COP stands for ‘Conference of the Parties’ and is the United Nations (UN) annual climate change conference.[1] Since the COP process was set up in 1992, the UN has been bringing together hundreds of countries for global climate summits.
In these past three decades, climate change has evolved from being a side issue to a key global priority. As an indication of how significant this issue has become, COP27 was scheduled to run from 6 – 18 November 2022, but went into overtime and finally concluded on Sunday 20 November 2022.
Businesses can no longer ignore climate change and the climate agenda is now big business. Large corporations from many countries, including Australia,[2] are increasing their presence at these annual climate events to display their ESG credentials or to source new opportunities for green investment.
In previous articles (accessible here and here), the authors (Thomas and Kenneth) addressed how Australia’s emissions target became law in the form of the Climate Change Act 2022 (Cth), and why ESG is important and the impact of ESG and sustainability on mergers and acquisitions. This article outlines three key takeaways from COP27.
After extended negotiations, COP27 closed on Sunday 20 November 2022 with a breakthrough announcement – that an agreement had been reached to provide ‘loss and damage’ (L & D) funding for vulnerable countries hit hard by climate disasters.[3] This was the first time that the L & D issue was listed on the official agenda and adopted for the first time at COP27. This decision will put in place climate funding arrangements to help developing countries respond to L & D, such as how to finance rescue and reconstruction costs after severe weather events. Details are yet to be worked out, but governments have agreed to create a ‘transitional committee’ that will consider how to operationalize the new arrangements and the L & D fund at COP28.
Of special mention is the fact that Australia’s climate minister, Christopher Bowen, was selected during COP27 to co-lead negotiations on climate finance.
When COP27 began, it became evident that certain countries were pushing to water down the commitments made at the previous COP26 in Glasgow and that the assumption that each climate summit would advance previous agreements or at least maintain status quo was not guaranteed. Nonetheless, COP27 has resulted in countries re-affirming their commitment to limit global temperature rise to 1.5 degrees above pre-industrial levels.
The Intergovernmental Panel on Climate Change in their 2022 study found that global warming, reaching 1.5 degrees in the near-term, would result in unavoidable increases in multiple climate hazards and present multiple risks to ecosystems and humans.[4]
An agenda item at future COPs would likely address progress on phasing out fossil fuels which represent a key factor in averting catastrophic warming.
Australia has submitted its bid to host COP31, the 2026 United Nations climate change conference. This will be in partnership with the Pacific Island nations. This is significant because Australia has never hosted a COP before, and this is a critical time on the global stage where countries are embarking on action to address climate change. If Australia wins its bid, this will likely flow through to domestic policy settings running up to COP31 (and beyond) as Australia may ramp up its climate change initiatives to put its best foot forward. As the COP president, it also represents an opportunity for Australia to steer discussions and direct global focus to preferred initiatives. This assists Australia’s goal to become a clean energy superpower.
Australia’s climate minister noted that he will provide the annual progress update to parliament on his return from COP27, in line with the requirements of the Climate Change Act 2022 (Cth).[5]
These are key steps towards climate certainty to encourage investment in the transition to a low-carbon economy. The much-needed certainty provided by clear targets empowers businesses to drive the net-zero transition by investing in new technologies and industries and provides a strong inducement for Australian organisations and businesses to progress their own decarbonisation plans.
This article was written by Thomas Kim, Partner and Kenneth Lee, Senior Associate. Thomas and Kenneth are corporate lawyers who focus on the impact of ESG and sustainability on various corporate transactions. They have a particular interest in how climate change is shaping the future as businesses adapt to the impacts of climate change and the transition to a net zero emissions world.
Important Disclaimer: The material contained in this publication is of a general nature only and is based on the law in Australia as of the date of publication. It is not, nor is it intended to be legal advice. If you wish to take any action based on the content of this publication we recommend that you seek professional advice.
Thomas Kim specialises in the areas of equity capital markets (IPOs and capital raisings), mergers and acquisitions, public company takeovers, private equity and venture capital transactions, funds management (registered and unregistered/wholesale schemes) and foreign investments. Thomas also regularly advises international conglomerates on their trading and investment activities in Australia.
Thomas has advised on numerous transactions for both investors and investees where ESG considerations have been a key driver of investment and capital allocation decisions. Having worked on some of the largest ESG investment initiatives in Australia, Thomas is well placed to assist clients with integrating sustainability considerations into their corporate strategies and investment decision making processes. This includes guiding boards or steering committees to be strategically positioned to capitalise on increasing ESG opportunities and addressing accelerating ESG risks. Connect with Thomas via LinkedIn
Kenneth Lee practises in mergers and acquisitions, private equity and venture capital transactions, funds management and equity capital markets (IPOs and capital raisings). Kenneth understands the key role ESG and sustainability has in decision making by corporate and private equity acquirers and investors. He actively follows ESG industry updates including the recent climate change discussions at COP27 and G20 and has published articles on ESG.
Kenneth’s transaction experience includes negotiation of funding rounds for companies at different investment stages and advising investors on strategy across industries including agribusiness, health, software, medical technology, food and beverage and resources. He speaks Chinese and assists clients from Australia, South-East Asia, China and the US. Connect with Kenneth via LinkedIn
[1] United Nations Climate Change, ‘What are United Nations Climate Change Conferences?’ (2022) <https://unfccc.int/process-and-meetings/what-are-united-nations-climate-change-conferences>.
[2] Australian Government, ‘COP27: Australian engagement at the 2022 United Nations Climate Change Conference’ (15 November 2022) <https://www.dcceew.gov.au/COP27Aus>.
[3] United Nations Climate Change, ‘COP27 Reaches Breakthrough Agreement on New “Loss and Damage” Fund for Vulnerable Countries’ (20 November 2022) <https://unfccc.int/news/cop27-reaches-breakthrough-agreement-on-new-loss-and-damage-fund-for-vulnerable-countries>.
[4] Intergovernmental Panel on Climate Change, ‘IPCC Press Release’ (28 February 2022) <https://www.ipcc.ch/site/assets/uploads/2022/02/PR_WGII_AR6_english.pdf>.
[5] Climate Change Act 2022 (Cth) s12(1) – to be completed within 6 months after the end of each financial year.