COP27 – progress despite geopolitical tensions

COP 27 – the Implementation COP

COP27 was held in mid-November 2022 in Egypt under the tagline “together for implementation”. Since COP26, which was held in November 2021 in Glasgow, the geopolitical backdrop has changed dramatically, with many observers concerned ahead of the event that governments might no longer prioritise fighting climate change in the midst of a cost-of-living and energy crisis and geopolitical tensions. It turned out that the majority of governments continue to care about climate change and are prepared to collaborate. The focus of COP27 was different to the focus of COP26 though.

In this article we present some of the most notable developments that took place at COP27, what was left unaddressed and a first take on what COP27 might imply for BCCG members. COP28 will take place in November 2023 in Dubai.

A fund for loss and damage

COP27 delivered some positive outcomes, not all of them expected prior to the event. The most notable outcome was an agreement on Loss and Damage, which complements climate-change mitigation and adaptation. While mitigation is about slowing climate change and adaptation is about building resilience to inevitable climate change, loss and damage is about helping vulnerable countries cope with devastating impacts of global warming such as flooding happening today and in the future.

In a landmark deal it was agreed to set up a dedicated loss and damage fund, something that vulnerable countries had demanded for many years, and complementary funding arrangements. The fund will be geared towards developing nations “that are particularly vulnerable to the adverse effects of climate change” – language that had been requested by the EU. Now comes the difficult part – the fund must be set up and filled with cash. There is no agreement yet on how the finance should be provided and where it should come from. An expert group was set up to prepare this for COP28.

The positive news of a loss and damage fund partially compensated for the disappointing news that rich countries have still not been able to transfer US$100bn annually to developing countries in climate finance. They will do so by 2023, three years later than originally planned. There was also little progress on what should replace this target beyond 2025, when the current pledge comes to an end. At COP26 it was agreed to develop a new collective quantified goal on climate finance to address this question. COP27 was supposed to make progress on this; in the end, it was decided to establish a working group to estimate the required climate finance and who should fund it by end-2024. It has been estimated that the funds required annually will probably run into the trillions rather than billions.

Limited progress on mitigation but at least the commitment to limit global temperature increases still stands

COP27 did not prioritise mitigation. With a few exceptions, governments did not submit more ambitious Nationally Determined Contributions (NDCs) before COP27, something they had agreed to do at COP26. Instead, a mitigation work programme was launched in Sharm el-Sheikh, aimed at scaling up mitigation ambition and implementation. The work programme will start immediately following COP27 and continue until 2030, with at least two global dialogues held each year. Governments were also requested to revisit and strengthen the 2030 targets in their national climate plans by the end of 2023, as well as accelerate efforts to phase down unabated coal power and phase-out inefficient fossil fuel subsidies. Phasing out the use of fossil fuel generally did not find a majority.

COP27 also adopted the so-called cover decision, known as the Sharm el-Sheikh Implementation Plan. The cover decision reaffirms the commitment to limit global temperature rise to 1.5 degrees Celsius above pre-industrial levels. This must be seen as a positive outcome as there had been pushbacks on this ambition from a number of countries. The cover decision also urges countries to further integrate water into adaptation efforts, the first time water has been referenced at a COP outcome document, emphasising the critical role water plays in climate-change adaptation.

More needs to be done on adaptation

Up to now climate finance has been mainly in the form of mitigation funding. There is a growing recognition that adaptation funding needs to increase urgently. COP27 saw progress on this issue, with governments agreeing on the way to move forward on the Global Goal on Adaptation, which will conclude at COP28 and inform the first Global Stocktake, improving resilience amongst the most vulnerable. New pledges, totalling more than US$230m, were made to the Adaptation Fund. These will help many more vulnerable communities adapt to climate change through concrete adaptation solutions.

What are the implications of COP27 for BCCG members?

The landmark decision to establish a fund for loss and damage was undoubtedly the highlight of COP27. This decision must be seen in the context of a wider debate on climate finance and how developed countries can support developing countries deal with climate change in the future.

For Germany, as an EU member, and the UK this will mean coordinating closely with other developed countries on how to design such a fund and how to raise the required funds. The role of international financial institutions such as the World Bank, of which Germany and the UK are major shareholders, will need to be revisited. Providing the appropriate conditions for private-sector banks, insurers and institutional investors and other actors in the capital markets to increasingly finance green projects around the world will be another priority for the two countries.

COP27 did not prioritise climate-change mitigation. Limiting the global temperature increase will remain a top priority for the German government though, with foreign minister Annalena Baerbock publicly venting her frustration at the limited progress made at COP27. Germany’s climate actions are embedded in the EU’s wider initiatives, with the EU indicating that they will submit a more ambitious NDC once they have legislated their flagship Fit for 55 and RePowerEU initiatives. This is expected in spring 2023.

For BCCG members we do not see any immediate consequences resulting from what was agreed at COP27. What was clear though at COP27 is that much of the world remains committed to addressing climate change and its consequences. As such British and German businesses will need to be ready to deal with ever more ambitious climate-change targets and high energy prices as carbon prices will continue to go up to encourage the energy transition. This is as much a challenge as an opportunity as Europe’s technology leaders should be able to take advantage of the ever-growing market opportunities around the world for green technologies and solutions.


Frank Eich                                      Marcus Pratsch

Director, Economicsense                Head of Sustainable Bonds & Finance, DZ Bank