Of the two global events taking place in the MENA region in November 2022, it seems likely that the World Cup will be better remembered, perhaps for more than just the football, than the outcomes of COP27. Sharm-El Sheik reflects a reality of stifled progress. Issues such as the need for a climate change devastation fund has been agreed upon but the devil will inevitably lie in the detail. So what were the key takeaways from this year’s event?

A loss and damage fund will be established

The implementation plan has accepted that climate change is having an adverse impact on all economies, with developing economies particularly suffering the consequences. Therefore, making provision for a Loss and Damage fund to provide compensation for these effects in countries in dire need of financial assistance is most welcome. However, there is no agreement on how this fund will be set up and funded, which will likely prolong the debate about taking responsibility over the coming years.

Financing gaps remain

Previous commitments for developed countries to provide annual funding of 100 billion dollars to developing countries for mitigation action have not yet been met. This highlights the gap between the pledges and commitments that are made, and real-world action. With the pledge now to establish the loss and damage fund, can the potential recipients of funding be sure it will materialise and what actions may they take?

The need for investment in renewables continues

There is a clear role for asset owners to provide capital, given the need for over 4 trillion dollars needs to be channelled towards renewable energy each year, this being in addition to the investment to support the transition to sustainable, net zero economies. The investment opportunities that will arise may include the creation of carbon capture technologies, flood defences and reforestation measures to help countries adapt to the current irreversible effects of climate change, whilst actively trying to mitigate further climate change damages.

There is still silence on fossil fuels

Whilst there is consensus on the need to reduce emissions and agreement to follow the best available science, the clear route to delivering this through the phase down of fossil fuels is not mentioned. Whilst there is agreement on phasing out unabated coal power generation, there is no settled pathway on oil and gas, potentially a consequence of the significant reported presence of industry lobbyists at the conference. There is clearly a desire from developing nations to be able to exploit these natural resources to fund growth, in the same way that developed nations have over many decades.

Policy uncertainty prevails

COP27 nations have reaffirmed Glasgow’s COP26 commitment to keeping temperature to a 1.5-degree limit. However, until policy makers make clearer and more robust commitments rather than skirting around the issue and stating commitments perceived to be in favour of making a real change, then uncertainties are likely to remain for investors.