Arianna Griffa
Senior Policy Manager - Global
Another year of tense negotiations saw discussions overrun in Baku, with the final text leaving some disappointed and others relieved that a deal was reached at all. We explore the outcomes and opportunities they might present for investors.
The 29th Conference of Parties (COP) delivered a New Collective Quantified Goal (NCQG) on climate finance but failed to define the mechanisms behind the headline financial target. Developed nations agreed to channel USD 300 billion a year to developing countries by 2035 to support their climate goals, a figure far short of the USD1.3 trillion required, according to research from the High-Level Expert Group on Climate Finance.
To strengthen this commitment we called for a multilayered approach, combining a robust policy framework with actionable steps to mobilise the private investment flows which are essential to deliver the capital required.
Although the final text made one mention of investors, it lacked detail on specific policy signals or mechanisms for meaningful engagement between public and private capital.
Baku to Belem finance roadmap
In response to calls from developing countries for the higher figure, a last-minute addition to the final text included the ‘Baku to Belem roadmap to USD 1.3 trillion’. It included a call on: “all actors to work together to enable the scaling up of financing to developing country parties from all public and private sources to at least 1.3 trillion per year by 2035.”
The presidencies of COP29 and COP30 must now figure out how to bridge this finance gap and deliver a report by the next COP, with solutions to include grants, concessional and nondebt-creating instruments as appropriate. This presents an opportunity to engage with private finance actors to explore practical solutions to help meet the objective.
Wording dropped
Disappointingly, reference to the “transition away from fossil fuels” — one of the key outcomes of COP28 — was absent from the COP29 final text. Many pushed for a stronger focus on this issue, but opposition from several petrostates, led by Saudi Arabia, excluded this critical commitment from the final text.
Leaders and other non-state actors emphasised the need for strong signals for investors across the fortnight but the final text failed to provide the enabling environment required. Although adaptation was mentioned considerably more than previous COPs, both it and mitigation were insufficiently prioritised and not reflected in the final outcome.
Several key topics, including the implementation of global stocktake (GST) outcomes, were deferred to future meetings. This is a missed opportunity, particularly given the urgency of mitigation and adaptation in achieving the goals of the Paris Agreement.
The concurrent G20 summit, which emphasised the need to mobilise public and private capital into these areas, failed to translate that momentum into decisive finance outcomes.
Progress made
COP29 did get off to a strong opening, with climate negotiators approving Article 6.4 of the Paris Agreement on the first day. This carbon crediting mechanism identifies opportunities for verifiable emission reductions and can help draw funding for climate goals. The United Nations Climate Change Executive Secretary, Simon Stiell, said that this would allow countries to implement their climate plans "faster and cheaper".
Nationally Determined Contributions (NDCs) came into sharp focus this year, with the United Kingdom (UK), Brazil and the United Arab Emirates (UAE) revealing their 2035 targets ahead of the February deadline. Meanwhile, 25 countries and the European Union committed to no new unabated coal power in their upcoming NDC plans.
Multilateral Development Banks (MDBs) also announced plans to increase climate finance and a new capital market mechanism to attract private investment. Collectively, MDBs aim to increase their annual financing for low- and middle-income countries to USD 120 billion, with plans to mobilise USD 65 billion from the private sector.
What's next?
Another year of fraught negotiations meant slow progress, but COP29 once more demonstrated that this vast, multilateral stage is functional. It provides an unrivalled platform for diverse stakeholders and non-state actors, including investors, to share their experiences and solutions to support negotiations. Some momentum was lost from last year’s COP28 text, but we remain optimistic that it will pick up in Belem at COP30.
The focus on NDCs will gather pace as the country deadline approaches. We will continue to call for more investable NDCs that support greater public-private collaboration to identify and co-develop investment opportunities for the transition. There is an opportunity for the more industrialised emerging markets and developing economies to show leadership in this space.
Looking ahead, COP30 discussions are likely to revolve around the outcomes of the COP29 Global stocktake and the first steps of the Baku to Belem roadmap. The line between climate and nature agendas will continue to blur, especially given Brazil’s position as a custodian of the Amazon rainforest in the deforestation conversation.
Ultimately, the ripple effects of COP29 will be felt well beyond the headline outcomes. It is these longer-term risks and opportunities that investors must consider.
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