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Key investment and market signals from COP28 

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    The UN's annual climate meetings can seem remote from the commercial world. As politicians and policy-makers wrangle over competing demands to agree decisions that ensure governments respond with appropriate urgency to the climate crisis, it can be hard to apply them to daily commercial activities.

    In this article we draw out the key outcomes from COP28 and the investment and market signals they send to help you to assess how climate risks, opportunities and associated policies will impact your business in 2024 and beyond.

    The world must transition away from fossil fuels

    A central outcome of COP28 was the UAE Consensus, which is the conclusion to the first Global Stocktake (the inventory on global climate action and support that informs the updates to countries' Nationally Determined Contributions or NDCs). One of the most important phrases in the Consensus was the call for countries to transition away from fossil fuels in energy systems, so as to achieve net zero by 2050. Already much analysed, this phrase has been heralded as the "beginning of the end” of the fossil fuel era by the UN Climate Change Executive Secretary, Simon Stiell. He also called for “all governments and businesses to turn these pledges into real-economy outcomes, without delay”.1

    As part of the Global Decarbonisation Accelerator (GDA), the COP Presidency and Saudi Arabia launched the Oil and Gas Decarbonisation Charter (OGDC), which sets out a plan to speed up climate action within the industry.2 Fifty companies, representing more than 40 per cent of global oil production committed to net zero operations by 2050 at the latest, ending routine flaring by 2030, and near-zero upstream methane emissions. The COP28 President, Dr. Sultan Al Jaber, described the OGDC as "a great first step" but acknowledged that the industry needed to do more and needed "to keep 1.5C within reach and set even stronger ambitions for decarbonisation".

    Renewables must triple and energy efficiency must double by 2030

    The UAE Consensus called for global renewable energy capacity to triple and the global average annual rate of energy efficiency improvements to double by 2030. A total of 116 countries signed the Global Renewables and Energy Efficiency Pledge, which includes a commitment to triple global installed renewable energy generation capacity to at least 11 000 GW by 2030.3 Twenty countries (including the United States, France, Japan and the United Kingdom) also signed a declaration to triple nuclear energy capacity by 2050.4

    Some countries, such as the UK, already have ambitious targets for increasing new-build nuclear and renewables capacity, but the Tripling Nuclear Declaration will give investors greater confidence that government policy will not veer from this path. In a further boost to the nuclear power sector, the UK government signed a Memorandum of Understanding with the Emirates Nuclear Energy Corporation, which will see the two countries work together to boost nuclear energy programmes, reach their net zero ambitions and bolster energy security.5

    While this is a very positive development for the renewables and nuclear industries, more work needs to be done by both governments and industry to ensure that all the necessary supply chains and infrastructure are in place to deliver the level of scaling up that is envisaged. In the UK context, the Government has been cognisant of this challenge: in particular, the Government commissioned two reviews – the Electricity Network Commissioner's review of the electricity transmission system and the Offshore Wind Champion's offshore wind review – to identify the key challenges that need to be overcome. Some of the recommendations of these reviews are already being implemented, and it is hoped that the COP28 commitments will provide even greater impetus to accelerate the reform of and investment in infrastructure needed to increase nuclear power and renewables capacity.

    Zero- and low-carbon technologies need to be accelerated

    The Consensus also called for countries to accelerate zero- and low-emission technologies (including abatement and removal technologies such as carbon capture, utilisation and storage (CCUS) and low-carbon hydrogen production).

    In this arena too, a number of countries have been making significant progress in delivering both CCUS and low-carbon hydrogen. As these are nascent technologies, the UAE Consensus will play an important role in affirming the role of CCUS and low-carbon hydrogen in the energy transition. The UK's CCUS cluster sequencing programme and hydrogen strategy have resulted in a number of projects due to reach financial investment decisions in 2024.

    "We are seeing more and more governments and key private sector players around the world take concrete steps towards supporting removal technologies such as CCUS" says Harvey Weaver, Projects and Energy Transition Partner, London. "A number of these are looking to the UK where the detail of what needs to be put in place, both in terms of overall scheme design and the legislative and subsidy support arrangements that underpin it, is becoming increasingly well developed. While there remain challenges, as more projects achieve close, the greater the market confidence will be that these challenges can be mitigated or overcome."

    Action is needed to close the gap between greenhouse gas (GHG) targets and delivering the 1.5°C Paris goal

    The Global Stocktake recognised that there is a significant gap between the 43 per cent reduction in GHG emissions from 2019 levels that is needed by 2030 and countries' current plans to reduce their emissions. If existing commitments in countries' NDCs were implemented, they would reduce emissions on average by only 2 per cent on 2019 levels by 2030.

