After the COP28 talks concluded in Dubai earlier this month, with an early breakthrough made on the climate disaster fund, private banking and wealth management groups share their views on the results, investment opportunities and the need to step up action to phase out fossil fuels.  

The 28th United Nations Climate Change Conference in Dubai, which took place earlier this month, closed on a global commitment for the first time to begin transitioning away from oil, gas, and coal this decade, to tackle climate change.

The COP28 statement calls for a consensus on “transitioning away from fossil fuels in energy systems, in a just, orderly, and equitable manner.” Alongside the new fossil fuel pledge, the commitment calls for a tripling of global renewable energy by 2030, a doubling of average annual energy efficiency gains by 2030, a rapid phase down of “unabated” coal and coal power generation, an acceleration of zero and low emissions technologies (such as renewables and nuclear), a “substantial” reduction in methane emissions by 2030, and the phasing out of some fossil fuel subsidies “as soon as possible.”

Nevertheless, some wealth managers feel that the final agreement falls short on delivering the change needed to effectively fight climate change. The implementation of the Loss and Damage Fund to help poorer countries cope with climate disasters on the first day of the conference signalled that it was possible to come to an historic agreement to protect the planet and its people but, to some, the final decisions demonstrate a lack of ambition and commitment from world leaders.

Gresham House

"We are at the beginning of the end for fossil fuels. Whilst 'fossil fuels' being included in the agreement for the first time in 30 years is historic, this is more of a shuffle in the right direction than a big step forward, with the long overdue recognition that continuing to burn fossil fuels is the problem," Rebecca Craddock-Taylor, director of sustainable investment at alternative asset manager at Gresham House, said.

"In practice, the agreement is voluntary and loopholes have already been identified that will allow the continued use of fossil fuels. This means that real progress largely depends on the commitment of governments and oil and gas companies to take action to transition away from fossil fuels as soon as possible. The strength of COP lies in its ability to bring so many important stakeholders together. Unfortunately, its weakness lies in the challenge of securing agreement on significant change among such a diverse group," she added.

Phoebe Stone, LGT Wealth Management, head of sustainability
"This year's COP has delivered significant news, but it is still essential to acknowledge that more work lies ahead for the effective implementation of these commitments. For the first time in history, COP28 explicitly addresses the reduction of fossil fuels to combat climate change and global temperatures. This signals a critical step forward in our collective efforts. The last big milestone was in Glasgow, when we had the phase-down of coal included in the COP26 text.

"While the commitment to reduce fossil fuels is commendable, there are notable gaps, especially concerning how developed nations will be supported in transitioning away from fossil fuels. The text reveals some substantial challenges that need attention. There are also loopholes, such as the transition of fuels, including gas. These nuances require careful consideration for a comprehensive and effective transition plan. The commitment to triple renewable capacity and double energy efficiency by 2030 is promising. As sustainable investors, we are pleased to witness these concrete steps towards a cleaner and more sustainable future. In our sustainable portfolios, we seek exposure to various facets of the energy transition. This extends beyond traditional renewable companies to include green transport and the entire ecosystem supporting green energy including even green metals."

UBS Global Wealth Management
“We see the potential for a recovery in investor confidence around many related investment themes. The new goal post of tripling global renewable energy capacity from 2022 to 2030 should drive meaningful progress in decarbonising power. COP28 has also brought nuclear energy back to the main table, with 22 nations pledging to triple nuclear power capacity by 2050, and the US leading research and development commitment for nuclear fusion. We currently see valuation support and favourable dynamics for clean air and carbon reduction based on our quantitative screen, and hope for renewed activity in voluntary carbon markets after market setbacks year-to- date.”

Phil Radford, director at Saffery Trust
“The global stocktake at COP28 this year revealed just how massive the shortfall is in terms of the funding required to finance climate adaptation and the clean energy transition – which is in the order of trillions of dollars. The UN itself admitted in its closing statement on COP28 that the financial progress made this year falls short in a major way and that a new climate finance goal is urgently needed at COP29.

“We have seen a growing interest in ESG from our clients and expect this trend to continue, with global HNWIs continuing to explore opportunities to deploy wealth responsibly for both impact and return. Private capital and a willingness from investors to utilise their wealth to support climate change efforts will, in my view, be the only thing that will facilitate the possibility of getting close to the level of funding needed to achieve the world’s sustainability and decarbonisation goals. Governments will at some point likely face a choice over the right blend of carrot and stick to encourage climate change-focused private investments. It would not be unprecedented for governments to eventually impose requirements for varying degrees of climate investments. Those investors who have not incorporated ESG into their approach already will, potentially, be dragged over by increasing legal and regulatory requirements in the future, or indeed may be presented with new opportunities through, say, ESG-targeted tax reliefs.”

David Nicholson, Mercy Corps chief climate officer  
“While there are some promising steps within the COP28 outcomes, such as the agreement to transition away from fossil fuels and operationalise the Loss and Damage fund, the conference failed to take the decisive action needed to implement and fund these changes equitably, considering the historical responsibilities of polluters. Once again, this COP failed to prioritise action on adaptation, which is a lifeline for women, men, and children who are losing their homes and livelihoods because of the climate crisis. We needed bigger steps towards integrating the Loss and Damage fund into the new climate finance goal, grounded in the principle that countries responsible for the climate crisis should be the ones providing the finance. The responsibility now lies with leaders to heed the call for a more substantial and equitable response as we look towards COP29 in Baku.” See more here and here about COP28.