What were the outcomes at COP29?

Negotiators from rich and poorer nations struggled to meet in the middle time and time again, highlighting divisions between many countries.

The summit, which was already overshadowed by the US election, proved to be challenging from the word go. In the first week we witnessed Argentina’s president and Trump ally Javier Milei withdraw its negotiating team. We also saw the continuing aggressive pro-oil and gas stance of the host country Azerbaijan and its President Ilham Aliyev.

Despite various disagreements, policymakers and negotiators persisted until early Sunday morning, when a final agreement was struck some 35 hours later than planned.

What was the situation before COP29?

In 2023, COP28 left climate policymakers feeling optimistic having worked collaboratively to reach a momentous agreement. The deal, agreed by almost 200 countries, was to transition away from fossil fuels in energy systems by 2050. That deal also saw countries commit to triple renewable energy and double energy efficiency. The G7 group of major economies reiterated this pledge in their leaders’ communique earlier this year.

Therefore, COP29 was believed to be the next step towards meeting those promises and aimed to get the financial agreements into place. This would help fund those steps that make it possible for all countries to reach climate goals, as well as mitigate any existing climate challenges with adaptation a crucial area. The expectation was that once the finances had been agreed, COP30 would see countries arrive with more ambitious climate plans having already started moving towards global decarbonisation.

Where do we now stand on climate change?

Initial talks saw some parties seek the removal of the ‘transition away from fossil fuels’ wording. This caused upset among several lead negotiators from the larger countries. In turn, we saw many attempts by many nations to reaffirm the UAE consensus of COP28. However, there were a handful of countries that were less supportive of any references to the outcomes of last year’s COP, including Saudi Arabia who explicitly said, “The Arab Group will not accept any text that targets specific sectors, including fossil fuels,” at the plenary.

Donald Trump’s election win sets the tone

There also appeared to be fears among key negotiators at the UN COP29 summit in Baku that Donald Trump’s US election victory has put the brakes on climate action. Having monitored the declining sentiment for climate policy, countries taking a step back was unsurprising at the conference.

After negotiations went way over time, the richest countries – the “developed nations” – have agreed to raise their contribution to the “developing nations” at least $300bn a year by 2035 to help battle climate change. This is much less than the requested $1.3trillion. It has been reported that the text was debated heavily resulting in plenty of concessions in the final deal. While it may not have been the outcome that experts say is needed, there is some possibility that the private markets can fill this gap.

Was there any positive news at COP 29?

Yes. We witnessed a handful of groups committing to action. The United Kingdom, New Zealand, and Colombia joined the international Coalition on Phasing Out Fossil Fuel Incentives Including Subsidies (COFFIS). This is a coalition of governments working together to remove barriers and facilitate transparency toward the phase-out of fossil fuel subsidies.

It now has 16 member countries, including Austria, the federal government of Antigua and Barbuda, Belgium, Canada, Colombia, Costa Rica, Denmark, Finland, France, Ireland, Luxemburg, the Netherlands, New Zealand, Spain, Switzerland, and the United Kingdom.

Further, while not at the conference, the United Kingdom also announced it will introduce legislation to ban new coal mines and block future coal mining licenses. This is part of the Labour government’s push to make Britain a global leader in clean energy. The move comes on the heels of the October closure of Ratcliffe-on-Soar, Britain’s last coal-fired power station, making the UK the first G7 nation to eliminate coal from its power grid.

What’s the impact?

We know that discussions at COP29 often involve targets and deadlines many years into the future, which can seem out of touch with our day-to-day lives. This can make investors believe the impact will be felt beyond their investment horizon or is not relevant to them. However, the reality is that climate change has already begun to affect companies and governments worldwide and we are already facing the costs of climate change, or, at a minimum, the cost of climate adaptation.

One of the most visible effects is the increase in extreme weather events. More frequent and severe storms, floods, droughts, and wildfires are causing widespread damage to infrastructure, ecosystems, and communities. According to the Association of British Insurers, adverse weather played a huge part in the rise in home claims last year, with the value of weather-related damage claims reaching £573 million. This is the highest on record and 36% greater than 2022 (£421 million). The impact of these high claims is then reflected in the price of premiums, pushing up the average price of combined building and contents home insurance.

The rise in food inflation in the UK is increasingly driven by climate change. Extreme weather events, such as heatwaves and heavy rainfall, are disrupting agricultural production, leading to lower crop yields and higher prices. For example, the UK's second warmest and seventh-wettest year on record in 2023 significantly impacted farming, with vegetable production dropping by 4.9%.

Climate change may also disrupt your holiday next year. Extreme weather events, such as heatwaves, wildfires, and storms, are making traditional holiday destinations less appealing and sometimes hazardous. Southeastern Europe, a popular summer destination, experienced ‘strong heat stress’, where the daily maximum feels-like temperature reached at least 32°C for around two thirds of the summer period this year.

There are plenty of other effects too which will be felt long before those government deadlines. If you’d like to talk to your investment manager about how they are managing the risks and opportunities, please get in touch.