    The Global Stocktake is designed to support the pledge and review system set up under the Paris Agreement, which anticipates that countries will ratchet up their commitments to cutting emissions over time. The next NDCs are due to be submitted in 2025 although countries can adjust their NDCs ahead of that cycle. If the Global Stocktake results in increased commitments by countries to put the world on track to meet the 1.5°C goal, this is likely to result in policies and legislation that will require further action from companies to reduce their GHGs.

    However, many companies are concerned that they may not be able to deliver on existing targets. "We have repeatedly heard concerns about "greenwashing" and "greenbashing", particularly in relation to the delta between emissions targets and what can be achieved without system-wide change, and concerted political leadership that translates into supportive regulatory frameworks." Ellie Reeves, Environment Partner, London.

    During 2023, there were significant global regulatory developments on greenwashing, including development of an EU Green Claims Directive and the Financial Conduct Authority's anti-greenwashing rule in the UK (see our Greenwatch: Issue 2 publication and article on UK sustainability disclosure and anti-greenwashing rules finalised).

    Concerns about the risk of greenwashing enforcement action or third party claims could lead to a roll-back on targets by companies. "The focus on greenwashing enforcement action or third party claims may encourage companies to be less ambitious about their climate targets. This is particularly the case if companies consider that governments are not putting in place the necessary frameworks to permit them to achieve their decarbonisation." Tom Cummins, Dispute Resolution Partner, London.

    Transition Plans can help companies avoid greenwashing claims

    The Transition Plan Taskforce's (TPT) commentary on the UEA Consensus explains that Transition Plans (TPs) are critical to translating climate targets into deliverable emissions reductions needed to meet the 1.5°C goal. The TPT states that "transition plans are a key part of the enabling environment. By bringing in transition plan requirements, jurisdictions can create the enabling conditions of transparency and standardisation, allowing investors and lenders to allocate capital into areas needed for the transition and allowing regulators and governments to understand how markets and firms are enabling the transition, and supporting national ambitions."6

    According to the CDP (formerly the Carbon Disclosure Project), the not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts, currently very few companies have put credible TPs in place.7

    During 2023, there were some significant sustainability reporting developments that will help companies to develop TPs and report on their climate risks and opportunities more generally. These include publication of the ISSB Sustainability Disclosure Standards (SDS), the development of the European Union's reporting standards under the Corporate Sustainability Reporting Directive (CSRD), and publication of the TPT Disclosure Framework. Now the ISSB's SDS have been published, the IFRS Foundation announced at COP28 that the work of the Taskforce on Climate-related Financial Disclosures (TCFD) was completed.8 The IFRS Foundation will take over monitoring and reporting to the Financial Stability Board on companies' progress in implementing climate-related financial disclosures.

    It is anticipated that production of TPs will become mandatory in the EU for large companies, financial sector firms and companies operating in high-impact sectors under the Corporate Sustainability Due Diligence Directive (CSDDD) (see our article on The Corporate Sustainability Due Diligence Directive proposal). Similarly, the UK Government is expected to legislate in 2024 to make TPs mandatory for large companies and financial sector firms, with the Financial Conduct Authority imposing similar obligations on companies with securities admitted to public markets.

    Despite the High Court's decision in July 20239 to refuse ClientEarth permission to bring a derivative claim against Shell's directors for alleged breaches of their duties concerning the company's climate risk management strategy, the risks of climate-related litigation10 and greenwashing actions are growing.

    "The mandatory publication of TPs provides an opportunity for in-scope companies to prepare credible, comprehensive and consistent plans, which may mitigate the risk that climate-related litigation and greenwashing actions will be brought against them." Rob Hanley, Corporate Governance Partner, London.

    Companies need to assess their climate- and nature-related risks and opportunities together

    The UAE Consensus emphasised the importance of conserving, protecting and restoring nature and ecosystems to achieving the 1.5°C Paris goal, including through enhanced efforts to halt and reverse deforestation and forest degradation by 2030, using other terrestrial and marine ecosystems as GHG sinks and by conserving biodiversity in line with the Kunming-Montreal Global Biodiversity Framework. It also noted the need for enhanced support and investment to halt and reverse deforestation and forest degradation by 2030, including through financial resources, technology transfer and capacity-building. It encourages countries to implement land use management, sustainable agriculture, resilient food systems, nature-based solutions and ecosystem-based approaches to capture a range of economic, social and environmental benefits such as improved resilience to climate change.

