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Last-minute compromises averted a washout but key questions need answers if the global agenda is to meet the climate change challenge


The 27th Conference of the Parties (COP27) to the United Nations Framework Convention on Climate Change took place in Sharm El-Sheikh, Egypt from 6-18 November 2022. COP27 was touted by the Egyptian presidency and other countries to be the "implementation COP", focusing on how governments will honour COP26 commitments from last year's conference (COP26) and addressing climate challenges on a global scale. COP27 was to focus on four areas: finance, mitigation, adaption and collaboration.

Set against a tense geopolitical backdrop, the summit announced new rounds of financial support and a breakthrough on Loss and Damage compensation. However, there has been criticism that COP27 did not adequately deliver on other key topics, particularly in relation to increased action on emissions reductions, which are not going far enough to achieve the 1.5°C target of the Paris Agreement. With the UN's Emissions Gap Report 2022 released ahead of COP27 stating there is no credible pathway in place to 1.5°C and current policies pointing to a 2.8°C rise above pre-industrial levels by the end of this century, COP27 has been criticised for being a missed opportunity.

Key outcomes

  • Parties agreed the Sharm el-Sheikh Implementation Plan (link)
  • Loss and Damage fund agreed
  • Future changes to the climate finance goal
  • Progress on the Global Goal on Adaptation
  • Updated guidance on carbon trading


  • The COP26 Glasgow Climate Pact called for a "phase down of unabated coal power". A proposal by India aimed at extending this to a commitment to "phase down" all fossil fuels was ultimately not agreed.
  • Proposed language aimed at boosting renewable energy was instead agreed to increase "low-emissions" energy. This has been criticised by some commentators on the basis this undefined term could justify new projects for fossil fuels such as gas.
  • The decision did not include a resolution to determine that emissions should reach their peak in 2025 in line with guidance from the UN's Intergovernmental Panel on Climate Change.
  • While a commitment to 1.5°C was stated in the final text, it was reported that several countries had resisted this.
  • Developed countries have continued to fail to meet the COP15 target to mobilise $100 billion of climate finance by 2020.

Loss and Damage

COP27 culminated with a breakthrough agreement to establish Loss and Damage (L&D) funding to compensate vulnerable countries heavily impacted by extreme weather events. This agreement comes 30 years after compensation for L&D for rising sea-levels affecting island nations was first proposed by Vanuatu at the 1991 international climate change meeting. 

Governments have agreed to establish new funding arrangements and a dedicated L&D fund as well as a transitional committee which will make recommendations on how to manage the funding arrangements and the fund which are to be adopted at COP28 next year. The recommendations will cover "identifying and expanding sources of funding" which refers to which countries should be paying into the new fund. While the EU and US have historically been hesitant to support an L&D fund, they have agreed on the basis there is opportunity for major economies such as China to contribute. The EU and US have argued that China and other large polluters that are technically classified as developing countries also have responsibility and financial capability to pay their share towards the fund. The EU and US have also previously expressed concerns in relation to attracting legal liability for historic greenhouse gas (GHG) emissions and opening the door to compensation claims.

Small Island Developing States view the agreement as a diplomatic triumph after their years of making the case for compensation. Parties have also agreed on arrangements to operationalise the Santiago network, set up at COP26 last year, to provide technical assistance to developing countries particularly vulnerable to the adverse effects of climate change.

Global Goal on Adaptation (GGA)

COP27 had aimed to make urgent progress on the GGA, set up under Article 7.1 of the Paris Agreement with the goal of "enhancing adaptive capacity, strengthening resilience and reducing vulnerability to climate change, with a view to contributing to sustainable development and ensuring an adequate adaptation response". Moreover, it urged all Parties to show the political will to capture and assess progress in increasing resilience and assist vulnerable communities.

At COP26, a two-year Glasgow-Sharm el-Sheikh work programme on the GGA was established to support adaptation through a country-driven process. The parties had tasked subsidiary groups with carrying out this mandate to clarify the GGA.

Building on the work of COP26, at COP27 it was agreed the GGA will conclude at COP28 and will develop a framework to guide delivery of the goal and track progress, considering countries' vulnerability and capacity to cope. This will inform the first Global Stocktake — an initiative to compile information on what progress has been made in meeting the Paris Agreement Goals as well as identifying gaps and opportunities for increasing ambition to limit the effects of the climate crisis. UN Secretary-General António Guterres will host a climate ambition summit in 2023, prior to the conclusion of the Global Stocktake.

