Seizing the opportunity? How COP28 might influence the future Trade and Investment

John McIIroy | 29 Nov 2023 | General

COP 28 in Dubai sees another round of talks on keeping global temperatures as close as possible to 1.5 degrees Celsius above pre-industrial levels. Here we discuss what the main talking points are likely to be and how they might impact those working in investment and trade promotion.


This year’s starting point will be a sobering one with the publication of the first Global Stocktake, which estimates where the world stands on climate action. Considering that an earlier UN statement has already calculated that the combined climate pledges of 194 Parties under the Paris Agreement put us closer to 2.5 degrees than 1.5, things need to change quickly[1].

We can expect the Global Stocktake to lead to calls from many nations for more ambition, particularly around critical areas such as energy, food, and finance.

A plan for energy transition

Regarding energy transition, it is clear what needs to be done, but less clear how it will be achieved. The International Energy Agency worked with stakeholders worldwide to arrive at a consensus for COP28, and their analysis shows what is required to achieve the 1.5-degree target. This includes tripling global renewables capacity, doubling energy efficiency progress, slashing emissions from the oil and gas industry, boosting clean energy finance for developing economies, redirecting fossil fuel investment into clean energy, and putting fossil fuel demand into sharp decline.

However, achieving this will be challenging as it requires rapid scaling up of investment and overcoming systemic barriers across infrastructure, policy, and institutional settings. There is also the need to find agreement among parties with different priorities. For example, at COP27, a coalition of over 80 countries tried and failed to expand language on phasing out coal to include all fossil fuels.

Fossil fuel discussions are further complicated by diverging opinions on the role and potential of technologies such as carbon capture and storage. There is a concern among many that a focus on reducing emissions from fossil fuels may detract from the need to phase out the actual production and use of coal, oil, and gas.

So, what will COP28 tell us about where energy investment is going in the future? A new Energy Transition Changemakers programme at COP28 might provide some answers. This programme was designed to foster public/private collaboration in innovative and scalable decarbonisation projects and demonstrate solutions to accelerate energy transition. Looking at the themes covered, you get an idea of what is most important: renewables, hydrogen, energy-efficiency, and supporting the heavy emitting sectors of steel, cement, and aluminium.

Technology at the heart of food security

The second key theme of COP28 will be food production and security. In the run-up to the event, food systems and agriculture have been receiving more diplomatic attention. The UN hopes COP28 will see the signing of the first-ever Leaders Declaration on Food Systems, Agriculture, and Climate Action. This declaration will serve as a landmark commitment, consolidating global ambition and firmly establishing food systems as a prominent item on the climate agenda.

Looking at the agenda for COP28 gives an idea of what leaders are looking to address and how they intend to do it. The key themes emerging include resilience, transforming food systems, emissions reduction, and water availability/consumption, with the solutions based around international agreements, finance, and perhaps most interestingly for investment – technology and innovation.

Scaling innovation is critical to success and COP28 will see a number of events in this area. Highlights include: presenting 5-8 scientifically vetted innovations for country buy-in, adoption, and financing; launching ‘Innovation Bundles’ to deliver agricultural innovations to climate-vulnerable people and small holder farmers at scale; and a joint initiative by the United States and the United Arab Emirates to significantly increase investment in climate-smart agriculture and food systems innovation.

Looking to new sources of finance

Climate finance has almost doubled in the past decade, but around three-quarters of funds remain in their country of origin and are primarily concentrated in advanced economies[2]. Developing countries need financial resources as much as technology transfer if they are to reduce emissions, adapt to climate change, and address loss and damage. But climate finance is one of the most contentious issues at every COP meeting, and progress can be notoriously slow.

Whatever the outcome of discussions, the fact remains that the world needs a breakthrough on climate finance that can mobilise around $1 trillion per year[3]. Beyond governments, there is a significant role to be played by more dynamic private finance and innovative low-cost financial models. This includes utilising impact investing and sovereign wealth funds who are very much up for the challenge.

