COP27 must ‘bring climate back to top’ of agenda amid energy crisis

Next week’s COP27 conference must push climate back to the top of the agenda, leading investors say, amid concerns the war in Ukraine and energy crisis have dragged governments’ focus away from achieving decarbonisation targets.

The two-week Conference of the Parties to the United Nations Framework Convention on Climate Change, known as COP27, will begin at the end of next week in Sharm El Sheikh, Egypt.

The two-week Conference of the Parties to the United Nations Framework Convention on Climate Change, known as COP27, will begin at the end of next week in Sharm El Sheikh, Egypt.Credit:AP

It has been characterised as the “implementation” conference with a focus on how the targets agreed to at COP26 will be reached. The conference is keenly watched by investors and the UN has flagged a focus on how to fund the climate transition and mobilise the trillions of dollars needed to finance it.

At the same time, governments across the world have been grappling with the impact of the deepening energy crisis, raising concerns of a diminishing focus on meeting climate targets.

The Russian invasion of Ukraine in February this year exacerbated an already tight energy market, which had been battered by the rapid economic rebound from the COVID-19 pandemic and extreme weather conditions in various parts of the world. The escalating crisis has led to soaring global energy prices, including for oil, gas and coal, and pushed costs up for consumers.

Daniela Jaramillo, the director of sustainable investing at $US618 billion ($966 billion) global asset manager Fidelity International, said the global context was very different at the time of the last conference.

“A lot has changed since then. And we don’t only see various domestic crisis around the world, but obviously the Ukraine war has really pushed climate down the agenda. So I think one of the first things that at least investors hope to see [at COP27] is this will be a space for the re-articulation of why do we need to continue moving faster towards net-zero,” she said.

“It’s really about re-articulating the ‘why’, when we’re thinking of energy security, why is actually decarbonising the fastest the more long-term way of thinking of energy security, as opposed to delaying action.”

Jaramillo said while she did not expect the same big headlines that came out of COP26, the discussion around implementation of net-zero pledges would be critical for investors.

“What these conferences do is to provide investors with more information … of the direction of policy travel. At the moment we only have these big statements which is we all pledge to something that’s very long-term. And while that gives us some direction of travel, we don’t know what that exactly means,” she said.

Fidelity’s sustainable investing director says the war in the Ukraine and the ongoing energy crisis has pushed climate down the agenda.

Rebecca Mikula-Wright, the chief executive of the Investor Group on Climate Change, also said the conference needed to keep climate change goals at the centre of the energy crisis discussion.

“In light of obviously geopolitical and energy crisis issues that are going on … really keeping the even keel and the direction of travel [is important] and continuing that acceleration and not using the current environment as an excuse to slow down the policy but recognising what we need to deal with the energy crisis,” she said.

She said a huge number of global investors and companies had made commitments to net-zero but they needed to see the government policies to back those up.

“We’re really getting into the specifics of implementation and those challenges and really identifying in much more detail some of the policy barriers that need to be broken,” she said.

EY climate change and sustainability partner Emma Herd said decarbonisation and the current energy crisis went hand in hand.

“I don’t think it’s an either-or. I think it’s actually the same discussion. Questions around energy security, energy supply, energy price, they are all questions about emissions and decarbonisation as well,” she said.

She said COP27 was taking place in a different world to last year’s conference and was likely to be more fractious as it will focus more on the detail of what is needed by each country.

“I just really hope that people don’t see that as an indication of lack of ambition because it’s actually all about how do we deliver on ambition. But I do think it’s going to be a lot more fractious than the heady times of Glasgow,” she said.

Last week, the chair of the Net-Zero Banking Alliance, one of seven groups that make up the Glasgow Financial Alliance for Net Zero launched last year, said that Russia’s unprovoked attack on Ukraine, the energy crisis and US politics were making it much harder for Wall Street to meet the climate promises it’s made.

Tracey McDermott told Bloomberg she was aware “short-term issues cannot distract us from the long-term goal” but “it must be recognised that they have an impact on how governments are approaching the energy debate”.

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