What to expect from COP29 – ‘The Finance COP’

The 29th Conference of the Parties (COP29) takes place in Baku, Azerbaijan, from 11 to 22 November. Agreeing on a new climate finance goal is top of the agenda, alongside a call to countries to update their national climate commitments ahead of COP30 - we outline what this means for investors. 

Some 50,000 government officials, policymakers, investors and non-state actors are expected to land in Baku to discuss climate goals, finance and implementation strategies to keep the 1.5°C temperature target within reach.   

Expect a new climate finance goal to dominate headlines, earning COP29 its "Finance COP" title. The New Collective Quantified Goal (NCQG) on climate finance will be vital in mobilising finance to accelerate climate action in developing countries, replacing the previous target of USD100 billion per year by 2020, which developed countries were late to meet.  

Leaders will debate how to fund resources for developing countries to help them mitigate and adapt to climate change, and transition to low-emissions and resilient economies.   

Also on the table is a new Climate Finance Action Fund (CFAF), announced in July by the COP29 Presidency. It aims to draw on voluntary contributions from fossil fuel-producing countries and companies to support developing countries' climate projects. Though innovative, its success depends on the mobilisation of significant, and ongoing, contributions for years to come.  

Including the private sector 

The NCQG can increase the quality and quantity of public finance that developed countries provide to support climate action in developing countries. It can further unlock critical private finance by helping to clarify the role of the private sector in global climate goals.  

The New Collective Quantified Goal must acknowledge the critical role of all financial actors.

Strong political signals from COP29, such as recognising the private sector's role in the NCQG specifically, would give investors a direction for climate ambition post-2025 and demonstrate a commitment by countries to address finance gaps.  

Studies suggest climate finance needs to scale up to USD2.4 trillion annually by 2030 for developing countries, excluding China, with USD1 trillion required in clean energy investments alone. Failing to meet this demand could cost up to USD1,266 trillion by 2100 under a 1.5°C scenario, warns the Climate Policy Initiative.  

For the NCQG to effectively engage the private sector and encourage private capital toward emerging markets and developing economies, it must acknowledge the critical role of all financial actors, including institutional investors, banks, private investors, and multilateral development banks (MDBs). 

Furthermore, the NCQG should “speak to” the private sector by sending clear policy signals that enables greater private investment into climate action with clear timelines and transparency mechanisms for implementation. This could include reviewing financial regulations that may hinder capital flows to developing countries and supporting the implementation of climate policies and sustainable finance frameworks.  

In an open letter, our CEO, Stephanie Pfeifer, voiced support for an ambitious NCQG on climate finance, detailing those asks. The letter emphasises that the private sector is ready to work with policymakers to unlock the finance needed for a net zero, climate-resilient world by 2050. The NCQG can help align the financial system to achieve this. 

Making NDCs investable  

This COP comes at a pivotal time for national climate commitments. Countries are expected to update their Nationally Determined Contributions (NDCs) early next year in time for COP30. The United Arab Emirates (UAE), Azerbaijan and Brazil (“the “Troika”) are expected to unveil their NDCs at COP29, promising to lead the way with 1.5°C aligned plans.  

Updated NDCs offer an opportunity for countries to produce more comprehensive and investable plans that attract long-term private investment.

Our report, published earlier this year, highlights the potential of NDCs to encourage private investment. While countries need to develop climate action plans to define their decarbonisation and adaptation strategies, private finance is crucial for their implementation.  

Currently, NDCs vary in quality and detail across countries, often lacking the necessary information on policy implementation to guide investment decisions. Investors seek insights into technological and sectoral opportunities and the policy landscape to gauge a country's progress toward meeting decarbonisation targets.  

Updated NDCs offer an opportunity for countries to produce more comprehensive and investable plans that attract long-term private investment. By helping investors to better understand the policy landscape, assess investment risks and opportunities, and facilitate engagement to support implementation, they could secure additional finance to meet their climate goals.  

Insufficient finance for developing countries' mitigation and adaptation efforts risks undermining their NDC ambition, delaying global climate action, and posing long-term systemic risks to global financial stability, impacting investor returns.  

Discussions on the NCQG and NDCs must therefore progress in parallel, with COP29 the perfect stage to ensure that private finance is part of these discussions.  

Opportunities for investors  

COP presents a unique opportunity for private finance to connect with policymakers, government representatives and other key stakeholders to make their voices heard and outline the challenges they face in decarbonising portfolios. Closer collaboration can shape a path forward.  

With finance being at the heart of the COP agenda, there is an opportunity to more effectively engage the private sector and help close the climate finance gap. The decisions made at COP29 will set the tone for how public and private sectors collaborate to fund sustainable projects, particularly in emerging markets and developing countries.  

Commitments have been made and implementation is underway. Now, investors hope that the right policy signals will stimulate new action in this decisive decade. 

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