COP28 has produced two significant results that companies globally need to incorporate in their ESG strategies and actions, and their long-term business models.
Boosting Climate Resilience: The Crucial Role of the Loss and Damage Fund
The first one is the commitment to the loss and damage fund that will assist low-income countries in meeting the economic costs of global warming. Although the pledges to the fund by the biggest contributors to global warming only add up to USD 700 million when the need is in hundreds of billions of USD, the hope is that the fund will grow faster and bigger. The World Bank will administer the fund in conjunction with its other programmes in the developing world for climate action. Businesses in the developing world, both domestic and international, can imaginatively develop green projects where the World Bank administered loss and damage fund can play an equity role for much bigger financial packages. There is clearly an excellent opportunity to build more resilient infrastructure and economic activities in the developing world by using the loss and damage fund.
Fossil Fuel Phase-Down at COP28: Transforming ESG Strategies for Businesses
The second result from COP28 with ESG consequences for businesses is, finally, the official recognition of fossil fuels as a source of global warming through the phase-down agreement. Although phase-out is a more urgent need to achieve the Paris Agreement target of 1.5C, the phase-down agreement declares in words the reality of global warming. Words are important in shaping human behaviour in all aspects of life. Walk follows the talk. We should not be surprised to see more actions of bigger investments in green energy sources. So, the global business community should formulate ESG actions and targets based explicitly and directly on fossil fuel production and use. The business community has already developed ESG and sustainability strategies and business models around meeting the net-zero targets. But now the cost of the use of fossil fuels can be explicitly included in long-term projections of the viability of business models. More importantly, the investments in introducing green energy into business activities should gain more urgency in ESG strategies.
As such COP28 strengthens the case for ESG in the business world. In 2023 we have witnessed significant backlash for ESG and scepticism about its future has gained traction. But COP28’s two significant results not just counterbalance the backlash and scepticism but entrench ESG further in business model designs.
About the Author
Senior Lecturer in Banking
Ismail Ertürk, Senior Lecturer in Banking, holds a multitude of experience teaching programmes and Alliance Manchester Business School’s MBA.
As well as vast academic experience, Ismail has also undertaken various advisory work for companies and government institutions internationally. His research interests include purpose of the firm, financialisation, corporate governance, cultural economy, green finance and ESG.