Finance Day at COP27

Finance Day: Key Discussion Topics

November 9th was the day that climate leaders at COP27 discussed how finance can be used to support the climate transition, topics for this discussion include, but are not limited to, “innovative and blended finance and financial instruments, tools and policies that has the potential to enhance access, scale up finance and contribute to the transition envisaged and needed”. Specifically, the agenda for the day included discussions about sovereign debt for nature and climate investments, reducing the cost of green loan borrowing, just energy transition in Africa, financing adaptation, and encouraging the role of the private sector in the climate transition. The main focus for finance this year seemed to be directed toward how companies and countries will finance the climate transition, rather than focusing on setting big goals for themselves that may be hard to achieve.

Will Commitments Finally be Met?

There’s some concern that the discussions from COP27 will amount to nothing more than empty promises, and these concerns are particularly valid when you consider how close the world is to missing the 1.5C warming mark the 2015 Paris Agreement aimed for 7 years ago. This, combined with substantial greenwashing from companies (mainly in the Utility sector) who promised significant change and a green transition but didn’t deliver, has created a somewhat pessimistic view around the outcomes of COP27 talks. However, there is a much stronger emphasis on practical implementation this year than there was before, especially as more climate disasters are occurring for people around the world. “Greenwashing” was even directly criticized by UN experts in a report regarding company commitments to net-zero pledges and other climate-related goals, with a UN panel suggesting mandatory regulations to cut down emissions and save the planet. This is all in stark contrast to previous years, where the main concern was getting companies and countries onboard in the first place, now it’s a matter of action. 

Whether or not companies and countries will actually deliver on their commitments this time is yet to be seen. There’s still an issue of enforcement and how the UN will hold these companies or countries accountable to these standards. Regardless of the outcome, it appears that the issue is being taken a bit more seriously, and more practically as well.

What Finance Day means for Sustainable Investors

If the outcome of COP27 proves to be effective, meaning the changes discussed will actually be followed and implemented by companies and countries alike, then it has positive implications for the future of sustainable investing. If the mandatory regulation proposed by the UN panel is to be implemented, then there will be little room for greenwashing or the currently non-existent sustainability standards, as the UN will ensure that companies are actually following through on their commitments rather than making empty promises. 

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