Climate finance at COP29

On a basic level, the Conference of Parties (COP) focuses on two key questions:

• How are countries contributing to the achievement of climate targets?
• How will the targets be achieved?

The answers to both questions are complex and multifaceted; the second question focuses heavily on climate finance – specifically, the financing of climate targets and the source of this funding. This represents a significant challenge for countries in which they must be aligned.

To create countries and communities that are climate resilient, financial investments must be directed towards climate solutions particularly supporting developing countries in implementing climate mitigation and adaptation strategies.

New Collective Quantified Goal (NCQG)

A key focus of COP29 in Baku is the agreement of a new collective quantified goal (NCQG) on climate finance. This goal aims to accelerate the achievement of Article 2 of the Paris Agreement, which seeks to limit global average temperature rise to well below 2 degrees above pre-industrial levels.  In 2009, a target was set to achieve $100bn annually by 2020 to support developing countries take climate action – this goal was achieved in 2022, two years behind target. A new target must be set for 2025 to address current needs. According to a report by the Independent High-Level Expert Group on Climate Finance, this should be $1 trillion annually by 2030. Climate activists are echoing this in BAKU, with a 10-metre-long “bill” declaring that “trillions, not billions” must be mobilised to support climate adaptation measures.

In selecting the NCQG, the following parameters must be finalised:

• Timeframe
• Structure
• Amount
• Mobilisation
• Financial sources
• Quality
• Transparency arrangements

Draft text on the climate finance goal has already been published by COP29 co-chairs, setting the stage for discussions. Technical expert dialogues pre-COP29 have preceded this to arrive at the draft text. It does appear that certain provisions are under discussion, with elements of the discussion now closed off to press. Progress in these discussions will determine whether an agreed NCQG can be finalised by the end of COP29.

Unequal distribution of climate finance

The backdrop of negotiations is in the context of an unfair distribution of funds to countries most affected by climate change. A report from Christian Aid highlights the disparity of funding allocated to the countries, with the ten countries most affected by climate change between 2000 and 2019 receiving less than 2% of all climate finance. This means that the 750 million people living in the most climate-vulnerable countries received on average less than $1 each per year from rich countries.

Further, minimal private financing secured is going towards climate adaptation with the report identifying that only 50 cents in every $100 from all climate finance is private finance for adaptation.

The need for investment in developed countries

Whilst extreme climate events are occurring with increasing frequency in developed countries, climate investment at COP29 has yet to be discussed exclusively for developing countries. The role of European regional governments in managing the fallout from extreme climate events was also raised, with regional EU leaders requesting more investment to support adaptation measures to prevent and mitigate impacts associated with extreme weather events, such as the recent extreme floods in Spain.  Governments are simply not prepared for these climate disasters and are voicing a requirement for investment to support readiness in advance of the next occurrence. All climate finance considerations should be factored into the NCQG.

Mobilisation of private funding

The reality is that public funding alone will not be enough to meet the target when it’s set. Private capital must also be mobilised. To do this, policy initiatives must be designed to drive demand for green products and allow organisations to seize opportunities associated with the transition to a low-carbon economy. The Industrial Transition Accelerator (ITA) issued an open letter last week urging governments to leverage policy measures to trigger demand for green investment. The letter (endorsed by 50 global business leaders and over 700 financial institutions) stated that well-designed policy initiatives would release up to $1 trillion of investments, particularly for green industrial plants awaiting finance for construction by 2030. It is essential that all private sector actors, including the insurance industry, play a part in de-risking certain investments.

Nationally Determined Contributions (NDC)

All COP countries are required to update and commit to nationally determined contributions (NDCs) –  country-specific emissions reduction targets – by early 2025. This can mobilise private finance to support the achievement of these targets through investment in new technologies and mobilisation of climate finance.

Once Ireland’s NDCs have been re-set in early 2025, it will highlight potential opportunities for domestic investment. Financial institutions should recognise that significant investment is required for climate adaptation and that as public finances will not fill the required finance pool, further private-sector funding is needed. Investing in these opportunities offers not only strong returns but also a chance to create a more resilient planet.

If an NCQG can be finalised by the end of COP29, it will represent a crucial first step. Clear and structured plans must follow to ensure targets are met without delay. Only through collective effort, strong financial commitments, and collaboration between governments, businesses, and financial institutions can we begin to address the scale of the climate crisis and build a sustainable future for all.