Climate finance, as it has been for past COP summits, is a crucial aspect of COP28 as the need to support renewable energy projects and sustainable solutions becomes ever more paramount in achieving the net zero target by 2050. This year’s summit will provide a comprehensive assessment of progress since adopting the COP21 Paris Agreement in 2015, heightened by the global climate disasters that have occurred in recent years including floods, wildfires and droughts.
Developing nations are bearing the brunt of these climate conditions and do not have the financial resources to be able to mitigate the consequent impact. Therefore, developed nations need to use their access to capital to support and meet previous commitments made, including the transfer of $100 billion a year by 2020 to developing nations hit by worsening climate change-fuelled disasters which was made in 2009 and has failed to materialise so far.
Last year’s COP27 saw a breakthrough agreement to provide “loss and damage” funding, which is expected to be implemented this year, for vulnerable countries hit hard by climate disasters, but there is still a way to go. The fund will be put to use when adaptation measures fail, and developing nations are experiencing the adverse effects of climate catastrophes that they are unable to manage, however there still remains the need for other aspects of financing, such as mitigation and adaptation.
Without the relevant and necessary funding, decarbonisation and the net zero target cannot be achieved. Developing nations say they cannot invest in green energy or adapt to extreme weather without greater support from developed nations whose historic industrialisation and fossil fuel use has contributed to climate change. Although the financial community has made strides in helping to tackle climate change, their overall policies are not yet aligned with net zero emission targets and despite more sustainable investment funds being made available, there is still a gap in the amount needed to create a positive climate impact.
International financial institutions like the IMF and World Bank have crucial roles to play in the mobilisation of climate finance, particularly in lower-income countries, to increase global resilience to climate change and reduce its impact. Without the buy-in of all nations to reduce and ultimately phase-out the use of fossil fuels, this cannot come to fruition. Therefore, the transition in the global financial system must provide affordable and accessible finance that will benefit individual nation economies if it is to be successful and stem the effects of climate change.
Our ESG team is closely following developments at COP28 and the broad range of issues being discussed – from finance, trade and energy, to youth/education, nature and land use. Read more in our previous blog post.