As the dust settles months after the landmark COP29 conference held in November at Baku, Azerbaijan, one key outcome stands out – many reports have hailed the ambitious new global climate finance goal as a “breakthrough agreement”.
Formalised under the New Collective Quantified Goal (NCQG) on climate finance, parties to the Paris Agreement have committed to (i) increase financial support to developing countries by tripling climate finance from US$100 billion to US$300 billion annually by 2035 and (ii) to have an “additional layer” of up to US$1.3 trillion by 2035, driven primarily by private financing.
What is climate finance?
During the two weeks of intense negotiations at the COP29 summit, climate finance took centre stage. UN Secretary-General António Guterres emphasised in his post-summit statement that developing countries, burdened by debt, disaster recovery and left behind in the renewables energy transition, are in desperate need of funds. While he had hoped for a more ambitious outcome to meet the great climate challenge, the agreement nonetheless provides a base to build on.
In simple terms, climate finance refers to the financial resources allocated to mitigate[1] or adapt[2] to the impacts of climate change. The impacts of climate change are undeniable, and large investments are essential to accelerate climate action to reduce emissions. An example of a climate finance initiative undertaken by Singapore would be the launch of the Financing Asia’s Transition Partnerships (FAST-P), a blended finance initiative[3] that will help de-risk and finance green projects. Projects that can be financed under FAST-P include the early phase-out of coal power plants and the upgrading of electricity grid infrastructure. At COP29, the Singapore government committed up to US$500 million to FAST-P, aiming to channel financing towards decarbonising Asia.
Why is climate finance important for climate action?
The significance of climate finance cannot be overstated. Systemic shifts, such as transitioning to renewable energy solutions like solar farms and wind turbines, require vast capital. Without access to such financing, developing nations face immense challenges in leaving behind fossil fuels and building the sustainable infrastructure necessary for long-term climate resilience[4]. As we move forward, it is clear that robust financial support for developing countries is not only a moral imperative but also a critical element in meeting the global climate goals essential for the survival of our planet.
COP29 has set a promising precedent for increased climate financing. However, the NCQG represents an ambitious target, especially when considering that nations did not fully meet their previous goal of mobilising US$100 billion per year in climate finance by 2020, as originally agreed under the Paris Agreement. The success of this new goal will depend on political will, transparency, and cooperation between governments, financial institutions and the private sector.