COP28 outcomes: implications for board directors

COP28: The first Global Stocktake and the UAE Consensus  

COP28 welcomed world leaders from almost 200 nations to conclude the Global Stocktake and confirm the actions of each country to tackle climate change.  The ‘UAE Consensus’ provided the final conclusions of the negotiations which includes: 

• A transition away from fossil fuels in an orderly and equitable way in line with the science 
• Tripling renewable energy capacity and doubling energy efficiency by 2030 
• Reducing methane emissions, reducing emissions from transport, and switching to zero and low-carbon fuels by 2050  
• Food systems transformation and nature-climate integration to solve the climate crisis  

A total of US$85 billion was pledged by governments to support the delivery of these commitments. Countries must now review and set new Nationally Determined Contributions (NDCs) following the call to action. 

Key messages for non-executive directors

Our partners at the Centre for Climate Engagement and the Climate Governance Initiative have summarised the key climate trends and announcements of most importance for non-executive directors and industry leaders from COP28.

The top takeaways for non-executive directors from this briefing are:

1. The world is shifting away from fossil fuels towards low-carbon energy sources with a focus on renewables but recognising clean hydrogen and nuclear energy need to be part of the mix.

• • Boards have a clear signal to consider the opportunities and risks of incorporating renewable energy into business operations. Transitioning to renewable energy will likely be a significant decarbonisation strategy for businesses given the commitment from governments made at COP28.
  • As a result of the COP process, governments may introduce new policies favouring renewable energy business or penalising high-emission industries. Similarly, financial institutions may be likely to prioritise investment in low carbon energy projects over more traditional fossil fuel investment. Board directors will need to keep track of these developments to understand the implications for business strategy and investment decisions.
  • Increased investment in renewable energy and other low-carbon options may impact global energy markets and influence future energy prices. Boards may want to track the cost implications for the business to determine strategies for transitioning to clean energy within the organisation, as well as look at the potential risks and opportunities across the organisation’s value chain.

2. The Taskforce on Net Zero Policy, formed at COP28, will support the creation of effective policy and regulatory frameworks to underpin net-zero commitments and accompanying transition plans by non-state actors, including businesses.

• • Developing a clear transition plan will be a key tool for organisations to set a clear strategy and delivery plan to decarbonise business operations in line with becoming net-zero and nature-positive. The UN intends to hold non-state entities accountable for emissions reduction commitments and signals towards increasing expectations and requirements for corporate climate transition plans, similar to recent trends for sustainability reporting. Board directors may want to ask their boards what measures are in place to develop and implement a clear transition plan.

• • Governments, investors and civil society are increasingly demanding businesses to disclose transition plans and climate commitments, now tracked by the Net-Zero Data Public Utility (NZDPU) launched at COP28. The NZDPU, a new global repository of corporate data on climate change is open for public consultation until March 2024.
  • The climate reporting landscape is shifting. Board directors should ensure that their organisation is ready to respond to these changes and disclose material information. At COP28, the Task Force on Climate-related Financial Disclosures (TCFD) was officially disbanded, with the IFRS Foundation's International Sustainability Standards Board (ISSB) taking over the TCFD’s responsibilities for corporate disclosure of climate targets, risks and opportunities. In addition to the TCFD recommendations, the ISSB sustainability standards require some additional industry-based metrics and information on corporate carbon credits.

3. A global shift to jointly tackle nature and climate is gaining momentum. Policy and finance will increasingly align with this dual focus and businesses are likely to face heightened expectations. A pledge to transform the food systems will also support climate and nature by reducing biodiversity loss and GHG emissions.

• • With increasing stakeholder expectations to disclose nature-related corporate information, board directors should consider reviewing whether nature is included within the organisation’s net zero strategy and whether it is a topic to raise in the boardroom. Board directors should also keep in mind that governments may suggest or enforce nature-related disclosure for businesses possibly adopting recommendations from the Taskforce on Nature-related Financial Disclosures (TNFD), which launched its sector guidance at COP28.
  • Financial institutions are shifting to an integrated nature and climate response. The Glasgow Financial Alliance for Net Zero (GFANZ) aims to incorporate nature into financial sector transition plans in 2024.
  • The global focus on nature alongside climate may impact the skills and competencies expected of board directors. Boards may want to cultivate leadership in addressing and managing climate and nature-related risks and opportunities. It will also be important to ensure there are appropriate skills and capabilities across the organisation to enable effective implementation.

4. The unprecedented number of public sector climate finance contributions and pledges at COP28 will help to unlock private finance.

• • COP28 recognised that public funds alone will not be sufficient to cover the required climate mitigation and adaptation action needed to deliver the binding commitment of the Paris Agreement. The UAE committed US$30 billion in public funding to mobilise US$250 billion of private funding through a new investment platform called ALTÉRRA. These investments will primarily support emerging markets and developing economies (EMDEs). Board directors may suggest their organisation look at options to access blended financing solutions, particularly in relation to operations in

• • Although there were no major breakthroughs on carbon markets at COP28, it remains a pending item that countries will submit their views on in early 2024. Consideration of existing tools to support climate finance such as green bonds and internal carbon pricing may be helpful for boards to review in the immediate term.

Looking to the year ahead

COP28 concluded with an agreement on the need to move away from fossil fuels in line with the science with country commitments to translate this into concrete action.

Countries will reconvene in Azerbaijan for COP29 in 2024, which is expected to have a strong focus on climate finance. Countries will also meet at the biodiversity summit, COP16 in Colombia, outcomes from which will be significantly relevant following the joint declaration on climate and nature. In 2025 at COP30, which will be hosted in Brazil, countries will be expected to submit their updated NDCs that should address and incorporate recommendations from the Global Stocktake which was finalised at COP28.