Multilateral development banks

The Sharm el-Sheikh Implementation Plan called on shareholders of multilateral development banks and international financial institutions to reform practices and priorities; align and scale up funding; ensure simplified access and mobilise climate finance; and encourage multilateral development banks to define new models to address the climate crisis. These banks are also called to contribute to increasing climate ambition.

This comes after a number of countries called for changes to the policies of the World Bank and other institutions on the basis they have failed to provide the funding to reduce carbon emissions and adapt to climate change.

Climate finance goal

An Organization for Economic Cooperation and Development study published in September 2022 found that developed countries had mobilised only $83 billion a year, which is markedly under the commitment of $100 billion annually by 2020 that developed countries made in COP15. At COP26 a new target was set to collectively double the adaptation finance from the 2019 amount of $20 billion to $40 billion by 2025. This has been restated at this year's COP.

There have been talks in relation to a new collective finance goal to be set in 2024, which would consider the needs and priorities of developing countries.

Further, the Sharm el-Sheikh Implementation Plan also urges developed country Parties to scale up their provision of climate finance, technology transfer and capacity-building for adaptation.

Carbon trading

At COP27, discussions continued in relation to a carbon trading scheme, the broad framework of which had been agreed at COP26. The focus was on paragraphs in Article 6 of the Paris Agreement detailing how and when the voluntary carbon market can be used for emissions trading. The current voluntary market, where private parties trade carbon offsets, has been described as a "wild west" in need of greater transparency and regulation.

Coming out of the COP27 discussions, a draft document was published that set out how the carbon trading would function, though this is far from final and still up for debate. It has outlined a two-tier system for carbon trading, where different rules apply depending on who buys the credits and for what purpose. There would be a new second-tier market for private companies to purchase "mitigation contributions", ie, carbon credits, to count towards their emissions goals. A private company can buy these from another country and the host would not need to adjust its emissions numbers. This would mean both the host country where the carbon-cutting project is located and the company paying for it could claim the same emissions reduction.

Commentators have therefore expressed concern that this draft opens the possibility for double counting (ie, where a country purchases a carbon emission credit, that is also being counted by a country under its emission reduction plan). Double counting had been banned under the text in Glasgow.

Also part of the discussions were recommendations for defining what kind of carbon removals are eligible for trading purposes. Many of the options proposed involve untested or controversial processes, with the recommendations opting for a wide definition of removals. This would mean there is greater risk of projects underdelivering or introducing ecological concerns (such as with ocean fertilisation). As such, calls have been made for more work on differentiating types of removal.

The text also allows governments to designate information about bilateral carbon trades between countries as confidential. Concern has been raised as to transparency and accountability in this regard.


At COP27, policing greenwashing was a recurring theme. Guided by the zero-tolerance stance set by UN Secretary-General António Guterres in launching the Integrity Matters Report COP27, delegates emphasised the need for greater accountability and transparency on sustainability commitments. The main recommendation of the report is that a net-zero pledge should be made publicly by non-state actors, particularly businesses, financial institutions, cities and regions. The pledge should contain interim targets and plans to reach net zero in line with the Intergovernmental Panel on Climate Change or International Energy Agency net zero GHG emissions modelled pathways.

Further, the targets set under these pledges should cover all GHG emissions and all scopes of emissions. This guidance gives corporations a clearer idea of what their net-zero pledges should involve. However, at COP27 there was no resolution on corporate leadership on curbing greenwashing or signing up to the recommendations of the Integrity Matters Report.

Despite not being a key talking point at COP27, it is noteworthy that the International Sustainability Standards Board (ISSB) created at COP26 is continuing its work to develop a comprehensive global baseline of sustainability disclosures for capital markets, general requirements and climate-related disclosures. The ISSB has indicated it will issue its first two standards for adoption in 2023, following extensive consultations in 2023. Therefore, post-COP27, fund managers and corporations will need to continue to give attention to issues of transparency and accuracy of sustainability/climate statements.

