The recent devastating floods in KwaZulu-Natal and the Western Cape are stark reminders of the socio-economic repercussions of climate change. These events resulted in significant job losses and economic disruptions, highlighting the critical intersection between environmental and economic sustainability.

At Sanlam Investments, we are committed to sustainable practices that address these issues and identified two immediate effects on South Africa from COP28.

Levy Charges by the Carbon Border Adjustment Mechanism

The Carbon Border Adjustment Mechanism (CBAM) is a new regulation that puts a price on carbon emissions embedded in goods imported into the EU and requires affected companies to report and offset associated emissions; helping to level the playing field for European businesses and encouraging other countries to reduce their emissions.

It is essential to recognise that delaying the transition to greener alternatives to protect jobs may absurdly expose those very jobs to the risks posed by climate impacts and regulatory shifts. The impending Carbon Border Adjustment Mechanism (CBAM) regulation, set to levy charges on certain goods imported from South Africa, particularly in the automotive industry, sends a clear warning.

The Case of Loss and Damage in South Africa

During the first day of COP28, there was a strong call for action, and a historic decision was made regarding Loss and Damage funding. This followed the 2022 COP27 proposal to provide rapid, accessible, non-debt financing to regions that are disproportionately affected by the impacts of climate change. Essentially, what it means is that developing countries should be compensated for loss and damages caused by climate related issues. This would include South Africa, and our recent rebuilding post the floods stands as a poignant example.

The critical question is who should compensate the loss and damage experienced by developing countries – should it be wealthy nations whose greenhouse gas emissions are far larger than any other developing country?

New developments around this proposal were that the World Bank had to agree on conditionalities that developing countries have put forward. The agreement reached signifies a significant step forward in addressing the financial support required for countries dealing with the impacts of climate change-related losses and damages. While specific details are not clear, the decision could have far-reaching implications for climate justice and international climate cooperation.

In the past, conversations on climate funding were more focused on funding the transition to renewable energy or cutting back on greenhouse gasses, but now, the question of loss and damage is an interesting one. In my view it is a good first step in addressing climate justice which highlights that, at the core, climate change is a social issue, and its impact is felt differently – and not always equitably.

Teboho Makhabane is Head of ESG and Impact at Sanlam Investments. She is passionate about leveraging investment capital to address pressing social and environmental issues in South Africa.