    Also, in a first-of-its-kind initiative, 20 countries issued a joint statement on climate, nature and people, which encourages the alignment of national climate, biodiversity and land restoration plans and strategies and, scaling up finance and investments for climate and nature from all sources. Countries also pledged to ensure that NDCs and National Adaptation Plans (NAPs) and National Biodiversity Strategies and Action Plans (NBSAPs) are produced in a coherent and coordinated way.11 The Statement also encourages the use of data sources and collection, metrics and methodologies, and voluntary reporting frameworks that allow for climate change, biodiversity and sustainable land management issues to be addressed coherently.

    There were significant developments in reporting nature-related impacts, dependencies, risks and opportunities during 2023. These include the Taskforce on Nature-related Financial Disclosures (TNFD), which is modelled on the TCFD's recommendations.

    These developments and those at COP28 signal the need for government and businesses to take a more coherent approach in how they deal with nature. This might mean changes to how retail units or housing are developed to minimise impacts on nature or it could require changes to agricultural and food systems that give space for nature. The UK Government's Projects for Nature platform, which matches corporate donations to nature recovery projects, is an example of how nature's recovery can be promoted by companies.12

    As companies start their climate transition process, they should also consider how they can plan for nature-related impacts, dependencies, risks and opportunities.

    Carbon trading rules are still to be agreed

    Article 6 of the Paris Agreement provides for three mechanisms for countries to cooperate to achieve their NDCs: (i) bilateral exchange of mitigation outcomes under article 6.2 (ii) a new UNFCCC mechanism for the validation, verification and issuance of high-quality carbon credits under article 6.4 and (iii) cooperation towards achieving NDCs outside of carbon markets under article 6.8.

    COP28 ended without an agreement on the article 6.2 and article 6.4 trading mechanisms or the article 6.8 "non-market approaches" (NMAs). This was in part due to the tension between the need to get a UN-backed bilateral global carbon market up and running and the need to ensure the integrity and transparency of the market. There was also a lack of consensus on defining NMAs, which means that agreement on these mechanisms will be held over until COP29, due to take place in Azerbaijan. Further work on the mechanisms will be undertaken at the next climate talks in Bonn, in June 2024.

    Although progress on common definitions and controls over authorisation and reporting processes under article 6.2 was lacking, COP28 encouraged participants to disclose a broader range of information in connection with exchanges of mitigation outcomes, which is a positive step forward. Some progress was made with respect to article 6.4 as parties were invited to submit their views on various technical matters, including tools and guidelines on baselines, additionality, leakage and reversal risk assessment by 5 February 2024, and the Supervisory Body was urged to prioritise its work on these matters (taking into account submissions from the parties) as a matter of urgency.

    "While progress has been made since COP27, the level of alignment that there should be between the bilateral and multilateral exchanges under article 6.2 and the international carbon market under article 6.4 still needs to be agreed. Until there is consensus on that, it seems unlikely that these rules will be agreed at the policy level and therefore these issues are likely to remain with technical experts, such as the Supervisory Body, to progress. Given reputational and other challenges the voluntary carbon markets are currently facing and the limited transparency and oversight of article 6.2 exchanges, it is a shame the recently developed recommendations on article 6.4 "methodologies" that would create a benchmark for quality in that market were not adopted." Kerion Ball, Global Markets Partner, London.

    Outside the main COP negotiations, there were positive announcements regarding the voluntary carbon markets including the announcement by the leading independent carbon credit standard providers to collaborate to increase the impact of their respective standards.13 Companies that offset their residual emissions still need to understand and conduct due diligence on standard providers in the voluntary carbon market, as well as the underlying projects that generate the offsets.


    1. COP28 Agreement Signals “Beginning of the End” of the Fossil Fuel Era | UNFCCC.

    2. Oil & Gas Decarbonization Charter launched to accelerate climate action (

    3. Global Renewables and Energy Efficiency Pledge (

    4. At COP28, Countries Launch Declaration to Triple Nuclear Energy Capacity by 2050, Recognizing the Key Role of Nuclear Energy in Reaching Net Zero | Department of Energy

    5. ENEC and UK Department for Energy Security and Net Zero sign MoU at COP28 to further promote friendship and cooperation in the field of nuclear energy.

    6. Supporting COP outcomes with transition plans - Transition Taskforce.


    8. IFRS - ISSB at COP28: Erkki Liikanen on progress and priorities to advance global sustainability disclosures.

    9. ClientEarth v Shell Plc [2023] EWHC 1897 (Ch) (24 July 2023).

    10. Our application to appeal in our case against Shell's Board of Directors has been rejected | ClientEarth.

    11. COP28 Joint Statement on Climate, Nature and People.

    12. The United Kingdom: Projects for Nature (P4N) — Political Vision: The 10 Point Plan for Financing Biodiversity (

    13. Independent Crediting Programmes Announce Ground-Breaking Collaboration to Increase the Positive Impact of Carbon Markets - Verra.

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.


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