COP27 – The verdict

In many respects, COP27 failed to advance the agenda on climate change by not delivering progress on emissions reductions needed for a genuine commitment to a 1.5°C warming limit. This has left corporations — now unable to avoid their responsibilities in relation to climate mitigation — caught between supply shortages and soaring energy costs on one hand and an unaligned continued commitment to net zero with limited legislative guidance on the other.

While progress was made in areas such as carbon trading, and there is scope to start trading under the Article 6 Paris Agreement mechanism, further decisions have been delayed to next year, leaving corporations unclear on the full picture of the operations of Article 6-backed carbon markets. The Integrity Matters Report has given some guidance on how companies should make a net-zero pledge, but no clear resolution was made at COP27 in this area to provide further comfort and a global baseline for business. Ultimately this means a lot of the action required to meet the Paris Agreement targets has been left up to business.

Based on the announced workplan of the ISSB, post COP27, it is expected that mandatory climate and sustainability related disclosures will continue to be strengthened under international compliance rules, which may mean stricter disclosure requirements for businesses but will also bring welcomed alignment and increased clarity.

In light of COP27's increased focus on adaptation, we anticipate countries will begin to transform their communities through adaptation policies, going beyond the mitigation approach of predominantly emissions reductions that has been the focus to date. While this is already the case as companies are reassessing supply chains, dialogues on adaptation will become an increasingly important element in corporate climate change discussions.

The Sharm el-Sheikh Implementation Plan has laid the groundwork for reforming multilateral development banks' priorities, and on that basis we may begin to see changes in how they operate and provide finance to climate projects.

Key COP27 finance pledges

  • The UK outlined a package of climate finance pledges including providing £200 million under the African Development Bank's Climate Action Window to support adaptation in vulnerable low-income countries, tripling funding for adaptation programmes from £500 million in 2019 to £1.5 billion.
  • New pledges totalling over $230 million were made to the Adaptation Fund.
  • EU member countries, namely Germany, Italy, the Netherlands and France, outlined increased financial contributions to developing countries that they have contributed the least to, but are disproportionately impacted by climate change. Commitments for climate adaptation to developing countries include Germany's pledge of €6 billion annually; the Netherlands' pledge of €1.8 billion annually; and Italy's pledge to provide €1.4 billion in funding over the next five years.
  • The United States Agency for International Development announced that it would be pledging €15 million to the Global Fund for Coral Reefs.
  • Eight countries (Denmark, Finland, Germany, Ireland, Slovenia, Sweden, Switzerland and the Walloon Region of Belgium) pledged new funding for the Least Developed Countries and Special Climate Change Fund, with Belgium, Canada, France, the US and European Commission signalling support for the funds and indicating intention to contribute further.
  • The Just Energy Transition Partnership (which includes the US, Japan and others) announced $20 billion in public and private finance to be given to Indonesia in its shift away from coal-fired energy to renewable power.
  • A $3.1 billion plan was announced by the UN Secretary-General to ensure everyone on the planet is protected by early warning systems within the next five years.
  • A Global Shield against Climate Risks was launched by the G7 and V20 with new funding commitments of over $200 million.

Other significant COP27 outcomes and announcements

  • The Mitigation Work Programme (MWP), aimed at scaling up mitigation was officially launched. The MWP will start immediately after COP27 and continue until 2030. Governments were also urged to strengthen their 2030 targets in their national climate plans by the end of 2023, as well as phasedown unabated coal and phase-out inefficient fossil fuel subsidies.
  • Brazil, Indonesia and the DRC, home to over half of world's tropical rainforests, have signed the Rainforest Protection Pact to co-operate on sustainable management and conservation, restoration of ecosystems and creation of economies to ensure the health of people and forests.
  • The African Carbon Markets Initiative was launched to increase the continent's participation in voluntary carbon markets and create jobs in Africa.
  • The Food and Agriculture for Sustainable Transformation was launched to unlock finance to increase climate resilience and implement transformation across agrifood systems.
  • The Enhancing Nature-based Solutions for an Accelerated Climate Transformation was officially launched, aiming to co-ordinate efforts to find nature-based solutions to address climate change and biodiversity loss.
  • A new five-year work programme was launched to promote climate technology solutions in developing countries.
  • The US announced that its Environmental Protection Agency would begin to regulate methane.

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