COP29 One Week To Go - New Collective Quantified Goal
A week today, COP29 will kick off in Baku, Azerbaijan, where the climate finance landscape is expected to shift with the establishment of the New Collective Quantified Goal (NCQG). The NCQG aims to replace the existing $100 billion annual climate finance target, set in 2009, with a more ambitious goal that considers current climate vulnerabilities and increased funding needs in developing countries. Projections suggest that developing economies will need around $1.1 trillion by 2025, rising to $1.8 trillion by 2030, with the private sector expected to play a more substantial role than before.
New Collective Quantified Goal on climate finance
At Paris’ COP21 in 2015, in accordance with Article 9, paragraph 3, of the Paris Agreement, developed countries decided on the intention to continue their existing collective mobilisation goal through 2025 in the context of meaningful mitigation actions and transparency on implementation; and that prior to 2025 the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement (CMA) shall set a New Collective Quantified Goal on climate finance (NCQG) from a floor of USD $100bn per year, taking into account the needs and priorities of developing countries.
The ad-hoc work programme on the NCQG commenced at the beginning of 2022 and will conclude at COP29 in Baku, which will commence in one week. As highlighted by the OECD/IEA Climate Change Expert Group, the global context has changed considerably since the $100bn goal was set in 2009: “On the one hand, climate-related initiatives in both the public and private finance sectors have significantly expanded, alongside an overall increase in global climate efforts. On the other hand, climate impacts and vulnerabilities to such impacts have increased across geographies, along with economic pressures, such as growing debt burdens in many developing countries. This evolving context makes the process of establishing a new goal that is both ambitious and achievable even more complex.”
Private sector finance in the NCQG
Last week, UN Trade and Development (UNCTAD) published its report on the quantitative and qualitative elements of the NCQG. It conveys a strong message that global climate finance needs a boost in both quantity and quality to address developing economies’ needs for a just transition towards sustainability and resilience.
The report modelled projections using the United Nations Global Policy Model (UN GPM), a tool for investigation of policy scenarios for the world economy. Based on these projections, developing countries require around $1.1tn for climate finance from 2025, rising to around $1.8tn by 2030.
Provided that key coordination measures that can better support developing countries are implemented at the international level, developed countries are expected to contribute around $0.89 trillion in 2025, rising to $1.46tn by 2030. This implies an NCQG target of around 1.4% of developed countries' GDP.
“Ultimately, the goal of the NCQG must be to transform the climate finance landscape and herald a new era of mutual trust, cooperation and climate action,” the report urges.
Mobilising private finance will be a key consideration of the NCQG. The report highlights that, according to the UNFCCC, private finance mobilisation in relation to the $100bn goal has fallen short of expectations. The most recent assessment by the OECD showed that private finance mobilised reached $21.9bn in 2022. Therefore, it represented 19% of what the OECD calculates towards developed countries’ climate finance contributions to developing countries. From 2016 to 2022, the average proportion made up by private finance mobilisation was 17.5%, never exceeding 20%.
Based on this, the report states that 20% is an ambitious but reasonable assumption for what could be mobilised from private finance based on current trends. Therefore, the projections imply a target of approximately $177bn of private sector mobilisation out of a total NCQG of $886 billion in 2025, leaving around $709 billion to come from public financing.
COP29 and the Climate Action Innovation Zone
On November 14, the COP29 Presidency will host a series of events on Finance, Investment and Trade Day. Within this, ‘Global Financial System: Scaling Up Financing for Climate Action’ will outline discussions about the global financial system's role in mobilising private sector investments for climate adaptation and mitigation, emphasising the need for consistent climate result measurements and new financial structures to crowd in private capital, especially in developing countries.
The Climate Action Innovation Zone will take place 13-15 November, bringing together the private and public sector, government representatives, climate leaders and civil society organisations. Transforming the climate finance landscape is embedded throughout the agenda, with a variety of panels, dialogues and inspiring keynotes.
At the Sustainable Innovation Forum, a Climate Leader Insight featuring Vera Songwe, Chair & Founder of the Liquidity & Sustainability Facility, will explore innovative financing mechanisms, the role of multilateral development banks, public-private partnerships, and updated regulatory risk perceptions. David Atkin, CEO of Principles for Responsible Investment (PRI), and Eric Usher, CEO of UNEP FI, will deliver a keynote address on an international financial framework fit for purpose. With a focus on creating opportunities and sustainable growth in the Global South, Smita Sanghrajka, Engagement Partner at the Mastercard Foundation Fund, will bring forward strategies and solutions for unlocking regional potential and resilience.
To see the full agenda and for further information: https://events.climateaction.org/sustainable-innovation-forum/agenda/
