Flash update - COP29 - November 2024

Aviva Investors Multi-Asset Team

The COP29 summit in Baku, Azerbaijan, branded as the 'finance COP' has concluded with several significant outcomes that could shape climate action in the coming years.

What were the key outcomes of COP29?

• Climate Finance Goal: The primary agenda item was agreeing a new annual climate finance target (New Collective Quantified Goal, or NCQG) whereby developed countries provide aid to developing economies to combat climate change. Negotiators agreed on a goal to deliver at least $300bn per year by 2035 with developed countries taking the lead, with the private sector in scope. However, many developing nations were disappointed, having requested $1.3 trillion per year with a focus on grants. The final text does however include language calling for a roadmap to gradually increase funding to $1.3trillion per year.
• National Climate Plans (known as NDCs): Ahead of the February 2025 deadline for the next round of NDCs, the UAE and Brazil have already submitted their plans. These included new emission reduction targets for 2035 alongside additional detail on the sectoral transformations that would underpin delivery. The UK also announced a new emission reduction target.
• Carbon credits: COP29 finalised part of the Paris Agreement related to the registration and transfer of carbon credits by countries to offset their emissions or to trade them on a market exchange. If this supports the establishment of high credibility carbon markets it could raise billions of dollars into new projects.
• Trade tensions: Developing countries pushed to discuss climate-related trade barriers, such as Europe's planned carbon border tax and Donald Trump's potential tariffs on imports. They argued their ability to invest into greening their economies was undermined by costly trade policies.
• Trump's influence: Although not physically present, President-elect Trump's influence was a feature of COP29 given that he has vowed to remove the US from global climate efforts and not contribute to the NCGQ. However, other countries were positive about continued progress, momentum in the transition (particularly in clean energy) and the need for closer cooperation.
• The rise of China: In 2025, China aims to lead global climate efforts at COP30 in Brazil, following President Xi's call for reforms to international financial institutions and stronger cooperation among Global South nations. This is furthered by the fact that developing countries face increasing trade barriers and reduced climate finance from the West, and hence may turn to BRICS partnerships for economic support.

What did Aviva Investors do?

• We provided an investor perspective on the mobilisation of private finance as part of the NCGQ through engagement with countries and other interested parties in both the run-up and during COP. The previous goal was predominantly government money but the scale of the need of developing countries makes private finance essential. The need for governments to create the enabling conditions for private finance to developing countries to scale was a key part of our engagements.
• In engagements with representatives from more than 10 sovereigns, we also made the case for new national climate plans that combined ambitious emission reduction targets with information on sector-level actions to guide implementation. These engagements also provided insights that will be shared with investment desks to help gauge the management of economy-wide climate risks and identify sectoral opportunities.

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