Beyond the Pledges
4 years, 7 months, 29 days
24 November 2024
As arguments and recriminations over the deal struck at #COP29 continue to reverberate, I look at what was agreed and can’t help feeling it was a lot better than might have been anticipated.
The backlash from emerging market countries is completely understandable and entirely justified, but at the same time I think it risks overemphasising the importance of public sector grants from developed countries and underestimating the importance of mobilising private finance into those markets. Of course free money is always preferred to interest-bearing and perhaps for some there is still ideological objection to private finance. But the simple fact is that far more money is available in the form of private finance and we will never achieve the scale and pace of investment we need in decarbonisation and asset adaptation without harnessing a lot more of it. The big challenge is getting it directed towards emerging markets. So what progress there?
First carbon markets. Although still foundational in nature, the agreement on how carbon markets will operate at global scale is a breakthrough. It covers standards on how trading and registration of carbon credits will operate both for trades between countries and for a centralised carbon market. The UNFCCC itself declares this good news for developing countries.
Second, lots of innovation is going into ways to accelerate private finance flowing to emerging markets. KPMG’s significant presence at COP29 included Cathy Chen chairing a discussion on a results-based model (‘Pull Finance’).
Third efforts are increasing on concrete steps to unlock capital markets funding to developing markets. The CIF Capital Market Mechanism, launched at COP29, and backed by the World Bank, is a London Stock Exchange inaugural bond issuance initially of $500 million but with plans to grow to $3 billion, aimed at clean energy and technology investments in developing markets.
Interestingly this may go some way to address the problem flagged by The Economist last week: ‘The Africa premium’. This gave significant coverage to the argument that perceived risk of investing in Africa was out of line with the statistical realities, and this ‘bias’ was accentuated by the world’s main rating agencies. Fitch Ratings declaring CCMM an AA+ is a nice example of how mechanisms that bring in good governance and risk diversification can overcome such challenges.
Things like these mean there is real substance behind and reasons to be optimistic about the pledge to scale up finance to developing countries to $1.3 trillion a year by 2035.