Client Update - 25th November 2022

As there has not been a significant change in market direction this week, I thought I would instead focus on the COP27 summit in Egypt. Ultimately the talks ended in discord after negotiators failed to reach a deal on greater cuts to greenhouse gas emissions and an end to fossil fuel use, however a ray of sunshine was offered by the news that less well off countries suffering from the effects of climate change will get financial help from richer nations. Last minute negotiations over-ran their Friday deadline and took until Sunday morning to complete, as almost 200 countries agreed to set up a fund to cover the “loss and damage” that “particularly vulnerable” nations are suffering from climate change. Pakistan’s climate minister Sherry Rehman described it as “an investment in climate justice”. The US shifted its long-held position to seal the deal; Joe Biden’s climate envoy John Kerry said Washington was “pleased” to support the new fund after it became clear there would be no legal liability.

This better news could not overshadow what was ultimately a conference hamstrung by self-interest and greed. UN secretary-general António Guterres joined in to praise the set-up of the fund for climate damage but also voiced his discontent with failure on global warming targets. “Our planet is still in the emergency room. We need to drastically reduce emissions now — and this is an issue this COP did not address,” he said. This lack of action was best summarised by delegates from the Polynesian microstate of Tuvalu, who echoed Guterres’ remarks in an emotional final statement. “A fund for loss and damage is essential — but it’s not an answer if the climate crisis washes a small island state off the map — or turns an entire African country to desert.”

The blame for the failure to reach agreement on stepping up the pace of emissions cuts and a push to reduce the use of all fossil fuels was directed at countries such as Saudi Arabia and Russia, emboldened by the current global energy crisis. Instead, the final agreement included the need for “low-emission” energy — which would allow the continued production of fossil fuels when paired with carbon capture technology. New Zealand’s minister for climate change James Shaw hit out at oil- and gas-producing countries which had sought to protect the production of fossil fuels. There were “still parties that are stuck in a state of denial or delusion about the state of the climate crisis”.

UK climate chief Alok Sharma, the president of COP26 in Glasgow, said this year’s negotiators had “had to fight incredibly hard, relentlessly — it was like a battle — to make sure that we preserved what we got over the line in Glasgow [last year]”. “I’m incredibly disappointed that we weren’t able to go further”. Germany’s foreign minister Annalena Baerbock said the conference had been “stonewalled by a number of large emitters and oil producers”. “That this conference did not end in utter failure despite the stonewalling and organisational shortcomings is mostly due to a progressive alliance of states across continents,” she said.

Significantly more work is undoubtedly needed by world leaders and it was heartening to hear John Kerry state that the US would continue to work with China to take bolder action on climate change, after the world’s two biggest polluters renewed negotiations last week. Ultimately, the final words of EU climate chief Frans Timmermans rang true – “The world will not thank us when they hear only excuses tomorrow. This is the make or break decade but what we have in front of us is not enough of a step forward”. Do have a good weekend.