COP28 negotiators have big gaps to bridge

We’ve reached the halfway point here at COP28 in Dubai. With many private-sector attendees now heading home, the “trade fair” element of the event is starting to slow down.

But the intergovernmental negotiations that are the real meat of this conference are just getting going. As I converse below, the talks on climate adaptation finance are proving particularly tough, and offer a window on the central tension here between developed and developing countries. — Simon Mundy

COP28 in brief:

A COP28 stand-off that highlights wider tensions

Much of the conversation at COP28 has rightly focused on climate change mitigation: reducing the flows of greenhouse gases that are cooking our planet.

But with the Earth’s average temperature now more than a full degree Celsius above pre-industrial levels, the effects of climate change are already hitting every nation, often with disastrous effects. And with carbon dioxide emissions reaching a new record this year, it’s clear that worse is to come.

So countries — especially the developing ones that are worst affected — will need to invest heavily in adapting to this increasingly dangerous new world, through measures from sea walls and drought-resistant crops to resettlement of entire communities.

Yet global finance for climate adaptation remains a tiny fraction of what’s required, and has actually been declining, according to a major report last month by the UN Environment Programme. That investigate found that global finance for climate adaptation in developing countries in 2021 was just $21.3bn, down from $25.2bn the year before — compared with estimated annual needs of $215bn-$387bn.

This problem has been the focus of some of the tensest negotiations here in Dubai’s Expo City, where national representatives are trying to agree on the details of a “global goal on adaptation”, as provided for in the 2015 Paris Agreement.

On Monday, the Swedish and Belizean “co-facilitators” of this work programme presented fellow negotiators with a nine-page draft agreement, saying they had worked through the night to produce it. Their colleagues gave a merciless response, raising numerous objections to the text and asking them to “start over”.

A revised version was then circulated yesterday, but drew complaints that it was little different from the previous draft.

The new version contains several “optional” clauses, which highlight some key demands of developing countries.

One of these stresses the importance of concessional and grant-based funding for adaptation — reflecting concerns that an excessive reliance on loans could put advance strain on heavily indebted developing nations.

Another would set an ambitious target of providing “at least $400bn per annum of multilateral climate finance” by 2030, as well as promising international technology transfer and capacity building.

Still another would highlight the inadequacy of developed nations’ existing pledge to double adaptation finance from 2019 levels by 2025, noting that this would reduce the financing gap by only 5 to 10 per cent.

As you can read in this report from the Earth Negotiations Bulletin (a handy resource for climate geeks who want to see how the COP sausages get made), the strength of the disagreement on this subject is raising doubts over whether the global goal on adaptation can be agreed in Dubai this month.

This element of the COP28 negotiations offers a prime example of the divergent priorities of wealthy and developing nations that, as I wrote yesterday, are looming over the entire conference. And the outcome of these climate adaptation talks will be a telling sign of whether those differences can be overcome. (Simon Mundy)

Quote of the day

“All of the flashy announcements about promised funding and scaling renewables and tree planting will sadly mean little if countries continue to extend fossil fuel development.”

— Vanessa Nakate, Ugandan climate activist

Beyond COP28: Why investors failed to adopt Jeff Ubben’s Inclusive Capital

Well-known activist investor Jeff Ubben stepped out on a limb in 2020 when he left his firm ValueAct Capital to jump entirely into sustainable investing. Ubben’s new fund, Inclusive Capital, was designed to couple shareholder activism with environmental concerns.

What started with high hopes in 2020 when Ubben started Inclusive has now come to an end. As I reported with our New York colleagues, the fund is being wound down and cash returned to investors.

The fund’s thesis “unfortunately has not been rewarded in the public markets”, Inclusive told its investors. “In fact, it has been the exact opposite — shares of companies pursuing capital intensive projects needed to drive lower greenhouse gas emissions have been ‘sold off’ in the public markets as being too risky or too far out in terms of any potential reward.”

For example, Inclusive invested in Enviva, which produces wood pellets for clean energy, but has seen its shares plunge 98 per cent over the past 12 months. Inclusive was Enviva’s second-largest shareholder and Ubben was on its board until last month.

The fund was also a difficult fit for environmentalists. Inclusive’s largest holding was ExxonMobil. It also invested in Bayer, which owns Monsanto and the weedkiller Roundup.

San Francisco-based Inclusive did not fit neatly into a “clear bucket” for institutional investors, said Robert Eccles, an Oxford university professor. It was not easily classified as a sustainability “impact” fund, which tends to focus on private assets, and it was not an activist hedge fund, he said. This murky space probably made it difficult to raise cash, he added.

Sustainability-focused investors should take lessons from this tale as they proceed forward into 2024. (Patrick Temple-West)

Smart read

Here’s a very useful analysis of how Brazil is using COP28 to challenge the EU over its “discriminatory” green measures.