Daniel Hanna, Group Head of Sustainable & Transition Finance
16 December 2024
A breakthrough agreement on global carbon markets and a commitment from developed nations to help channel “at least” $300bn a year in climate finance to developing countries by 2035 were the notable outcomes from a lacklustre Conference of the Parties (COP) in Baku, Azerbaijan.
But beneath the headlines, three key themes emerged from ‘finance COP’ that will shape the road to COP30 in Belém, Brazil next year.
1. Mobilising Capital
Mobilising the necessary capital to meet the ambitious climate goals laid out in the Paris Agreement with a growing focus on how public and private finance can work together to unlock it.
2. Transition plans
Transition finance emerged as a central theme at COP29, particularly in hard-to-abate sectors like energy, industry, and transport. COP29 called for clear and credible transition plans as a prerequisite for mobilising capital at scale.
3. Unlocking carbon markets
Credible carbon markets can play a crucial role in catalysing action on transition, increasing resilience in a warming world and closing the climate finance gap in low income countries.
Mobilising capital: Private and public finance
One of the most significant takeaways from COP29 was the focus on mobilising both public and private capital to fund the transition.
COP29 saw developed nations commit to mobilising $300 billion annually by 2035 to support climate mitigation and adaptation. However, the private sector’s role was equally emphasised, as public funding alone is insufficient to meet the scale of investment needed.
The conversation shifted toward leveraging blended finance models and risk-sharing mechanisms to attract institutional investors. Such tools, which combine public finance with private capital to derisk projects, ensure that private investors are encouraged to finance otherwise high-risk climate initiatives. Public finance acts as a safety net, lowering the perceived risks and increasing private investor confidence.
Such collaboration is particularly important for early stage climate technology companies seeking to rapidly scale their products. These companies have difficulty accessing capital for growth on account of the perceived risk from investors and financiers – their technologies are new to market, are capital intensive, and often require ancillary networks (i.e. electricity grids) to change to be effective. Public finance reduces the risk, allowing private finance to follow.
Businesses can also accelerate climate action in the real economy via their own actions and investments, and through advocating a stronger policy and regulatory environment from governments. Opportunities to source finance more widely than traditional capital markets and to incorporate innovative financing tools will need to be explored if the levels of climate finance needed are to be secured.
COP30 will build on these existing public-private tools and frameworks, with the aim that these financial flows are directed toward transformative projects in emerging markets.
Transition plans needed to unlock finance
COP29 highlighted a key challenge in mobilising finance – a widespread absence of transition plans at both a national scale as well as at the business level. Additionally, adaptation was highlighted as an integral part of these plans, with a focus on building resilience in vulnerable regions through investments in climate-resilient infrastructure, water management, and sustainable agriculture.
Businesses are increasingly recognising that supporting the transition presents a significant commercial opportunity – new data from CDP found that the world’s largest companies foresee a record $5trillion in potential financial opportunities from climate action1.
More businesses are also starting to acknowledge how principles like the circular economy can reduce costs, and how protecting and restoring nature can help to improve resilience.
To be able to access private finance in support of such business strategies, it’s imperative that businesses develop transparent and robust transition plans which are truly embedded into their business strategy.
However, transition plans rely on real economy pathways, levers, and incentives to guide investments towards sustainable projects. Without cohesive national strategies, financial institutions and companies face uncertainty and lack the necessary direction to allocate resources effectively.
The gap in planning results in fragmented efforts and missed opportunities to transition the real economy – particularly for transition finance. Transition finance plays a critical role in supporting the transition to a lower carbon economy, facilitating capital flow to all parts of the economy, including high-emitting and hard-to-abate sectors, as well as innovation and climate technology.
Ahead of the February 2025 deadline, several countries updated their Nationally Determined Contributions to reflect heightened ambition. The UK committed to reducing emissions by 81% by 2035 compared to 1990 levels, while Brazil pledged a 67% reduction against 2005 levels. These updates signal a shift toward actionable, sector-specific pathways, creating a pipeline of investable opportunities.
COP30 will focus on operationalising these plans, integrating adaptation measures, policy support, and addressing definitional clarity in transition finance.
Unlocking carbon markets
COP29 underscored the importance of credible carbon markets as a crucial source of financing for the transition to a low-carbon economy. The approval of Article 6.4 marked a significant step toward creating a high-integrity, global carbon trading market. The establishment of transparent, robust, and effective carbon markets is essential to de-risk participation, build confidence and encourage greater capital flows, and thus vital for achieving the global emissions reductions needed to meet climate targets.
However, discussions highlighted the need for robust governance and quality assurance to ensure environmental integrity. We have seen developments in this area already; for example, the UK Government’s latest policy paper, ‘Principles for voluntary carbon and nature market integrity’, outlines six principles to improve the integrity of voluntary carbon and nature markets. Such frameworks are key to ensuring that carbon markets become a credible tool for financing the transition. As the market for carbon credits and nature-based solutions continues to grow, approaches like this will be instrumental in shaping best practices and standards for global climate action.
At COP30, the focus will shift to scaling market participation, particularly for developing nations.
Listen to Daniel Hanna, Group Head of Sustainable and Transition Finance at Barclays, share key themes he took away from COP29.
Nature and its central role at COP30
This year’s UN Biodiversity Conference, COP16, also highlighted the importance of integrating nature into global climate frameworks, which was reflected in discussions later that month in Azerbaijan.
COP30 will likely scale these efforts, emphasising financing mechanisms for nature, such as carbon credits tied to forest conservation, reforestation, and sustainable land management. These initiatives will underline the global need to prioritise natural capital as part of the climate transition.
A pivotal moment for global climate action
COP29 set the stage for the next phase of climate action.
By aligning finance, transition plans, carbon markets, and nature-based solutions, COP29 created a foundation for COP30 to drive systemic change and deliver the scale of investment required for a low-carbon, resilient future.
