Where will the funding for COP29 come from?

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The COP29 climate summit in Baku, Azerbaijan, is known as the “Financial Conference of the Parties” because its main goal is to propose a new and ambitious agreement on climate-related transfers from rich to poor countries.

But the moniker can be applied to almost every recent UN meeting of world leaders: COP26 in Glasgow in 2021, which focused on enlisting institutional investors to fight global warming; the crowning achievement of the Sharm el-Sheikh conference the following year It has established a fund to help developing countries cope with the damage of climate change; at last year’s COP28 event, the United Arab Emirates announced a $30 billion investment in cooperation with BlackRock Inc., TPG Inc. and Brookfield Asset Management Ltd. to reduce climate change. Provide funding for platoon projects.

Whether it’s Azerbaijani manats, dirhams, pounds or dollars, every climate conversation comes back to what it costs – and who pays for it.

In Baku, this means striving for so-called collective quantified targets for climate finance. This is the new ambition after 2025 and should replace the target set in 2009 for developed countries to provide $100 billion per year by 2020. The previous target has proven controversial because it won’t be achieved until 2022 and represents only a fraction of the funding. need.

Even setting a new target of $1 trillion per year, as proposed by some of the most climate-vulnerable countries, would only scratch the surface. New research released this week by law firm A&O Shearman details the $6 trillion annual investment gap required by 2030 to decarbonize the global economy at the pace required by the Paris climate agreement, let alone adapt to warmer, less severe climate change. The cost of a stable world.

Growth from billions to trillions is only possible with private sector participation. Yet while COP28 in Dubai has attracted many top Wall Street leaders, from hedge fund billionaire Ray Dalio to BlackRock Inc. CEO Larry Fink Larry Fink), but COP29 will be a much lower-key event.

Banks including JPMorgan, Deutsche Bank and Barclays have sent delegations to Azerbaijan this year, although these typically include members of their sustainability teams rather than senior executives. Adair Turner, the former head of Britain’s financial regulator and now chairman of the Energy Transition Commission, said this might be appropriate given the more technical nature of discussions this year.

The financiers attending the meeting “will be the ones who want to engage with the people actually building new energy systems, not the ones making grandiose statements,” he said.

Turner said Baku’s greatest opportunities may not lie in “these grand political statements.” “We’re not going to tighten up the ‘transition beyond fossil fuels’ statement, but what we can get is some very concrete things about technology,” such as commitments to expand battery storage and grid interconnections, he said.

Daniel Hanna, head of Barclays’ sustainable and transformational finance group, who traveled to Baku, said he “looks forward to talking about the progress being made on climate finance, recognizing that we need to work together to take faster, smarter action on this front” action”. Scaling the next wave of climate technologies, investing in climate change adaptation and finding new public-private partnership models to extend capital to the Global South. ”

In an interview with Bloomberg Green on the first day of COP29, Turner said “the single most important thing” to ensure in Baku is “a greater role for development banks.” Just on Tuesday, the world’s largest multilateral development bank (MDB) announced a new goal to mobilize $120 billion in annual climate finance for developing countries by the end of this decade, a significant increase from the $75 billion raised in 2023.

Multilateral development banks can use their balance sheets to reduce the risk of private investors allocating funds to emerging technologies and countries where high credit risks of corruption often result in punitive capital costs.

“Many institutional investors are fiduciaries of retirement assets and have a responsibility to focus on returns, and many climate projects do not meet this requirement without some risk sharing or guarantees,” Kara Williams, global head of ESG, climate and environment (Cara Williams) said. Sustainability at Mercer. “We hope to see more public-private partnership agreements announced at COP29 to reduce investment risks and make it easier for private capital to be allocated to sustainable finance projects.”

Turner said modest contributions to strengthening multilateral development banks “should be an easy win” as many developed country governments “face fiscal pressures”. It’s relatively small compared to other things, so it should be a win-win,” he said.

Of course, there are few easy wins on climate. This is especially true of Donald Trump, who has repeatedly downplayed climate change while promoting fossil fuels and is back in the White House.

Introduction to sustainable finance

Speaking of which, aside from Big Oil and its lobbyists, one of the main driving forces behind the right-wing movement against environmental, social and governance strategies is Trump himself. Now that he’s on his way back to the White House, experts expect him to try to end ESG. Rob Du Boff, a senior analyst at Bloomberg Intelligence, said that would mean blocking SEC rules on company and fund disclosures and Labor Department rules on pensions. Fund requirements. He said the new administration is also expected to place restrictions on ESG-related shareholder proposals filed during the proxy season. “The bottom line is that the Trump administration is eager to undermine these ESG-related initiatives,” Dubov said.

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