COP29: Will it deliver on climate finance?

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COP29: Will it deliver on climate finance?

Vicki Bakhshi
Vicki Bakhshi
Director, Responsible Investment

In brief

  • The COP29 climate talks have been billed the ‘Finance COP’, as negotiators aim to agree a new global goal for the flow of finance to mitigate and adapt to climate change in developing nations.
  • With mitigation and adaptation needs running into hundreds of billions of dollars, and public finances stretched, the expectation is that the private sector will need to deliver much of this necessary ‘climate finance’.
  • Here we set out Columbia Threadneedle Investment’s view on some of the key measures governments should consider in order to make climate financing more attractive to investors.

The aims of COP29

The COP29 climate negotiations will take place in Baku, Azerbaijan, from 11-22 November. The headline objective is to agree a new target for the provision of climate finance to developing nations, superseding the goal set in 2009 to deliver $100 billion a year by 2020.

Since that target was agreed, estimates of the scale of finance needed have ballooned, particularly as physical climate risks have hit harder and faster than expected. Estimates vary widely, but one analysis from the Independent High-Level Expert Group on Climate Finance1 suggests that the needs of developing countries (excluding China) are in the region of $2.4 trillion a year by 2030. These finance needs span supporting the clean energy transition; adapting to the changing climate; and compensating loss and damage from mounting extreme weather events.

The talks on this target – the New Collective Quantified Goal on Climate Finance (NCQG) – will focus not only on the overall scale of finance needed, but also on the extent to which the private sector could contribute. The prospects for a major scaleup in public finance transfers from developed to developing countries look extremely challenging, given fiscal conditions. The International Monetary Fund recently estimated that global public debt will exceed $100 trillion for the first time ever by the end of 20242  and many developed nations are being hit by the costs of escalating extremes of weather in their own countries, leaving even less space for overseas funding.

The meeting also comes as countries are finalising their updated Nationally Determined Contributions (NDCs), in the third fiveyear cycle since the 2015 Paris climate agreement. These national climate plans, due to be submitted in early 2025, will for the first time extend the current 2030 timeline to 2035. Negotiators will be discussing both the content and level of ambition of these plans in the Baku talks. Alongside the forwardlooking NDCs, countries are for the first time also required to submit Biennial Transparency Reports (BTRs), which track progress against commitments.

Columbia Threadneedle’s view on the energy transition

We believe that the shift to pivot the global energy system toward cleaner energy sources is reshaping the economy and transforming many industries. Our decades of independent research and engagement with issuers on the topic provides insights into how specific companies and sectors are addressing a range of financially material risks and opportunities related to the energy transition.3

Government policies, such as carbon pricing mechanisms, subsidies and regulation, can play an important role in determining the relative economic viability of different energy technologies, and influence how investors allocate capital. We closely monitor policy developments to understand how they impact key energy-intensive sectors.

However, a lack of supportive, clear and well-designed policies is hampering private sector investments in the energy transition, resulting in a geographically divergent pace of the energy transition. Competing national agendas, and complex and shifting policies, can have benefits for investors able to use their research expertise to see through the uncertainties and identify opportunities; but they create challenges to long-term, large-scale changes in capital flows. As such, to the extent it is possible, investors such as Columbia Threadneedle would benefit from more stable and effective policy frameworks . These allow us to analyse company and sector-level policy implications and integrate them into our investment theses.

What outcomes from COP29 would drive greater flows of transition finance?

There is an opportunity for governments to provide investors with greater transparency and clarity on the long-term direction of climate policies via the new NDCs currently being finalised – particularly given the extension to 2035 and the submission of biennial transparency reports. In these documents we would like to see two key issues addressed:

  • How do governments plan for high-level, long-term targets to translate into sector pathways? Investors would value detail on what transition planning is in place for the main highemissions sectors such as electricity, transportation and heavy industry, including levels of ambition and the main policy levers, so we can factor it into our research. NDCs have historically been light on such detail, leaving them less useful to investors.
  • What adaptation strategies are in place? With the economic impacts of extreme weather ever more present, we have been focusing research effort on the implications of the changing climate to our investments.4 We see adaptation planning by governments as increasingly important, alongside mitigation measures.

