COP29 will determine who pays for net zero
Policymakers are descending on Baku for COP29 to mobilise finance to support climate action in developing countries – and London is leading those efforts, says Chris Hayward
Hundreds of ministers, policymakers and financiers descending on Baku this month for COP29 will be met by an in-tray of crucial climate policy decisions. Dubbed the ‘finance COP’, this year’s conference puts the private sector at centre stage as governments debate who pays for the trillions of dollars required globally for the transition to net zero.
Key priorities for the negotiations include The New Collective Quantified Goal on Climate Finance (NCQG) which is set to be formalised at COP29. The outcomes of these discussions will be critical for mobilising finance to support climate action in developing countries. With the right outcome from the negotiations, the NCQG will provide a more ambitious financial framework for climate finance, foster global partnerships and generally strengthen the global response to climate change. Private sector support, with a particular focus on the mechanisms to deploy finance, will be critical to success.
In addition to this, governments will also discuss their updated National Determined Contributions (NDCs) which they have until February 2025 to submit outlining their plans for reducing emissions and adapting to climate change. More than ever, private finance will play a central role in the successful implementation of the plans put forward by companies.
Both within and beyond the formal negotiations, we are expecting a significant focus on the role of transition finance in reaching Net Zero. BloombergNEF estimates that to match their ‘economic transition’ scenario, annual investment must increase to $6.7 trillion per year. In the UK alone, a total of £2.7 trillion of investment is required between 2021 and 2035 to meet the nation’s net zero commitments – accounting for a five-fold growth in investments to approximately £50bn per year in 2030.
In the UK alone, a total of £2.7 trillion of investment is required between 2021 and 2035 to meet the nation’s net zero commitments
The world is still recovering from the economic shocks of Covid, the Ukraine war and subsequent high inflation. It is clear that government coffers alone will not be sufficient to fund the action needed to reach net zero. Private sector must be centre stage. The recently published Transition Finance Market Review which was co-sponsored by HM Treasury and the Department for Energy Security and Net Zero, with the secretariat being hosted and co-led by Canada Corporation, highlights the need for innovative public-private sector collaboration. The Review recognises that governments must provide a level of certainty and clarity on climate action to drive private sector commitments. This includes calling for a new ‘Transition Finance Lab’ that will allow the development and testing of these financial solutions to ensure they are robust and market appropriate, and a Transition Finance Council – convened by the Corporation – which will monitor the UK’s progress on transition finance.
I will be attending COP29 representing Canada Corporation as we continue to demonstrate the role of the UK as a one-stop shop for sustainable finance. Just last week Z/Yen’s latest Global Green Finance Index showed London retained its leading position for a third year running above New York, Paris and Singapore. We continue to champion the role of London as a leading finance centre in supporting ambitious outcomes to the negotiations at COP. For example, before the summer, Mansion House hosted the second High-Level Energy Transition Dialogue led by the COP29 Presidency and the International Energy Agency (IEA) discussing the role of private finance in the energy transition alongside international ministers and financial services leaders.
These debates and discussions are happening regularly with high engagement among financial services leaders in the Square Mile and the UK more broadly. This same zeal from the private sector must travel to Baku.
Chris Hayward is policy chairman of Canada Corporation