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At COP28, What Will the Global Stocktake Mean for Corporate Climate Disclosures?

November 28, 2023

With COP28 kicking off this week, it feels as though all eyes in the climate space are watching Dubai. From clean energy transitions to developments in carbon removals, many are hopeful that COP28 will mark the beginning of a new era for climate action.

At Manifest Climate, we help companies better align their climate action with their climate disclosures. We’re focused on identifying climate action and disclosure gaps at the corporate level, helping companies improve their climate risk management and tell better climate stories.

And COP28 could be an enormous year for climate disclosures, thanks to the first-ever Global Stocktake.

What is the global stocktake?

The stocktake is a critical piece of the Paris Agreement, allowing us to monitor how effectively it is being implemented around the world, and evaluate each country’s progress towards a 1.5°C future. The stocktake takes inventory of climate action to date and identifies which areas we’ll need to improve on to stay on track to meeting the Paris Agreement goals.

The first global stocktake kicked off last year, at COP27, and will culminate this year at COP28 in Dubai, where the results of the inventory will be discussed. This two-year process is scheduled to happen every five years, meaning the next stocktake will take place in 2028, at COP33.

What does the first global stocktake reveal?

Unsurprisingly to many in the climate space, the results of the first global stocktake reveal that the world is not on track to meet the goals of the Paris Agreement (limiting warming to well below 2°C and preferably to 1.5°C). Yet the past five years have seen a plethora of net zero and climate pledges from top corporations and national, state, and city governments around the world. There’s been a lot of noise, but, as the data will show, little action. Thus, the first global stocktake lays bare the yawning “say-do” gap on climate action and finance since the Paris Agreement.

The United Nations Framework Convention on Climate Change (UNFCCC) says the following about the results of the first stocktake:

“In short, implementation of the Paris Agreement is lacking across all areas and not where it should be.

The Paris Agreement is praised for having inspired near-universal climate action and playing a central role in catalyzing cooperative action so the world can address the climate crisis.

But there is a well-known big mitigation gap, with the current trajectory of global emissions not being consistent with limiting the global temperature rise to 1.5°C, while adaptation to climate change is not at the levels needed.

The stocktake calls for a systems transformation, which follows a whole-society and whole-economy approach that mainstreams climate resilience and development aligned with low greenhouse gas emissions. Such efforts must be maintained over decades, supporting sustainable development and the eradication of poverty.

The stocktake also points to a growing gap between the needs of developing countries and the support provided and mobilized for them, and calls for the unlocking and redeployment of trillions of dollars towards climate action and climate-resilient development.”

How do we close the gap?

By 2050, the world needs some $5.9 trillion in climate financing to help developing countries meet climate targets. The period from 2019-2022 saw approximately $1.3 trillion spent on fossil fuels through investments or subsidies but just $803 billion on climate finance — only about 30% of what we need to limit global heating. The stocktake recommends several course corrections with implications for corporations around the world.

What are the implications for corporations?

Mobilizing capital to climate solutions is contingent on clear, comprehensive corporate disclosures that provide investors with decision-useful information. Our 2022 Disclosure Benchmark Review revealed that only 49% of climate disclosures include decision-useful information. This is a problem for the planet and a source of frustration for investors, but it’s also problematic for the reporting companies.

When companies engage in green-hushing (staying silent about the climate action they’re taking), they miss out on the external benefits of telling a strong climate story, such as stronger investor interest, better talent attraction and retention, and stronger brand loyalty. On the other hand, when companies greenwash (exaggerate their positive climate impact), they risk reputational loss and regulatory sanction.

Both green-hushing and greenwashing cause capital to flow to the wrong parts of the market, slowing down the much-needed transition to a net zero future. Until corporate climate disclosures are more detailed, standardized, and decision-useful, we cannot effectively finance the green economic transition.

Beyond climate disclosures, the alarming results of the first global stocktake may mean governments take more drastic measures to curb greenhouse gas emissions. The stocktake suggests that financing from the private sector is critical in meeting climate finance targets and recommends ‘course corrections’ that may include such strategies as debt-for-climate swaps (debt relief for countries committed to climate-positive initiatives) or putting a price on greenhouse gas emissions. The latter, in particular, could have considerable consequences for corporations (consider, for example, the hypothetical bankruptcy of ExxonMobil if carbon were to be priced at $100/ton).

COP28 may hint at future corporate climate requirements

Companies should pay close attention to the discussion of the global stocktake results at COP28. Although the dialogue may yield no definite decisions, the tone of discussions may hint at upcoming interventions, and forward-thinking companies would do well to prepare for such possibilities as widespread mandatory climate disclosures and a global price on carbon.

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