We also see a need for the COP negotiations to acknowledge and address investor concerns about a lack of clear rules on the process, standards and guarantees in some emerging markets for ensuring project implementation. Climate finance needs to be supplemented by policies, regulation and financial frameworks that stimulate investments. However, many emerging countries lack these. High-quality NDCs may be one route to providing greater clarity; there is also scope for a more active role for international organisations such as development banks to help create a more enabling environment for international investment, including through strengthening governance and legal frameworks.

The road to Brazil

The next COP meeting, due to take place in Brazil in 2025, will mark 10 years since the signing of the landmark Paris Agreement, and will take stock of how the new NDCs measure up against the goals agreed by governments back in 2015. Good quality, investor-relevant NDCs will help to pave the trail toward this landmark meeting.

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COP29: Will it deliver on climate finance?

1 Adam Smith Institute, Wealth of Nations
2 Bloomberg, Bipartisanship is dead. Except on China, 13 November 2022

Important information:

For use by professional clients and/or equivalent investor types in your jurisdiction (not to be used with or passed on to retail clients). For marketing purposes.
This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services. Investing involves risk including the risk of loss of principal. Your capital is at risk. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be suitable for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either. Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This document and its contents have not been reviewed by any regulatory authority.
In Australia: Issued by Threadneedle Investments Singapore (Pte.) Limited [“TIS”], ARBN 600 027 414. TIS is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cth) and relies on Class Order 03/1102 in respect of the financial services it provides to wholesale clients in Australia. This document should only be distributed in Australia to “wholesale clients” as defined in Section 761G of the Corporations Act. TIS is regulated in Singapore (Registration number: 201101559W) by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289), which differ from Australian laws.
In Singapore: Issued by Threadneedle Investments Singapore (Pte.) Limited, 3 Killiney Road, #07-07, Winsland House 1, Singapore 239519, which is regulated in Singapore by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289). Registration number: 201101559W. This advertisement has not been reviewed by the Monetary Authority of Singapore.
In Hong Kong: Issued by Threadneedle Portfolio Services Hong Kong Limited 天利投資管理香港有限公司. Unit 3004, Two Exchange Square, 8 Connaught Place, Hong Kong, which is licensed by the Securities and Futures Commission (“SFC”) to conduct Type 1 regulated activities (CE:AQA779). Registered in Hong Kong under the Companies Ordinance (Chapter 622), No. 1173058.
In Japan: Issued by Columbia Threadneedle Investments Japan Co., Ltd. Financial Instruments Business Operator, The Director-General of Kanto Local Finance Bureau (FIBO) No.3281, and a member of Japan Investment Advisers Association and Type II Financial Instruments Firms Association.
In the UK: Issued by Threadneedle Asset Management Limited, No. 573204 and/or Columbia Threadneedle Management Limited, No. 517895, both registered in England and Wales and authorised and regulated in the UK by the Financial Conduct Authority.
In the EEA: Issued by Threadneedle Management Luxembourg S.A., registered with the Registre de Commerce et des Sociétés (Luxembourg), No. B 110242 and/or Columbia Threadneedle Netherlands B.V., regulated by the Dutch Authority for the Financial Markets (AFM), registered No. 08068841.
In Switzerland: Issued by Threadneedle Portfolio Services AG, Registered address: Claridenstrasse 41, 8002 Zurich, Switzerland.
In the Middle East: This document is distributed by Columbia Threadneedle Investments (ME) Limited, which is regulated by the Dubai Financial Services Authority (DFSA). The information in this document is not intended as financial advice and is only intended for persons with appropriate investment knowledge who meet the regulatory criteria to be classified as a Professional Client or Market Counterparty and no other person should act upon it. This document and its contents and any other information or opinions subsequently supplied or given to you are strictly confidential and for the sole use of those attending the presentation. It may not be reproduced in any form or passed on to any third party without the express written permission of CTIME. By accepting delivery of this presentation, you agree that it is not to be copied or reproduced in whole or in part and that you will not disclose its contents to any other person.
This document may be made available to you by an affiliated company which is part of the Columbia Threadneedle Investments group of companies: Columbia Threadneedle Management Limited in the UK; Columbia Threadneedle Netherlands B.V., regulated by the Dutch Authority for the Financial Markets (AFM), registered No. 08068841.
Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

