Key sustainable finance takeaways from a productive COP28

The recently concluded COP28 climate summit in Dubai generated plenty of sustainable finance developments to watch going forward. ISF Director of Research Ryan Riordan and Research Associate Yingzhi Tang cover the important announcements on the transition away from fossil fuels, carbon markets, nature finance and more.

Transition away from fossil fuels

In the first “Global Stocktake” at COP28, nearly 200 countries agreed to “transition away from fossil fuels in energy systems” to keep the Paris Agreement’s 1.5°C target within reach. This requires global greenhouse gas emissions to drop 43% by 2030, compared to 2019 levels.

For Canada, financing is urgently needed to facilitate a just and orderly transition to a net-zero emissions economy by 2050. A common definition of what qualifies as “transition” activities, for example, a green and transition taxonomy, is crucial to mobilizing private finance and preventing “green or transition washing”.

• Learn more about Transition Finance with ISF’s primer article by Yingzhi Tang, Caelan Welch and Ryan Riordan.
• Learn more about Canada’s proposed green and transition taxonomy with ISF's taxonomy resources page.

Nature finance and TNFD

Nature helps us to both mitigate and adapt to the changing climate. COP28 recognized the importance of “protecting, conserving, and restoring nature and ecosystems”, a restatement of the 2022 Kunming-Montreal Global Biodiversity Framework.  

Canada plans to introduce a federal nature accountability bill in 2024 to bring Canada’s nature and biodiversity commitments into law.

The interim version of Canada’s 2030 National Biodiversity Strategy highlights the need to unlock innovative financial solutions to solve both the nature and climate crises. The document mentions “leveraging private finance, promoting blended finance, stimulating innovative schemes such as payment for ecosystem services, green bonds, biodiversity offsets and credits…”

Besides financing nature conservation, how can the financial sector be better informed in pricing biodiversity-related risks and opportunities? With the recent launch of the Taskforce on Nature-related Financial Disclosures (TNFD) framework and tools already made available, companies can now start to report on their nature-related dependencies, impacts, risks, and opportunities.

• Check out the video of the recent webinar co-hosted with CPA Canada to learn more about TNFD.

Carbon markets

Carbon markets, both the compliance and voluntary markets, can allocate capital to where it is cost-effective to reduce or remove carbon emissions. However, the credibility of voluntary carbon markets (VCMs) has been eroded by issues around the quality and verification of the projects underlying the offsets. At COP28, a global consensus emerged on the critical role that high-integrity voluntary carbon markets (VCMs) can play in mobilizing private finance.

The Board of the International Organization of Securities Commissions (IOSCO) has released a consultation paper that proposes 21 Good Practices to facilitate more transparent and accessible VCMs. The consultation touches upon primary market issuance, secondary market trading and the broader governance and risk management approach to VCMs.

Six independent VCMs standards organizations, including Verra and Gold Standard announced a collaboration to scale and increase the impacts of VCMs. The six standards organizations pledged to seek standards alignment to common principles for the quantification and accounting of removals and reductions.

However, COP28 failed to achieve an agreement on the international carbon market mechanisms (Article 6). If operationalized, these bilateral and multilateral international carbon markets may have the potential to further accelerate the global pace towards net zero.   

• Get the basics on how carbon markets work, and their potential and challenges, and learn more about forthcoming publications as part of ISF's recently announced collaborative research project with CPA Canada and the International Federation of Accountants. 

Other important highlights from COP28

• The historic Loss and Damage fund was created with around $800 million US pledged so far. Canada announced an initial commitment of $16 million ($11.8 million US) to support climate-vulnerable developing countries.
• Global food security is being severely impacted by the climate crisis. More than 150 countries, covering more than 70% of global food production, including Canada, a major agrifood producer, endorsed the Declaration on Sustainable Agriculture, Resilient Food Systems, and Climate Action. 
• Ten Multilateral Development Banks (MDBs), including the World Bank Group, published a joint statement reaffirming their commitments towards climate, nature, and development through actions such as increasing co-financing and attracting private capital at scale.

About the Institute for Sustainable Finance

ISF was launched in 2019 as a Canadian-specific centre of expertise and collaboration for advancing sustainable finance. Housed at Smith School of Business at Queen’s University, ISF is independent and non-partisan. It focuses on developing research, education, and collaborations among academia, business and government that will improve Canada’s capacity for sustainable finance as the shift to a low-carbon economy occurs. ISF’s work is generously supported by Ivey Foundation (inaugural supporter), McConnell Foundation, McCall MacBain Foundation, Chisholm Thomson Family Foundation, Smith School of Business, Queen’s University and Founding Contributors BMO, CIBC, RBC, Scotiabank and TD Bank Group. For more information, visit https://smith.queensu.ca/centres/isf/

Media contact

David Watson
Associate Director, Communications, Institute for Sustainable Finance
david.watson@queensu.ca
C: 613.796.3605