COP29 is just 6 weeks away, running from 11-22 November.
Climate finance, as a critical enabler of climate action, is a centrepiece of the COP29 Presidency’s vision.
The world’s nations are set to decide on a new climate-finance goal, to go beyond the $100 billion per year target set at COP15 in Copenhagen in 2009.
- The previous climate finance target was a pledge to jointly mobilise $100 billion per year by 2020, to address the needs of developing countries.
- At COP26, this was supplemented by an additional pledge of $12 bln – the Global Forest Finance Pledge – at COP26, including £1.5 billion over 5 years from the UK.
- The COP15 target was ultimately met, albeit 2 years late. The OECD’s $115.9bn climate finance total consisted of $94.2bn of new funds and $27bn from existing development aid, according to analysis by the Center for Global Development (CGD).
- The OECD notes that around 69% of this public climate finance total was provided as loans. This has raised concerns, given the number of global south countries already struggling with debt.
COP29 – Initiatives and Outcomes
- Climate Finance Action Fund (CFAF): A fund, capitalised with voluntary contributions from fossil fuel producing countries and companies, to catalyse the public and private sectors across mitigation, adaptation, and research and development. The Fund will also have special facilities for highly concessional and grant-based funding to rapidly address the consequences of natural disasters in the developing countries in need.
- The Baku Initiative for Climate Finance, Investment and Trade (BICFIT): An initiative to focus on the nexus of climate finance, investment and trade, with a platform to promote investment into green diversification, support policy development, and share expertise through dialogue.
- The full list of planned initiatives is shown here.
Turning Pledges into Progress
At Climate Week, the IEA, IMEO and EDF presented a framework for tracking oil and gas emissions progress, as they progress towards the emissions and flaring targets set out in the Oil and Gas Decarbonization Charter launched at COP28.
For the industry to deliver the methane and flaring reduction targets set – better policing will be needed. The initiative plans to publish its first full assessment in 2025, with new measurement systems, including the MethaneSAT and Carbon Mapper Tanager satellites.
Addressing the Banking Sector
Most banks are arguably not realistic in their modelling of nature and climate related risks.
The impetus for change is increasing, with new laws, regulations and standards on the way.
- The ECB has set clear expectations for financial institutions to identify, measure, and manage climate-related and environmental risks.
- They need to incorporate nature-related risks into traditional risk categories, from credit to market risks, meeting specific deadlines.
- The ECB Climate and Nature Plan 2024-2025 is in the works.
- The legal bases for mandating the integration of environmental protection into ECB policies are already in the EU Treaties.
“Time is running out to prepare for the materialisation of nature-related risks. We need to be ready for the impact of these risks, just like we are for climate-related risks – or indeed for any other risk driver.”
“the nature crisis could have direct implications for price stability – the primary objective of the ECB,”
Frank Elderson, European Central Bank
A recent speech by Frank Elderson, ECB Executive Board member and Vice-Chair of the ECB Supervisory Board, highlighted two growing legal risks of nature degradation for the financial sector: Nature-related litigation and the impact on central bank / supervisory mandates.
- 72% of euro area companies are highly dependent on ecosystem services, in key sectors such as agriculture, real estate, construction and healthcare.
- The degradation of nature impacts vital ecosystem services like food, water and carbon uptake, with the potential for catastrophic and irreversible changes.
- There is a growing trend of legal actions addressing biodiversity crises and ecosystem degradation. Most cases target states and public entities, but an increasing number are also directed at corporates and banks.
Whilst many countries around the world are already bearing the pain of these effects, the EU has an important role to play in developing higher standards for member states and other countries to follow.
