By: Mike Hayes, Climate Change and Decarbonization Leader at KPMG

It’s just over a month since I returned home from the COP 29 summit in Baku. In that time, there has been widespread commentary and analysis of the gathering – much of it fatalistic and critical. In some corners, it’s been described as ‘no longer fit for purpose’ while others have spoken of the ‘dark forces’ driving the negotiations towards dead ends.

I’ve attending COP meetings for many years and I’ve watched as the number of delegates and the number of countries and territories represented has ballooned. While the growth in the number of voices has slowed down some of the rapid progress I witnessed in the COP early years, I believe some of the criticism is overblown and risks jeopardizing some of the real achievements that are being made.

COP 29 was aptly described as the “Finance COP,” with much of the focus on the commitment from developed countries to provide climate finance to emerging markets under the New Collective Quantified Goal (NCQG) initiative. However, this is just one aspect of the broader climate finance narrative – in reality, what is happening is that the  momentum is being created and the evidence of public: private collaboration is clear and this will only accelerate.

Under the breakthrough agreement reached in the final hours of COP 29, developed countries will triple public finance to developing economies, from the previous USD 100 billion annually, to USD 300 billion annually by 2035. Additionally, there is a commitment to scale up finance from both public and private sources to a total of USD 1.3 trillion per year by 2035. There are still significant details to be established around operationalizing this commitment which is expected to be principally in the form of grants and other low-cost forms of concessional capital. Notwithstanding the fact that it falls short of expectations from developing countries, my view is that this outcome will help drive greater levels of investment into emerging markets. Through the use of blended finance/Government guarantees etc, it should be possible to use the public funding to catalyse significant additional private funding. There arena number of other factors at play also.

All signatories to the Paris Agreement are required to produce third generation Nationally Determined Contributions (NDCs) plans, essentially climate plans (outlining intended climate actions through to 2035), by February 2025. These NDCs will be implemented through a wide range of Government policy and incentive interventions e.g. carbon taxes being the most important measure. A central theme at COP 29 is for these NDCs to be not only more ambitious but also investable. The goal is to send strong signals to the private sector about future government policy, thereby creating conditions that encourage accelerated private sector investment across all sectors.

In the context of the wider policy environment, the Taskforce on Net Zero Policy – an initiative to take forward key elements of the UN SG’s High Level Expert Group on the Net Zero Emissions Commitments of Non-State Entities (HLEG) – published its inaugural report, taking stock of the global policy environment governing the net zero activities of corporations and financial institutions. The report found that progress on net zero policy is advancing in many regions around the world, but the policy landscape is still insufficiently aligned with a 1.5°C future.

There was clear messaging from numerous private finance sources about their willingness to invest in emerging markets under the right conditions. We saw several new initiatives announced at COP 29 designed to bring public and private investors closer together. Pronounced at this year’s COP was the participation and elevated interest from a broader range of public and private market investors, including family offices’ joint announcement with other asset owners to accelerate private market investments including into emerging markets.

COP 29 also resulted in an agreement on Article 6 of the Paris Agreement, which is designed to facilitate a global carbon market for both countries and corporates. This means there is now a set of rules in place to (1) enable carbon market transactions for both avoidance and removal credits (that build in integrity considerations), which will make country-to-country trading and a carbon crediting mechanism fully operational, and (2) support climate finance flows. As part of the agreement, the least developed countries will also get the capacity-building support they need to get a foothold in the carbon markets. While there is still work to be done to create greater corporate demand, it is hoped that this will materialize due to revised standards from SBTI and other regulatory developments. As a result, it is possible that there will be  a significant uptick in carbon market transactions over the coming years, creating a substantial source of climate finance to support both developing and developed countries. Some estimates suggest that carbon markets alone will generate an additional USD 250 billion p.a. of climate finance.

Another key area of focus at COP 29 was industrial decarbonization and the role of transition finance to decarbonize the hard-to-abate sectors. Various initiatives are underway, especially those focusing on creating greater demand-led incentives through organizations such as the Industrial Transitions Accelerator (ITA).  The Industrial Transition Accelerator’s open letter,  endorsed by 50 global business leaders and a network of more than 700 financial institution, urges governments to use proven policy measures to stimulate demand for green products and seize the potential of industrial decarbonization. The focus of the ITA is to help create the policy frameworks to help incentivize investment and also to reduce the cost of energy transition technologies.  My view is that this si a really important initiative that needs to be supported.

In a COP 29 statement,  major Multilateral Development Banks announced that their collective climate financing is expected to reach an impressive USD 120 billion per annum for low and middle-income countries by 2030, including USD 42 billion for adaptation. For high-income countries, this annual collective climate financing is projected to reach USD 50 billion p.a. This substantial commitment is anticipated to be further supplemented by mobilizing an additional USD 65 billion financing from private sector (enabled by blended concessional finance). This approach is crucial for leveraging more private sector investment. MDBs also play a significant role in assisting countries in developing and updating their Long-Term Strategies (LTS), NDCs, and National Adaptation Plans (NAPs).

Yes COP 29 could have achieved more and critical voices deserve to be heard – the climate crisis is an urgent threat and as we head toward COP 30 in Brazil, our optimism and focus will naturally be tested.

In January, I’ll be heading to the World Economic Forum in Davos to continue to drive a clear message – collaboration between public and private sector investors and ongoing dialogue is essential. We cannot stop talking and simply press pause until the next COP gathering in Belem.

Overall,  there is clear evidence of increased private sector interest in investing in emerging markets, and there have been many initiatives and announcements about greater collaboration between public and private sector investors. There is also increased understanding of the reality of emerging market risks and some of the mitigating solutions. The momentum is there if we keep talking and moving forward.

Mike Hayes is Climate Change and Decarbonization Leader at KPMG International