Can COP29 secure the trillions needed from wealthy nations and reformed multilateral banks to support climate resilience in developing countries?
As the world prepares for COP29 under the shadow of unprecedented geopolitical challenges — two bloody conflicts and a contentious election in the world’s most powerful economy — one critical issue remains front and centre: financing the fight against climate change.
Annual climate change damages are expected to cost the world as much as $59 trillion a year in 2050, more than half its current GDP. And, while violence and conflict dominate new cycles, the metre for losses caused by human-induced climate change globally continues to tick, at the staggering cost of $16 million per hour. The solutions, although clear, require immense financial mobilisation.
Yet, current climate funding commitments continue to fall woefully short of the trillions of dollars needed to cool the planet by transitioning to a low-carbon economy and to protect the most vulnerable. This makes climate finance critical for the nearly 200 nations attending COP29 in Baku this month.
Chasing a collective goal
This year, nations are to set a new finance target to bring much-needed funds to developing countries. Known as the New Collective Quantified Goal (NCQG).
It will replace the previous commitment made in 2009 by wealthy nations to deliver $100 billion annually by 2020—a target that has yet to be met. To date, a list of the 23 mostly high-income countries, including the likes of the United States, Japan and Germany — known as Annex II of the Convention — have been jointly responsible for making financial contributions to help developing countries.
The NCQG is expected to reflect the actual costs of addressing the climate crisis, estimated at between $5.8 trillion and $5.9 trillion annually for developing countries alone, covering both mitigation and adaptation efforts.
The failure of wealthier nations to meet the $100 billion target reveals more than just lack of commitment on their behalf. It reveals structural issues in how funds are allocated and used.
Much of the climate finance under the target came as loans, which worsened debt burdens for vulnerable countries. Over 70% of finance provided to developing nations between 2013 and 2018 was in loans, not grants, deepening their debt instead of providing the necessary support to tackle the climate crisis.
As a result, the main focus at COP29’s NCQG negotiations will be to ensure funds are accessible, equitable, and responsive to the real needs of developing nations.
Given the reticence of developed countries to commit to financial goals and the developing nations’ demand that commitments be aligned with the scale of the challenges they face will ensure the NCQG negotiations remain contentious. For the NCQG to succeed, wealthy nations must do more than merely acknowledge that their historical emissions have been a major contributor to the climate crisis. The key challenge will be to ensure that wealthy nations deliver on their promises.
Structural Changes
Crucial also to the raising of funds, is a reform to global financial structures that disperse the monies. The current global multilateral funding architecture was first put in place at the Bretton Woods Conference, held in 1944, during World War II — years before India, China, Brazil, South Africa or the west and east Asian nations had developed their economies.
The two key financial institutions created under the Bretton Woods Accords had no space for developing economies, many which were then occupied colonies for the developed world to exploit.
The International Monetary Fund (IMF) was set up to ensure global monetary cooperation, stabilise exchange rates, and provide short-term financial assistance to nations facing balance of payments crises. The International Bank for Reconstruction and Development (IBRD), which later became part of the World Bank Group was created to aid reconstruction of war-torn Europe and, only later began providing loans and financial assistance for infrastructure projects in developing countries.
While newer financial institutions were set up in the subsequent decades, the IMF and World Bank continue to hold sway on the global economy. This makes reforms within Multilateral Development Banks (MDBs) another crucial thread to rectify climate funding flows if nations want better lending rates and reduced debt. Also, while MDBs play a crucial role in channelling funds to developing countries, their approach has long been criticised as biased and undemocratic with an unequal distribution of voting share in the institutions. The United States continues to have the largest voting power in the WBG and IMF, holding greater than 15% of the voting power, giving it veto power over decisions. The majority of the WBG and IMF decisions require a 50% majority vote, while some critical matters require a 70% or 85% rate of affirmative votes.
The recent Bridgetown Initiative proposed by Barbados’ Prime Minister, Mia Mottley, brought attention to the limitations of the current global financial architecture and called for MDBs to extend concessional financing, offer debt relief, and scale up grants to climate-vulnerable nations that are unfairly bearing the brunt of a crisis they did not create but add to their unsustainable debt burdens.
MDB reforms were also highlighted by India’s Presidency at the G20 Summit in 2023, with leaders agreeing on the need to mobilise trillions, not billions, in climate finance. The commitment to strengthen MDBs was a step in the right direction, but much work remains to turn these high-level discussions into concrete actions. COP29 will provide another opportunity to push for these reforms, with developing nations expected to demand that MDBs deliver more concessional finance tailored to their needs.
The Asian Development Bank last month approved a new goal to devote 50% of its annual lending to climate finance by 2030 and boost private sector capital mobilisation. The goal comes with a dollar-based target of $100 billion in cumulative climate finance between 2019 and 2030, with only $30 billion contributed so far.
