations agreed to establish a loss and damage fund to assist “developing countries that are particularly vulnerable” to the negative impacts of climate change. A committee will meet over the next year to work out details, such as potential additional sources of funding to add to the voluntary contributions from developed countries.

Creating a dedicated loss and damage fund was one of the pillars of the Paris Agreement, particularly since poorest countries tend to contribute the fewest emissions but are already feeling disproportionate effects. Additional climate finance announcements included—

• A public-private partnership between the U.S. Government, The Rockefeller Foundation and the Bezos Earth Fund that will work to direct private capital to energy transition projects in developing economies.
• More than $230 million in additional pledges to the Adaptation Fund for projects to assist communities vulnerable to climate change.
• The launch of the Just Energy Transition Partnership to transform Indonesia’s power sector to deploy renewable energy and cap emissions, announced during the G20 Summit that took place simultaneously to COP27.

2. UN ‘Draws Red Line around Greenwashing’ with Net Zero Guidelines

With the timeline for action to limit global temperature warming to 1.5 degrees becoming more urgent, the United Nations issued ten recommendations that set clear standards and criteria for the net zero pledges that have become common in organizations’ sustainability reporting.

The recommendations aim “to bring integrity, transparency and accountability” to net zero statements, writes Catherine McKenna, chair of the expert group appointed by United Nations Secretary-General António Guterres to assess the state of play of net zero commitments. The United Nations report addresses concerns about greenwashing—something that critics argue net zero statements are ripe for due to their longer-term time frames and frequent scarcity of detail. The report makes detailed recommendations to guide businesses, financial institutions, cities and regions as they announce net zero pledges, set net zero targets, create transition plans and engage in other related activities.

3. ISSB and Global Baseline Efforts Continue to Make Headlines

The International Sustainability Standards Board (ISSB) announced at last year’s COP26 continued to generate news during this year’s summit.The ISSB is working to set global baseline sustainability standards for financial markets. 

Working to Align with Existing Standards - Over the past year the ISSB has engaged with jurisdictions around the world that, for global baseline standards to be effective, would need to either regulate adoption of ISSB standards or issue local regulations that are in relative alignment with the global baseline ISSB is developing.

During COP27, ISSB gave an update that it is working with the European Commission and the European Financial Reporting Advisory Group (EFRAG) on the ability of their respective standards to work together and to align on key climate disclosures. ISSB also says that it continues to work with the International Organization of Securities Commissions (IOSCO) to prepare for the group’s potential endorsement of its standards.  

An Emphasis on Emerging Economy Stakeholders - ISSB also announced the Partnership Framework, a five-year initiative with approximately 30 initial partners, to increase awareness and adoption of its sustainability standards. Inclusion of stakeholders from developing and emerging economies as well as smaller entities is an emphasis.

The Framework is a means to work toward the ISSB’s goal to establish a “truly global baseline,” notes the IFRS document outlining the initiative—one in which stakeholders from every country will be able to participate. In addition to raising awareness and providing education about the standards, the Partnership aims to make sure that stakeholders from emerging and developing economies are included in the standard-setting process itself.

Adoption by an ESG Heavyweight - Finally, CDP announced that beginning in 2024 the questions it asks businesses and governments about their environmental performance and practices will incorporate ISSB climate-related disclosures (which are currently in the process of being developed). CDP is an established and respected force in the sustainability questionnaire space. The nonprofit says that more than 18,700 companies, which represent half of global market cap, disclosed data during its most recent questionnaire cycle. 

4. Green Shipping Challenge Sets Sail

It’s increasingly common for organizations to consider their complete greenhouse gas emissions inventories, and the transportation and distribution of products is an important component of many businesses’ Scope 3 disclosures.

During COP27, the United States and Norway announced a Green Shipping Challenge to help align the shipping sector—which, if the shipping sector were a country, would be among the 10 largest greenhouse gas emitters according to a U.S. State Department press release—with the global 1.5 degrees target.

More than 40 countries, businesses and ports made announcements that align with the challenge. The United States says that it will facilitate low and zero-emissions green shipping corridors and create a national action plan for maritime decarbonization.  

5. Disaster Warning Systems Discussed as a Critical Need

Early in the conference, United Nations Secretary-General Guterres announced a $3.1 billion plan to bring early warning systems to communities in developing countries that are at high risk for extreme weather events but have no life-saving warning and response infrastructure in place. Between 2023 and 2027, the plan will establish processes and tools for monitoring and forecasting, rapid communication, and preparation and response.

In conjunction with COP27, Google announced the expansion of its flood forecasting and alerts to 18 additional countries in Africa, Latin America and Southeast Asia. The tech giant has provided flood forecasting and alerts in some areas since 2018 but says that this year’s expansion is due to recent breakthroughs in AI-based flood forecasting models.

We will continue to monitor key developments in sustainability topics and reporting. Visit the BDO ESG Center of Excellence to read more insights.