Recent climate catastrophes have raised the bar for securing funding to address global warming. At COP29, climate finance will be a focus.

At last year’s COP28 conference in Dubai, the participating governments—197 countries plus the European Union—committed to a tripling of renewables targets and a doubling of energy efficiency. When they check on their progress at COP29, officially known as the Conference of Parties, which opens on November 11 in Baku, the capital of Azerbaijan, their agenda will be, if anything, more ambitious. It will range from protecting biodiversity to capacity-building for carbon markets to climate education and youth action to inclusiveness for Indigenous people and other marginalized groups.

Added to that should be grid and storage targets ensuring that countries have the capacity to store renewable-generated energy, says Dave Jones, Global Insights program director at Ember, a UK-based energy think tank. COP29 has already called for a sixfold increase in global energy storage by 2030, to 1,500 gigawatts of capacity. “To reach this goal,” Michael Bloomberg, the UN’s special envoy on climate ambition and solutions, has said, “it’s critical that we increase collaboration among private, public, and nonprofit leaders.”

Key to all these goals is climate finance, which is expected to be a central focus of this year’s gathering.

“This year is known as the finance COP,” says Natalia Alayza, manager in the Sustainable Finance Center of the World Resources Institute (WRI). This year’s participants are expected to adopt a new target for the collective investment they pledge to make each year toward climate action. That target was set at $100 billion in 2009, a goal they only met in 2022.

“Adopting the new collective quantified goal (NCQG) which will replace the $100 billion goal will be the key priority,” says Alazya, “not only because it will bring trust into the international climate finance negotiations but also because it will be crucial to supporting developing countries’ climate ambition commitments.” At a minimum, she urges, the participants should pair the new target with a clear delineation of what it will fund—adaptation, mitigation, loss and damage, for example—who the providers and recipients will be, and the timeframe for delivery.

Bridging the often-considerable gap between ambition and accomplishment has been one of the biggest hurdles to meaningful implementation of climate change goals. The Climate Bonds Initiative’s Partnership Program is just one of many attempts to boost the use of climate bonds, particularly in the areas of GSS (green, social, and sustainability) markets. This year’s Climate Finance Summit, held in Kuala Lumpur in August, and the Climate Investment Summit held in London in June, underscored the importance of governments and the private sector working closely together, particularly as climate mitigation becomes a priority.

The Price Tag Rises

With dramatic storms and floods in many places becoming more common, some observers argue that countries will have to be ready for a once-in-100-years storm pretty much every year—which raises the urgency of securing financing now.

“One of the most important needs in Central Asia is sustainable infrastructure,” says Ludger Schuknecht, vice president of the Asian Infrastructure Investment Bank (AIIB), “everything from dealing with effluent water from the Aral Sea to the enhanced connectivity of transport infrastructure between the five countries of the region.” The AIIB held its annual general meeting this year in Samarkand, Uzbekistan, focusing closely on meeting climate goals.

“Private capital mobilization is one of the main priorities for doing so,” says Schuknecht, adding that the AIIB has already exceeded its 2023 climate finance goal of 55% of total investment, typically $10 billion a year, with 60% of total invested funds going toward green infrastructure, connectivity and regional cooperation, private capital mobilization, and technology-enabled infrastructure.

“There is now almost no project that we sign or initiate that doesn’t have a climate change dimension,” he notes.

Mobilizing private capital is the only realistic way to bridge the “trillions of dollars wide” climate finance gap, argues Dimitri Gvindadze, director of Climate Strategy, Regional Delivery at the European Bank for Reconstruction and Development (EBRD). Last year, the bank’s annual green finance investment totalled close to €7 billion ($7.3 billion), nearly half its total outlay.

“Through our investment, we mobilized a total of €27 billion in private sector finance toward climate-related projects,” he notes, “meaning that for every €1 of our own investment, we mobilized over €3 in the private sector.” 

A Green Dimension Everywhere

Aside from boosting climate finance generally, Gvindadze would like to see COP29 prioritize Article 6—carbon trading—as well as areas that align with the EBRD’s activities. The bank is working on a new strategic and capital framework, to be published next year, that will focus on three priorities: green, inclusion, and governance.

But he sees a green dimension in just about every sector, including finance, transport, agribusiness, municipal, industrial and energy. Scaling up private investment in renewables often requires additional investment in public infrastructure such as electrical grids, he notes, which generally means major involvement by the state. Going forward, a faster-paced green transition will depend on politics, the business climate, macroeconomic stability, land rights, various regulations and licenses, budgetary and financial constraints, and concerns about energy security. These must be tackled as and when they arise.

“In terms of country ambition, our view is that where there’s a will, there’s a window,” Gvindadze argues. “Yes, there is a correlation between projects and geopolitical risk aversion, but our view is that the green transition is about enhancing the long-term competitiveness of your economy,” adding that COP29’s aims should be seen in these terms.

Another key priority, says the WRI’s Alayza, should be to find ways to boost public-private cooperation.

One option, Alayza says, could be to “explore or increase the use of financial instruments that mitigate the risks of private investments, such as guarantees, which still have space to grow when looking at, for example, the multilateral development banks’ climate finance portfolio.”

While many critics complain that the COP process is moving too slowly, Ember’s Jones is broadly positive. He points to the recent decision by the UK—the world’s first industrial nation, whose prosperity was built on coal—to phase out its last coal-fired power station by next year. Since the Paris Climate Change Agreement of 2015, he notes, 27 of the 38 OECD countries have committed to becoming coal-free by 2030, and since then, coal generation has dropped by 52%.

“We’ve seen action where you’d maybe least expect it,” Jones says, “with Saudi Arabia committing to having half of its electricity generated by renewables by 2030 while two-thirds each of the wind turbines and solar energy plants now installed worldwide are in China.”

With COP29 only weeks away, the world is not sitting still, however. The US presidential election will have already been held by then; with one of the two candidates highly skeptical of the realities of climate change, the outcome could significantly undermine US involvement and commitment to COP goals. On the other hand, the meeting of the G20 Rio de Janeiro Summit on November 18-19 will overlap with COP29. That, and the fact that Brazil is scheduled to host COP30 next year and is committed to serious action to mitigate climate, could bring more intensity to the proceedings.

“COPs are inherently complex, because they represent a platform for multiple stakeholders,” says EBRD’s Gvindadadze. “But they are useful for drumming up a sense of urgency.”

After a year of unprecedented climactic volatility—ranging from heat waves and drought to high-intensity storms, hur- ricanes, and major flooding—the urgency is already there.