Additionally, the developing nations’ demands for new allocation of Special Drawing Rights and recycling existing SDRs through MDBs as hybrid capital could help leverage up to $80 billion in additional financing for resilience projects, according to reports. Another $250 billion can be raised through international clampdown on tax evasion with a global minimum tax on billionaires, according to the EU Tax Observatory.
The role of the G20 and COP29 cannot be overstated in shaping the future of climate finance. The G20 Summit in 2023 marked a significant moment, with leaders recognising that multilateral reforms and private sector mobilisation are essential for addressing the climate crisis. The agreement to push MDBs to take on more risk and increase climate-related lending was a positive step, but the follow-through at COP29 will be crucial.
Missing Piece of the Puzzle
The New Delhi Leaders’ Declaration acknowledged that the developing world will need $5.9 trillion till 2030 for its Nationally Determined Contributions (NDCs), and an additional $4 trillion each year for clean energy technologies to meet zero-emission goals. That’s a whopping $34 trillion by 2030 – more than the US’ GDP of $28.78 trillion. On an annualised basis, the sum is about 5% of global GDP.
While public financing and MDB reforms are crucial, they will not be enough. Closing the climate finance gap for the approximately 140 lower-middle-income countries worldwide will need all stakeholders — from public lending to private capital to philanthropic participants and beyond — to step up. Global investments in clean energy and adaptation projects need to exceed $4 trillion per year by 2030, yet private capital has been slow to move at the scale needed.
At the IMF meetings in Washington DC in mid-April, discussions centred on the persistence of high funding costs and lack of progress mobilising private capital into this grouping of countries. The private sector currently manages more than $210 trillion in assets, but only a very minor part of it is dedicated to climate investments, according to the Green Climate Fund (GCF), the world’s largest multilateral climate fund set up by the UNFCCC.
Developing countries will also have to finetune their policies to first reduce the currently high perception of risk in regions where political instability, currency volatility, and regulatory uncertainty exacerbate the risks of losing their capital. Governments can work with MDBs to de-risk investments using instruments like blended finance to absorb some of the upfront risks for private investors.
In addition the lack of clear, consistent policies on carbon pricing, regulation, and the overall investment landscape makes it difficult for businesses to plan and invest in long-term climate projects. The problem can be resolved through regulatory frameworks that create stable, predictable environments for private capital flows into climate solutions. There’s also a need to put in place adaptation and resilience action plans in nations to help companies manage risks.
While carbon markets are being touted as a means to unlock billions in finance for climate mitigation projects, these are plagued by concerns over greenwashing and the integrity of carbon credits. Article 6 of the Paris Agreement, which seeks to create a global carbon market, will be a key focus at COP29. As will discussions on ensuring more bankable projects in developing nations, especially in adaptation.
The NCQG, MDB reforms, and increased private sector participation are all critical for the world to successfully transition to a low-carbon, climate-resilient future COP29 discussions and decisions made there will determine whether we can marshal the trillions of dollars needed to avert the worst impacts of climate change and build a sustainable, equitable future for all.
If the financial commitments do not materialise in the way that science demands, we risk leaving billions of people exposed to the devastating consequences of a warming planet. The world is watching, and the stakes could not be higher.
Developing nations—such as those in Africa, the Arab Group, and India—are calling for at least $1 trillion annually in public finance to help reduce GHG emissions and manage the impacts of climate impacts.
Will COP29 address historical debt or fuel more broken promises?
The pressure is on for COP29 to compel developed nations to finally fulfill their climate finance commitments, prioritising grants over loans and addressing loss and damage, to support vulnerable countries facing escalating climate impacts
The impacts of climate change are worsening year by year, with no part of the world immune from its devastating consequences. In September 2024, severe flooding in Nepal engulfed Kathmandu and adjacent districts, triggering landslides and washing away homes, leaving hundreds dead and thousands displaced. Earlier, between March and June, India and Pakistan experienced record-breaking temperatures and prolonged heatwaves, paralysing daily life and leading to widespread deaths and hospitalisations. Meanwhile, hurricanes have ravaged the Caribbean and the southern United States since mid-2024, and Canadian wildfires have scorched unprecedented areas of forest. These disasters illustrate an alarming trend: Climate change is no longer a distant threat, but an immediate crisis, disproportionately impacting the most vulnerable regions and populations.
As COP29 approaches, the question remains: Will developed nations finally deliver on their climate finance commitments, or will the world witness yet another failure at the cost of millions of lives?
Failure to Deliver Climate Finance Despite Warnings
In October 2024, the UNEP released its latest Emissions Gap Report, confirming that even if countries fully meet their current climate pledges to cut emissions by 2030, global temperatures are still projected to rise by 2.6°C by the end of the century. This trajectory will push the planet past several dangerous tipping points, threatening food security, public health, and biodiversity. The gap between current global emissions and the reductions needed to limit the temperature rise to 1.5°C is widening. This failure is largely due to inadequate financial support from developed countries. Without enhanced financial resources for developing nations, the world’s most vulnerable communities will be left defenseless against worsening climate impacts.
