Arianna Griffa
Senior Policy Manager - Global
Finance took centre stage at Bonn climate meetings, with negotiations on the new global climate finance goal featuring heavily. The next set of Nationally Defined Contributions (NDCs) were also a reoccurring theme: private capital is pivotal to the success of both.
Over 8,000 delegates joined talks in Bonn from 3-13 June, with the New Collective Quantified Goal (NCQG) on climate finance core to every discussion. It is expected to replace the previous USD100bn per year by 2020 commitment agreed at COP15 in 2009, aimed at helping developing countries respond to, and mitigate the effects of, climate change. The NCQG will likely be a defining issue of COP29 in Baku.
This comes as analysis from the Center for Global Development confirmed that developed nations likely met the goal for the first time in 2022, two years later than promised.
Research from LSE Grantham Institute pins an effective climate finance target at USD1trn per year by 2030.
The COP28, COP29 and COP30 presidencies – known as ‘the Troika’ – have been calling on all countries to increase their climate finance contributions ahead of COP29 this November. Many already refer to it as a ‘Finance COP.’ June’s Bonn meetings were supposed to set the stage for agreements in Baku, including on finance, but as discussions came to a close, most countries remained entrenched in their positions with no clear commitments to climate finance.
Ambition is urgent – new research from the LSE Grantham Institute pins an effective climate finance target at USD1trn per year by 2030. Private capital will be critical if nations are to fill this gap and meet the costs of the climate challenge.
Our message at Bonn was that to be most effective, the delivery of finance must be considered on a case-by-case basis. Early-stage initiatives are likely to benefit most from grants and public finance, whereas larger projects, such as the scaling up of renewables, are better suited to higher proportions of private capital.
Access remains a key issue for investors. If finance exists in large, complex funds run by multilateral development banks, capital will not be able to flow efficiently and at the pace necessary to offer real support.
A new goal for climate finance?
The delay in meeting the USD100bn per year by 2020 goal has damaged credibility and created mistrust amongst emerging markets and developing economies (EMDEs) around the level of financial commitment from developed nations. This in turn could materially limit the ambition of any emission reduction targets EMDEs set.
The next target must not only increase the quantity of climate finance, but also hold nations accountable to target deadlines.
Talks were again mired by counterarguments that nations such as China and resource-rich Arab states have outgrown their emerging status and should therefore pay more. This is a familiar argument in global negotiations and one that is unlikely to be resolved at this COP or the next.
The result was slow progress on finance discussions with no concrete agreements. Nonetheless, there was a willingness to continue discussions and to find common ground ahead of the next round of talks on areas including transparency. Last minute announcements from COP28 remind us that reaching an agreement can fall to the 11th hour – not unusual in the world of climate diplomacy.
What is clear is that this next target must not only increase the quantity of climate finance, but also hold nations accountable to target deadlines to help build a sufficient response to the climate crisis. While primarily a public finance commitment, a bolder, more ambitious approach to the NCQG can send strong signals to the international finance system.
Ultimately, the availability and accessibility of finance, including through the signal of the NCQG, will determine how ambitious the next round of NDC’s will be and how much countries can close the ‘ambition gap’. These are due in 2025, with many of the big G7 emitters encouraged to submit high ambition NDCs as early as possible ahead of COP30 in Brazil to set a leadership example.
Ensuring NDC credibility
Our research with investors highlights that this next wave of NDCs can help national climate plans become attractive ‘investment plans’ for private finance. They will be instrumental to implementing the global targets set out in the COP28 Global Stocktake (GST), including tripling renewables and doubling the rate of energy efficiency.
At a UNFCCC roundtable event for the Annual GST Dialogue we explained that private finance can support these targets in context of developing new NDCs. We called for more information on policy implementation, which is vital to investment decision making. Effective NDCs need granular detail on national pathways, based on context at a sector-specific level and helped by supporting policy and regulatory frameworks which map towards targets. Together, this helps to assure investors that decarbonisation plans are credible.
Active engagement from the private sector will be key in pushing progress and ambition for national climate goals and climate finance commitments alike. More spaces for dialogue and collaboration between public and private sectors can help to identify challenges, and solutions, to accelerate the flow of capital towards climate- and nature-positive outcomes.
We are ready to support both investors and policymakers with these goals, including at the upcoming COP summits – more on our plans on the ground coming soon.
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