Analysis: Businesses seek details in the face of mixed COP29 climate messages

BAKU: COP29 agreements on finance and carbon markets could see billions of dollars flow into the business world if countries are able to develop climate plans with clear policies for markets and investment next year.

The plans, due to be prepared by the United Nations climate body before the next UN climate summit in Brazil, would outline steps to help make projects realistic and less risky.

However, questions remain about the pace of the transition after some countries tried to slow the world’s transition away from fossil fuels, posing even more difficult questions for boards already grappling with the implications of Donald Trump’s return to the US presidency.

Two weeks of bitter negotiations in the Azerbaijani capital Baku resulted in an agreement on $300 billion in annual climate finance by 2035. Many developing countries said the pledge would not be enough to help them implement credible national climate plans.

While private sector investment was teased throughout the summit, including a multilateral development bank pledge to mobilize $65 billion annually, the devil is in the details.

Some of these details may emerge in discussions between countries ahead of next year’s COP30 summit, where they will outline their next set of emissions reduction plans.

Countries are due to submit their national climate plans in February, but many have said they will miss the deadline.

Businesses are urging that these plans include projects and efforts that are “investment-ready” – and with as much specificity as possible – to help investors evaluate their long-term liabilities and risks.

Money will only start flowing once the broad goals agreed at events such as COP29 are translated into “regulation, legislation and other policy measures,” said Thomas Tyler, head of climate finance at asset manager Aviva Investors.

Equally important will be demonstrating a commitment to implementing those policies and regulations and reporting on their progress, Tyler said.

MIXED ENERGY MESSAGES

While climate talks are rocky even at the best of times, the latest round began in Baku just a week after climate denier Trump won the US presidential election on November 5. Few expect Trump to deliver climate finance from the world’s largest economy or champion U.S. policies friendly to climate investment.

While countries at COP29 set a new climate finance target of $300 billion, they only guaranteed that amount by 2035, although they promised to prioritize the most vulnerable countries for those funds.

They also began discussing new potential revenue streams, such as global taxes on polluting industries such as aviation and freight, oil and gas trading, financial transactions and the super-rich.

While these efforts may help make infrastructure projects more attractive in riskier parts of the world, efforts to attract profit-oriented investors are still a work in progress.

The global transition to green energy has already been slowed by the war in Ukraine and the resulting energy crisis, with governments slowing green reforms and companies such as BP and Unilever abandoning their efforts.

In this regard, COP29 did not help. Amid lobbying from countries including Saudi Arabia, the summit failed to offer any steps to deliver on last year’s COP28 pledges to divest from fossil fuels and triple its renewable capacity by 2030, according to sources in several countries at COP29.

“The influence of the fossil fuel lobby remains a major obstacle that must be addressed ahead of COP30 if we are to make meaningful progress,” said David King, Chair of the Climate Crisis Advisory Group.

CARBON GOOD

For companies involved in carbon removal projects, COP29 offered a brighter prospect by providing a long-debated agreement to set the rules for trading national carbon credits, including the creation of a central registry that could also issue those credits and track their sales.

It is hoped that clarity on market structure will encourage countries and companies to invest, as well as allay their concerns about reputational risk. However, the deal made clear that the participation of the UN registry does not automatically confirm the quality of the loans.

“There is a lot more funding to come out of this agreement,” said Eliot Whittington, director of systems change at the Cambridge Institute for Sustainability Leadership.