Limiting global temperature increases to 1.5°C and setting net-zero emissions targets became the benchmarks of climate strategies at last year’s COP26 conference. In 2022, pressure to revisit and strengthen climate pledges will build ahead of November’s COP27 in Egypt. COP26 in Glasgow was a modest success, guidelines for implementing the Paris Agreement were finalised and curbs on coal and fossil fuels were a surprise. But while the emissions trajectory for 2030 was trimmed to a 13.7 per cent increase on 2010 levels, it needs a fall by 45 per cent. This year’s challenge will be to seek even more ambitious 2030 targets. However, making pledges is easy; delivering and implementing the policies is much harder.

The Egypt summit is important because countries have been asked to strengthen their climate pledges by making further cuts or bringing those cuts forward. There is also potential to extend the pledges to cover more economic activity. For instance, only two-fifths of pledges cover all greenhouse gases and only 3 per cent cover shipping and aviation. Adaptation will also be a major focus this year because of its importance to many African countries. Other issues include collecting information for a Global Stocktake to assess progress towards the Paris Agreement, and various work programmes to advance the understanding of adaptation goals as well as to begin to quantify long-term finance goals. Climate finance will remain high on the 2022 agenda as developed countries try to meet the USD100 billion target that was missed in 2020.

During 2022, investors will increasingly analyse corporate emission-reduction targets and net-zero strategies to learn the full climate exposure of their own portfolios. Interest in carbon markets will be strong and several countries are introducing carbon pricing this year. We also expect much greater awareness of methane emissions in 2022. The Global Methane Pledge, signed by over 100 countries ahead of COP26, aims to reduce these emissions by at least 30 per cent from 2020 levels by 2030. The US has already tabled legislation and the EU has proposed new regulations on reducing methane emissions. This year, the speed at which countries implement policies are likely to be affected by upcoming elections.


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