Research from the Philanthropy Europe Association in 2023 showed that environmental funding from leading European foundations more than doubled in value between 2018 and 2021, with the top five areas for funding being climate, biodiversity, energy, trade, and agriculture[4]. Globally, funding for climate mitigation increased by more than 40% in large part due to the arrival of significant new donors such as the Bezos Earth Fund and commitments from ​​Bloomberg Philanthropies, the IKEA Foundation and the Rockefeller Foundation[5].

Sovereign wealth funds (SWFs) have also been ramping up their focus on climate. According to an Invesco study in July last year, 75% of SWFs had a formal ESG policy in place, up from 47% in 2017. In addition, the One Planet SWF Network – founded by six funds, four of which are based in the Middle East – has launched climate disclosure guidance for private markets to help implement recommendations by the Task Force on Climate-related Financial Disclosures[6].

Preventing or paying for loss and damage?

Probably the most contentious part of climate negotiations is Loss and Damage, a phrase that gets to the heart of questions around fairness, equity, and historical responsibility for climate change.

Loss and Damage broadly refers to efforts to avert, minimise and address any loss or damage associated with climate change impacts. This is particularly important for developing countries that are often more vulnerable to the adverse effects of climate change. However, wealthier nations are wary of Loss and Damage being considered compensation and typically push for negotiations to focus on preventing future loss rather than paying for past events.

In essence, wealthier countries see Loss and Damage as supporting adaptation and want to link it to increasing resilience before the occurrence of an extreme weather or slow-onset event – for example, by strengthening flood defences.  They also see opportunities to reduce loss and damage after severe weather events by incorporating resilience into recovery, such as rebuilding infrastructure to be more climate-resilient in the future.

At COP27 in Egypt in 2022 governments agreed to establish a transitional committee to operationalise the new funding commitments, but eligibility for the fund has yet to be agreed upon as we enter COP28. Expect discussions this year to focus on which countries are defined as particularly vulnerable, which countries might contribute, and how might the funding be raised – including the use of innovative and private sector funding.

In a recent article about COP28, Economist Robert Stavins from the Salata Institute for Climate and Sustainability at Harvard University argued that foreign direct investment also has a role to play in Loss and Damage[7]. He argues that government-to-government transfers through foreign aid can often understandably end up dealing with immediate needs such as health and education rather than supporting longer-term sustainability projects. With FDI, an investment is made by a private company for a specific purpose, such as renewable energy production, and could be counted as a contribution to Loss and Damage.

How will this impact international trade and investment?

The discussions at COP28 will be lengthy and cover multiple topics, but three key areas stand out fpr those in international trade and investment: adaptation, technology, and finance.

  • Adaptation is the pragmatic response. The Global Stocktake is likely to show that extreme weather events will only increase, and we can expect more interest and funding for adaptation. Wealthier nations are keen to support projects around resilience and there are significant global opportunities for companies working in climate resilient infrastructure and food systems.
  • Technology is the saviour. COP is a ClimateTech trade show as much as a negotiating space and new technologies are an easier sell than changing behaviours and economic models. More funding (both public and private) is likely to be allocated to the search for innovative climate technologies, providing new openings for innovators who can identify and pitch to the appropriate funders.
  • Finance is the lifeblood. Both adaptation and technology require finance to make them happen and more finance is likely to flow after COP28. Exactly how this emerges will depend on the outcome (and wording) of negotiations, but we should also look to the rise of new finding sources from philanthropic organisations and Sovereign Wealth Funds that have a strong ESG focus.


[1] United Nations Climate Change (2023) Why the Global Stocktake is Important for Climate Action this Decade (link)

[2] Independent High-Level Expert Group on Climate Finance (2022) Finance for climate action (link)

[3] Independent High-Level Expert Group on Climate Finance (2022) Finance for climate action (link)

[4] Philanthropy Europe Association (2023) Environmental Funding by European Foundations : Volume 6 (link)

[5] Alliance for Philanthropy and Social Investment Worldwide (2023) What philanthropy can do to narrow the climate finance gap (link)

[6] HSBC (2023) Urgency and honesty on the road to COP28 (link)

[7] Salata Institute for Climate and Sustainability (2023) Economist Robert Stavins previews Harvard’s role at COP28 (link)