06 Nov COP29: Discussions over finance expected to dominate the climate summit
The focus is on finance at the UN climate summit in Baku, Azerbaijan, this month. Agreeing on a new climate finance goal is top of the agenda, along with encouraging countries to update their climate commitments. Nearly 50,000 government representatives, decision-makers and investors are due to visit Baku to discuss climate goals, finance and implementation strategies to maintain the Paris Agreement targets within reach.
The New Collective Quantified Goal (NCQG) on climate finance will prove critical in securing finance to accelerate climate action in developing nations, replacing the original goal of $100 billion per year by 2020, which developed nations failed to meet. Global leaders will discuss how to fund and allocate resources for developing nations to support them, manage and adapt to climate change and move towards low emissions and resilient economies. Also at COP29 is the new Climate Finance Action Fund (CFAF), announced earlier this year. This intends to focus on voluntary contributions from fossil-fuel-producing countries and businesses to support developing nations with climate-focused projects.
The NCQG can increase the quality and quantity of public finance developed nations provide to support climate action in developing countries. It can enable vital private finance by supporting the position of the private industry in global climate goals. Delivering strong signals at the climate summit, such as determining the role of the private sector in the NCQG, would provide investors with a clear pathway and show commitment to tackling finance gaps.
Recent studies state climate finance must increase to $2.4 trillion annually by 2030 for developing countries, with $1 trillion needed in clean energy investments alone. For the NCQG to be effective with the private industry and drive private capital towards emerging economies, it must recognise the critical role of all financial groups, including investors, banks and other private associations.
The NCQG should provide clear policy guidance enabling greater private investment into climate action measures with a comprehensive timeline and mechanisms for implementation.
Stephanie Pfeifer, the CEO of Institutional Investors Group on Climate Change, produced an open letter emphasising that the private sector is prepared to work with policymakers and enable the finance required for a net-zero, climate-resilient future by 2050. The NCQG can deliver the necessary financial system to achieve this.
Focusing on Nationally Determined Contributions (NDCs)
This COPS comes at a crucial time for climate commitments. Countries intend to adopt the NDCs next year before the next climate summit. The UAE, Azerbaijan and Brazil are due to announce their NDCs at COP29. Updating NDCs is a chance for countries to deliver a more structured and investable plan that secures long-term private investment.
A separate report by IIGCC highlighted the potential of NDCs to drive private investment. While countries must create their climate action plans and adaptation measures, private finance is critical for the overall implementation of these plans. Existing NDCs differ in details between countries and often lack the necessary information on policies required to make informed investment decisions. Investors require specific insights on opportunities and policy measures to determine progress towards achieving decarbonisation goals. Updated NDCs provide opportunities for countries to deliver a more structured and investable plan that secures long-term investment. By enabling investors to understand the policies, investment risks and opportunities and support implementation, they can secure further finance to reach their climate goals.
A lack of finance for developing countries’ plans could impact the goals of the NDC, impacting climate action and overall financial stability worldwide. Private finance must be a priority subject at COP29. COP presents a great opportunity for private finance to integrate with policymakers, government members and key stakeholders to ensure risks and opportunities are recognised. Building stronger collaboration can deliver a clear pathway for the future.
With finance at the core of COP29, there is an opportunity to work with the private sector and reduce the climate finance gap. The discussions and decisions at COP29 will deliver the next steps for how public and private sectors work together to support sustainable projects, especially in developing nations.
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