Reflections on COP29 Finance Day
Finance Day at COP29 took place on 18th November 2024 in Baku, Azerbaijan. This crucial event focused on addressing the financial needs of global climate action, highlighting the critical role that finance plays in achieving the Paris Agreement's goals. The day brought together government leaders, financial institutions, and climate experts to discuss how to scale up financial resources, ensure equitable access, and strengthen climate resilience, particularly in vulnerable nations. With a focus on innovative funding mechanisms, accountability, and the mobilisation of climate finance, Finance Day underscored the urgency of aligning global financial systems with the climate crisis.
- Establishing the New Climate Finance Goal (NCQG): During the High-Level Ministerial Dialogue on Climate Finance, discussions aimed to establish a new global financial target to replace the $100 billion annual goal set in 2009. Delegates proposed a blended financing model that integrates public and private investments to unlock the trillions needed annually for clean energy transitions and climate resilience in vulnerable nations. By the close of the Baku COP, parties had agreed a text that called on all parties to work together using “all public and private sources” to get closer to the $1.3 trillion per year goal by 2035.
- Bridging the Adaptation Finance Gap: The Global Adaptation Finance Roundtable spotlighted the critical need to double adaptation finance by 2025, as pledged in the Glasgow Climate Pact. Experts outlined a significant adaption finance gap, with an estimated $194–$366 billion required annually to align with global goals. Discussions included Europe’s need for €800 billion by 2030 to upgrade green infrastructure, serving as an example of the scale of investments necessary worldwide.
- Scaling Up the Loss and Damage Fund: The Plenary Session on Loss and Damage Financing highlighted the urgent requirement to address the current $700 million funding shortfall for the Loss and Damage Fund, far below the estimated $580 billion annual need by 2030. Speakers called for developed nations to make new contributions, focusing on disaster relief and resilience-building projects for highly affected regions like Bangladesh and Pakistan. This fund is crucial for addressing damages that surpass what countries can adapt to.
- Expanding Carbon Markets: At the Side Event on Carbon Markets for Climate Action, delegates discussed finalising rules under Article 6 of the Paris Agreement to improve international carbon trading systems. This included ensuring transparent credit accounting and environmental safeguards to enhance their credibility and effectiveness. Case studies from Costa Rica and Chile demonstrated how these mechanisms can finance low-carbon initiatives while incentivising emissions reductions globally.
- Innovative Financing Mechanisms: During the Innovative Finance for Climate Action Panel Discussion, participants explored new approaches such as solidarity levies on high-emission industries and activities. These innovative mechanisms are designed to generate additional funds for climate action while ensuring fairness across developed and developing nations. Proposals also included the role of philanthropic and private sector contributions in bridging funding gaps.
- Promoting Transparency and Accountability: The Accountability and Transparency Dialogue focused on the need for greater transparency from major emitters like China and Russia. China pledged to increase its contributions to international climate finance, though participants emphasised the importance of clear reporting and monitoring frameworks to ensure credibility. This session also addressed ways to hold nations accountable for past commitments.
- Alarm Over Current Warming Trajectory: During the UNEP Report Launch, alarming projections were presented, indicating a potential global temperature rise of 2.7°C under current policies. This stark warning underscored the urgency for stronger climate finance commitments and more ambitious Nationally Determined Contributions (NDCs). The session called for aligning global financial flows with efforts to keep temperature rise within 1.5°C.
- Major Investment Announcements: The Regional Leadership in Green Investments Session showcased Azerbaijan’s signing of a 760 MW solar project, a significant step in renewable energy development. This project exemplified the potential for public-private partnerships in advancing the global energy transition, with Azerbaijan positioning itself as a regional leader in climate action.
- GIC's Carbon Emission Reduction: The Release Conference of Carbon Emission Reduction on Consumption Side was chaired by Liew Tzu Mi, Chief Investment Officer of Fixed Income at GIC. Liew, who also serves as Chair of the Sustainability Committee at GIC, highlighted that 66 million people in China are using carbon account books to track and reduce their carbon footprints. This effort directly contributes to China's climate peak and neutrality goals. Liew also discussed the promotion of dual carbon standards by HSBC, which supports both individual and corporate carbon accounts as part of global climate initiatives. Additionally, nine additional carbon standards for individual carbon accounts were introduced in China, further advancing the country’s climate objectives and encouraging broader consumer participation in carbon reduction efforts.
- Alice Ho’s Talk on Global Youth Leadership for Climate: Alice Ho, Chief Youth Officer for the Global Alliance of Unity on Climate, spoke about the importance of consumer carbon reduction. She emphasised how changing consumption habits allows individuals to directly reduce emissions at the source. Alice also discussed the ClimateX Campaign, which blends theoretical learning with real-world application. This campaign has engaged over 2,000 students from 79 countries, who have organised over 500 climate-related activities. These students have put their knowledge into practice by collaborating with various partners to drive demand for sustainable practices.
- UNHCR’s Refugees for Climate Action: UNHCR launched the Refugees for Climate Action Network, co-founded by Theo James and Opira Bosco Okot, to highlight the disproportionate climate impact on refugees. They stressed the need for more climate financing for displaced communities, as the majority of funding currently goes to middle-income countries. These initiatives emphasize the need for global cooperation, consumer involvement, and targeted financing to address climate change’s broad and diverse challenges.
- Major Public and Private Finance Coalition Issues Recommendations for Post-2025 Climate Finance Goals: On Finance Day, a global coalition of financial organisations issued recommendations for post-2025 climate finance. They emphasised strategic mobilisation of public and private capital for climate mitigation, adaptation and resilience, particularly in developing nations, aiming to align financial flows with the Paris Agreement goals.
Conclusion: Impact and Importance
Finance Day at COP29 was a defining moment in the global response to climate change, significantly influencing the direction of climate finance and underscoring its role in achieving the Paris Agreement goals. This day was not merely about pledges; it was a catalyst for concrete financial transformation, aiming to bridge the immense funding gaps for adaptation, resilience, and loss and damage that developing nations, particularly, face as climate impacts intensify.
The New Collective Quantitative Goal (NCQG) was described as “an insurance policy for humanity” by Simon Stiell, Executive Secretary of UN Climate Change. “But like any insurance policy – it only works – if premiums are paid in full, and on time. Promises must be kept, to protect billions of lives.” Here all finance professionals have a role to play, ensuring that as they mobilise capital through their lending and investment decisions, this facilitates and supports a global transition to cleaner energy, climate adaptation, the protection of nature and reduction in biodiversity loss.
The discussions also brought innovative financial solutions to the fore, such as solidarity levies and expanded carbon markets, which have the potential to create self-sustaining funds for climate initiatives. Moreover, the emphasis on adaptation and the Loss and Damage Fund set the stage for proactive climate resilience, as opposed to reactive crisis response, allowing affected regions to recover more quickly and prepare for future impacts.
Ultimately, the outcomes of Finance Day are pivotal for shaping a sustainable, inclusive global financial response to the climate crisis. By laying a foundation for long-term funding mechanisms, COP29 Finance Day established a path forward for collective climate resilience and equitable adaptation—a path that will be essential for safeguarding communities, ecosystems, and economies worldwide against the worst impacts of climate change.
Reflecting on the pivotal outcomes of not only its Finance Day, but the COP29 as a whole, it remains clear that our sector has a crucial role to play in driving global climate action. The New Collective Quantified Goal can be viewed as a framework to mobilize and direct capital towards climate resilience and adaptation projects, innovating to help bridge the funding gaps and support vulnerable communities. As finance professionals, find the opportunities to enhance and deploy your expertise and influence to champion responsible and sustainable finance initiatives within your organisation.