Money drives the green transition – UN climate summit closes with a strong message of transitioning away from fossils
The role of financing in promoting the green transition and implementing the Paris Agreement was one of the most frequently discussed themes at the UN Climate Change Conference (COP28). The summit was even casually referred to as the "Money COP".
The UN's annual climate summit COP has grown into a huge event. According to some estimates, this year's summit in Dubai attracted as many as 100,000 visitors. This year's conference in Dubai has been considered the most important since the Paris summit in 2015, which agreed on a goal of limiting global warming to 1.5 degrees. COP28 reviewed the Global Stocktake (GST), which looks at how the targets are being achieved.
Contrary to expectations, the outcome of the negotiations was a surprisingly solid compromise. Although the long-standing entry on phasing out fossil fuels was not accepted by all participants, it was replaced in the negotiations by the nearly equally weighty transitioning away from fossil fuels. The entry will have a positive impact on the global demand of green transition innovations by Finnish companies – and, consequently, on the need for financing.
However, the world is still far off from reaching the targets, which is why cooperation between the private and public sectors is more important than ever. Today, the corporate world and businesses are seen as important participants along with everyone else.
One of the theme days at COP28 was titled Finance Day, and the role of financing in the green transition was a key topic throughout the summit, both on stage and behind the scenes. Around a fifth of the topics of negotiations between countries concerned financing and how both public and private streams of financing could be aligned with the climate goals of the Paris Agreement.
In the case of banks, the impact on the climate mainly takes place through value chains. The role of banks in promoting the green transition is to direct financing to innovations and technologies that promote climate goals.
Financing always involves risk-taking and at OP Financial Group, for example, ESG and emissions targets are a part of risk appetite processes. Banks must understand which sectors face the greatest climate and environmental impacts and make contingency plans for the risks of these sectors. At a panel hosted by OP Financial Group, one of the topics discussed was the wish that shareholders of companies with significant emissions would demand more ambitious goals from the companies they own and encourage them to invest in ground-breaking technologies that benefit the climate.
In addition, companies called for green financing instruments and investments in sustainable solutions that increase the carbon handprint of companies' value chains, in other words their positive climate impact, rather than simply reducing their carbon footprint. As one discussion put it aptly, "investors want to skate where the puck will be in the future, not where it is at the moment".
The scientific community believes that the next decade will be critical to achieving the 1.5 degree target. While not impossible, the task will not be easy. Still, we have demonstrated that the power of cooperation can break down walls and change the world, and we want to do our part as the largest financial services company in Finland to help lead this change. As heard many times at the Finland Pavilion and elsewhere, the time to act is now.
The OP Climate Change Conference (COP28) was held in Dubai in the United Arab Emirates from 30 November to 12 December. For the first time, Finland hosted its own pavilion at the summit, and OP Financial Group took part as one of the pavilion's partners. Read what expectations OP Financial Group's Director of ESG and Corporate Responsibility Annina Tanhuanpää had for COP28 here (in finnish).
Annina toimii OP Ryhmän ESG- ja vastuullisuusjohtajana. Hän on myös Euroopan tilinpäätösraportoinnin neuvoa-antavan ryhmän EFRAGin (European Financial Reporting Advisory Group) kestävyysraportoinnin kehittämisestä vastaavan hallituksen (Sustainability Reporting Board) jäsen. Annina edustaa hallituksessa Euroopan pankkeja.
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