COP29 focuses on finance as key issues take center stage

Banking & Financial Services
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Jamie Graham Chief Compliance Officer | Nordea Bank

The upcoming UN Climate Change Conference, COP29, is scheduled to occur in Baku, Azerbaijan, from November 11-22. Historically, the conference has influenced share price performance in the month leading up to the event. However, this year’s COP is anticipated to have a more subdued impact as it is considered a transitional event ahead of COP30 in Brazil next year. Despite this, COP29 remains an essential measure of global climate policy progress amid current geopolitical challenges.

This year's conference will emphasize climate finance and has been labeled the “Finance COP.” Three main areas are expected to be critical indicators of success:

1. A new climate finance target agreement: Developed countries currently contribute USD 100 billion annually toward climate mitigation and adaptation in developing nations. This target expires in 2025, necessitating a new agreement at COP29 for the New Collective Quantified Goal (NCQG). The existing goal from 2009 falls short of addressing the estimated USD 0.5-1 trillion annual climate finance gap. Intense negotiations regarding contribution size, contributor list (including China's role), timeframe, and terms are expected.

2. New Nationally Determined Contributions (NDCs): Under the Paris Agreement, countries must submit updated climate targets every five years, with deadlines approaching in February 2025. While major revisions will occur at next year's COP30, COP29 aims to build momentum with early examples set by some nations.

3. Expanding the “loss and damage” fund: Last year saw preliminary agreements on an insurance-like fund for developing countries affected by climate change impacts—the “loss & damage” fund—with only about USD 0.6 billion pledged so far. Increasing this fund's size and defining private sector involvement will be crucial.

Other notable areas include preventing regression on fossil fuel transition ambitions established last year and advancing international carbon markets under Article 6 of the Paris Agreement—a long-standing gridlock issue. Additionally, progress on operationalizing existing frameworks for climate adaptation is necessary.

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