The UK Government has pledged almost £500m of climate finance aid to developing countries at the ‘Finance Day’ at COP28 today.
It says this is part of a wider £1.6bn climate aid package, and is structured to help mobilise private investment into these emerging economies as a means to tackling climate change.
The government will launch the Climate Investment Funds (CIF) Capital Market Mechanism next year will see bonds generate up to $750 million per year in new climate finance – $7.5 billion over the next decade – which it says could attract over $50 billion in co-financing for climate projects in emerging and developing economies. The intention to launch the mechanism was first announced by Prime Minister Rishi Sunak, then Chancellor, under the UK’s COP26 presidency.
The announcement comes at the so-called ‘Finance Day’ of COP28 — the latest United Nations conference on tackling climate change, that is being held in Dubai, UEA this year. This looks at how government, and specifically the financial industry, can support efforts to meet the Paris goals of limiting global warming to 1.5 degrees above industrial levels.
This year’s finance day has focused on the the green finance needed for energy transition, climate adaptation and disaster relief, particularly in developing economies.
A report released today estimated that emerging markets and developing countries will need $2.4 trillion a year in investment to cap emissions and adapt to the challenges posed by climate change.
“The world is not on track to realise the goals of the Paris Agreement. The reason for this failure is a lack of investment, particularly in emerging market and developing countries outside China,” said co-author Nicholas Stern, chair of the Grantham Research Institute on Climate Change and the Environment.
He added: “The central challenge is to accelerate and implement the fostering and financing of this investment from a range of sources.”
Morningstar’s director of investment stewardship Lindsey Stewart points out that this year’s COP continues to debate many of the unresolved issues from previous years.
Can the world commit to a “phase-out” or merely a “phase-down” of fossil fuel energy use? Can we rely on renewables to power the global economy, or does there need to be a much greater role for carbon capture or similar technologies?
“Answers to these questions of course differ based on one’s level of interest in maintaining the fossil-fuel based status quo, so we’re seeing the arguments being played out in stark fashion with this year’s COP being held in oil-rich Dubai with a huge presence of energy industry lobbyists. “
Stewart added that one high point of the conference, was the consensus that had formed around around tackling methane emissions, an even more potent greenhouse gas than CO2.
“The US government has agreed a final rule to reduce such emissions by the oil and gas industry. Meanwhile, in what will be seen as a victory for stewardship activities on the part of sustainability conscious asset managers, ExxonMobil has agreed to report on its methane emissions under the OGMP framework. Only in April this year did the ExxonMobil board reject a shareholder resolution backed by over one-third of the company’s shareholders requesting such reporting.”