The United Nations COP29 climate conference has come to a contentious end, with rich countries pledging to mobilise $300 billion annually by 2035 to help poorer countries fight climate change – triple the current funding levels, but far short of what the developing world had hoped for. Delegates from 190 countries worked overtime to avoid leaving Baku empty-handed.
Under the agreement, wealthy nations will pay from a range of sources, including government as well as bilateral and multilateral deals. The agreement also reaffirmed COP28 pledges, which included tripling renewable energy, doubling energy efficiency, and transitioning away from fossil fuels.
The current goal of $100 billion per year is set to expire in 2025, so setting a new target was one of the key mandates of COP29. Going into the Baku conference, there was general agreement that the deepening climate crisis demands greater financial investment, but estimates of how much ranged from $200 billion to $1.3 trillion per year.
However, national investment is only part of the story – the climate fight also demands an unprecedented level of international cooperation between private interests, development banks and carbon markets. Here are four key ways the world can step up the fight against global heating beyond the confines of COP29.
1. Encourage private investment
The COP29 final agreement makes it clear that public funds will only go so far in financing the green transition. There is a growing need for private capital.
But one of the key steps in mobilising large-scale private finance is standardisation and convergence. This may sound disingenuous in a political context that seems ever more fractured, but for financial institutions and markets to get behind climate financing, they have to know what they’re getting into.
Setting those definitions is the work of central banks, standard-setting bodies, regulators and stock exchanges. Coordination in this regard needs to drastically and swiftly improve.
2. Fight greenwashing
We need to enhance global standards to counter greenwashing – marketing that persuades consumers, or investors, that a company is more concerned about the environment than it really is.
While capital markets are global, they work within fragmented frameworks that undermine their effectiveness. This has led to a rise in greenwashing, as companies and investors operate under vague or inconsistent guidelines – words like “environmentally friendly” or “green” can have different legal or cultural connotations in different places around the world.
The European Union’s green taxonomy serves as a step in the right direction, offering transparency that helps prevent greenwashing and aligns investment with genuine sustainability efforts.
3. Standardise carbon credits
Stocks and bonds are universal, but carbon credits are not. They depend on the country, because different countries set up their own Emissions Trading Systems, and price them accordingly.
Fragmented carbon pricing is a significant barrier to global climate action. While the economic damage of emissions is shared globally, CO2 prices vary widely by country, and this fragmented pricing undermines the effectiveness of climate finance. It also complicates global trade, investment and emission reduction strategies.
A global standard for carbon pricing would enhance coordination, reduce market distortions, and facilitate cross-border investment.
This is not only an ethical issue, it is also a matter of practicality. Without a balanced approach, public resistance in fossil fuel dependent regions will be enormous, slowing or halting progress altogether. These governments must be able to invest in reskilling, community development, and infrastructure that support alternative livelihoods, ensuring that those most affected by the shift to a green economy are not left behind.
4. Get development banks involved
In the past, institutions like the World Trade Organization were instrumental in promoting trade during the height of globalisation, and Multilateral Development Banks (MDBs) can serve a similar function today for climate finance.
MDBs – such as the World Bank and the European Investment Bank – are uniquely positioned to act as climate finance coordinators, mitigating risk and mobilising private investment.
Through structured processes, risk-sharing, and credit enhancements, MDBs exert a multiplier effect that brings in private capital for climate projects that might otherwise be considered too risky. By leveraging their partnerships, these banks can lead transformative changes, pooling public and private capital to scale up climate finance in a way that traditional government interventions alone cannot achieve.
Scaling up cross-border climate finance is in developed countries’ self-interest, given the economic risks they face. Harmonised carbon pricing and robust green standards reduce inefficiencies and build trust. MDBs, with their multiplier effect, can mobilise private capital at scale. These pillars are not idealistic but practical, aligning national interests with global needs.
