With COP27 taking place in Egypt, we outline some of the challenges facing delegates

This year, COP27 takes place in Sharm El-Sheikh, Egypt, and marks 30 years since the United Nations Framework Convention on Climate Change (UNFCCC) was adopted. It also celebrates the 7th anniversary of the Paris Agreement, which was confirmed at COP21. 

Being a yearly event, the "Conference of the Parties" (COP) brings together the governments that have signed the UNFCCC, the Kyoto Protocol, as well as the Paris Agreement. The world’s most renowned leaders, ministers, personalities and negotiators come together to agree how to collectively tackle the pressing climate issues, whose impacts have clearly mounted recently. 

Before we dive into the main topics on the agenda this year, it is worth remembering the geopolitical context in which the meeting takes place. Although COP26's background was far from stable, the world has since seen further damaging fractures with the implications of the Russian invasion of Ukraine, as well as raising tensions between the U.S and China. 

Ukraine's invasion has been severely condemned internationally and destabilised key multilateral platforms such as the G20. Besides all the impact in local economies, directly affecting people's daily lives, the war's main impact has been energy insecurity. Pushing climate change down domestic agendas around the globe, it also reignited the demand for fossil fuel projects to reduce the dependency on Russian gas. 

The above becomes even more important given that, according to the world's leading scientific authority on climate change, the Intergovernmental Panel on Climate Change (IPCC), the world is now in "extraordinarily dangerous territory". So, and as we have seen with all the recent natural disasters such as the flooding in Germany and the hurricanes in the Americas, there is no time to waste.  

Therefore, one of the most important topics of COP27 is risk mitigation. If last year's event was the first test of the Paris ratchet mechanism for raising mitigation ambitions through Nationally Determined Contributions (NDCs), promised emissions cuts remained insufficient to limit global warming to acceptable levels. The Glasgow Climate Pact, which called for countries to reinforce targets for the year ahead, also needs to be revisited. Despite the crescent need for action, few countries have answered the call to submit updated NDCs. 

And the UNFCCC's latest assessment is quite shocking. According to their study, as of late September 2022, risk mitigation commitments for NDCs would, if implemented, increase emissions by 10.6% by 2030, in significant contrast to the 45% emissions reduction needed to align with 1.5°C. Under current circumstances, the planet would be very likely to see a catastrophic 2.5°C increase by the end of the century.  

Another subject that caused frustration was the failure to deliver on promises of regular climate finance. At COP27, developing nations will look to fulfil historic promises, such as the $100 billion annual climate finance, which developed countries were meant to deliver each year, from 2020 to 2025. The promise has also not been met. 

And while wealthier nations are dealing with significant internal problems, such as recession, as well as soaring energy and food prices, it is crucial that climate finance for underdeveloped countries is not deprioritised. The fact that this year's event takes place in Egypt, a highly climate-vulnerable country on a highly climate-vulnerable continent, does help and should be taken as example. 

The IMG estimates that developing countries need approximately $2.5 trillion of external financing annually until 2030 in order to meet the Paris Agreement and Sustainable Development Goals. And since climate change is not contained within countries' borders, financing global mitigation, as well as adaptation, should be seen as a matter of common interest. 

These same underdeveloped countries are also seeking financial support towards the cost of loss and damage from wealthier nations whose current and historic activities have largely contributed to the state of the current climate crisis. COP26 attempted to tackle the issue with the "Glasgow Dialogue", which, after considerable reluctance, was signed to pledge £2 million and €1 million from Scotland and Wallonia (in Belgium) to address loss and damage. 

Mia Mottley, Prime Minister of Barbados, said: “We were the ones whose blood, sweat and tears financed the industrial revolution,” pointedly referring to the legacy of slavery and imperialism. “Are we now to face double jeopardy by having to pay the cost as a result of those greenhouse gases from the industrial revolution? That is fundamentally unfair.” 

Since then, Denmark has committed to 100m DKK ($13m) in loss and damage finance. Although this is a start, it is still far from enough. Developing countries will be hoping to see the topic formally adopted as part of the agenda, and to see concrete decisions on funding arrangements at the conference. 

As if all the above was not enough, public protests are taking place all over the globe, raising the tension – and the stake of everything the conference stands for. As the storm clouds gather, climate change activists are on the alert for action and that is a situation being monitored with increasing alarm by (re)insurers and businesses alike.