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Important information:

For use by professional clients and/or equivalent investor types in your jurisdiction (not to be used with or passed on to retail clients). For marketing purposes.
This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services. Investing involves risk including the risk of loss of principal. Your capital is at risk. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be suitable for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either. Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This document and its contents have not been reviewed by any regulatory authority.
In Australia: Issued by Threadneedle Investments Singapore (Pte.) Limited [“TIS”], ARBN 600 027 414. TIS is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cth) and relies on Class Order 03/1102 in respect of the financial services it provides to wholesale clients in Australia. This document should only be distributed in Australia to “wholesale clients” as defined in Section 761G of the Corporations Act. TIS is regulated in Singapore (Registration number: 201101559W) by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289), which differ from Australian laws.
In Singapore: Issued by Threadneedle Investments Singapore (Pte.) Limited, 3 Killiney Road, #07-07, Winsland House 1, Singapore 239519, which is regulated in Singapore by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289). Registration number: 201101559W. This advertisement has not been reviewed by the Monetary Authority of Singapore.
In Hong Kong: Issued by Threadneedle Portfolio Services Hong Kong Limited 天利投資管理香港有限公司. Unit 3004, Two Exchange Square, 8 Connaught Place, Hong Kong, which is licensed by the Securities and Futures Commission (“SFC”) to conduct Type 1 regulated activities (CE:AQA779). Registered in Hong Kong under the Companies Ordinance (Chapter 622), No. 1173058.
In Japan: Issued by Columbia Threadneedle Investments Japan Co., Ltd. Financial Instruments Business Operator, The Director-General of Kanto Local Finance Bureau (FIBO) No.3281, and a member of Japan Investment Advisers Association and Type II Financial Instruments Firms Association.
In the UK: Issued by Threadneedle Asset Management Limited, No. 573204 and/or Columbia Threadneedle Management Limited, No. 517895, both registered in England and Wales and authorised and regulated in the UK by the Financial Conduct Authority.
In the EEA: Issued by Threadneedle Management Luxembourg S.A., registered with the Registre de Commerce et des Sociétés (Luxembourg), No. B 110242 and/or Columbia Threadneedle Netherlands B.V., regulated by the Dutch Authority for the Financial Markets (AFM), registered No. 08068841.
In Switzerland: Issued by Threadneedle Portfolio Services AG, Registered address: Claridenstrasse 41, 8002 Zurich, Switzerland.
In the Middle East: This document is distributed by Columbia Threadneedle Investments (ME) Limited, which is regulated by the Dubai Financial Services Authority (DFSA). The information in this document is not intended as financial advice and is only intended for persons with appropriate investment knowledge who meet the regulatory criteria to be classified as a Professional Client or Market Counterparty and no other person should act upon it. This document and its contents and any other information or opinions subsequently supplied or given to you are strictly confidential and for the sole use of those attending the presentation. It may not be reproduced in any form or passed on to any third party without the express written permission of CTIME. By accepting delivery of this presentation, you agree that it is not to be copied or reproduced in whole or in part and that you will not disclose its contents to any other person.
This document may be made available to you by an affiliated company which is part of the Columbia Threadneedle Investments group of companies: Columbia Threadneedle Management Limited in the UK; Columbia Threadneedle Netherlands B.V., regulated by the Dutch Authority for the Financial Markets (AFM), registered No. 08068841.
Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

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