The Nationally Determined Contributions (NDC) Synthesis Report synthesising contributions from 195 parties, released shortly after the UNEP report, reiterates that many developing nations’ climate commitments remain contingent upon undelivered climate finance. It stresses that without significant increases in mitigation ambition and funding, the world is on a trajectory for even higher emissions, estimating that total global greenhouse gas (GHG) emissions in 2030 will only be about 2.6% lower than in 2019—far from the reductions required to stay on track for the 1.5°C target. Developing nations, which have contributed significantly fewer emissions historically, are being hit hardest by climate change, yet they are receiving little support to implement the necessary mitigation and adaptation measures.Developed countries often highlight their $100 billion annual climate finance target, first set in 2009, but delivered two years later than the original 2020 deadline, as evidence of their commitment to global climate action. However, an OECD report admitted that, in 2022, as in previous years, a majority of public climate finance — 69%, or $63.6 billion — was provided through loans. A portion of this lending was on market terms rather than concessional. In contrast, grants represented just 28% of the total, amounting to $25.6 billion, while equity investments were significantly lower at $2.4 billion. These loans contribute to the mounting financial crises in these nations, turning what should be reparations into another tool of exploitation.
Developing countries have long called for a redefinition of climate finance that prioritises grants over loans and eliminates the harmful debt cycle. Grants from multilateral climate funds, like the Green Climate Fund (GCF), the Adaptation Fund and the new Fund for responding to Loss and Damage (FRLD), are essential for ensuring that climate action does not push vulnerable countries further into financial distress.
New Climate Finance Goal: Who Pays, Who Receives, and How Much?
The New Collective Quantified Goal (NCQG) —the new financial target set to replace the outdated $100 billion goal in 2025 — is to be finalised at the COP29 climate conference in Baku this month.
Developing nations—such as those in Africa, the Arab Group, and India—are calling for at least $1 trillion annually in public finance to help reduce greenhouse gas emissions and manage the impacts of climate impacts. As the article highlights, while developed countries agree that public finance should form a key part of the NCQG, they remain vague on the size of this commitment. Their position, strongly advocated by the United States, is that achieving the necessary scale of climate finance requires structuring the NCQG as a multi-layered global investment goal. This approach would encompass not only private sector investments in clean energy and resilience measures—most of which still heavily favor wealthy nations and a few emerging market economies—but also include domestic efforts already underway in developing countries, despite inadequate support from rich nations for adaptation and addressing loss and damage.
Whereas, the research by the advocacy group Oil Change International, published in The Guardian, shows that wealthy countries could generate $5 trillion annually through a combination of wealth and corporate taxes, as well as a crackdown on fossil fuels. The report estimates that a wealth tax on billionaires could raise $483 billion globally, while a financial transaction tax could generate $327 billion. Additionally, taxes on sales in sectors like big technology, arms, and luxury fashion could bring in $112 billion, and reallocating 20% of global public military spending would be worth $454 billion. Ending fossil fuel subsidies could free up $270 billion in public funds in wealthy nations and about $846 billion globally, while taxes on fossil fuel extraction could generate $160 billion in rich countries and $618 billion worldwide.
Another major point of contention in the NCQG negotiations is the question of who should contribute and who should receive. Developed nations have been pushing to broaden the base of contributors to include wealthier developing countries, like China, the Gulf States and other emerging economies like India. This approach undermines the principle of common but differentiated responsibilities and respective capabilities (CBDR-RC), which is central to the UNFCCC framework. Developing countries and civil society stress that industrialized nations, as historical polluters, should bear the primary responsibility for climate finance. Meanwhile, China and other emerging economies reject mandatory contributions, emphasizing that developed nations must meet their obligations before placing demands on others.
As the author mentioned to The Hindustan Times, “wealthy nations, whose prosperity was built on over 150 years of fossil-fuelled industrialization, cannot simply start counting the emissions from the 1990s. They bear a historical responsibility for driving climate change, and it’s time they acknowledge that debt. Climate finance for developing nations is not charity or business investments—it’s a matter of reparations. The burden of this crisis should not be shifted onto those barely responsible for causing it.”
While developed countries contend that emerging economies should contribute due to their growing wealth and emissions, they cannot ignore their historical responsibility for climate change—a core tenet of climate justice that makes them primarily accountable for financing climate action. Despite this, developed nations continue to expand fossil fuel use while pushing for broader contributions from the Global South, placing the bulk of the responsibility on others.
On the other hand, China, for example, has made significant voluntary contributions, including $45 billion for climate action between 2013 and 2022. Similarly, the United Arab Emirates (UAE) and South Korea have contributed to the Fund for Responding to Loss and Damage (FRLD) and the GCF, respectively.
Complicating negotiations further, developed countries are attempting to limit public finance to the nations they deem most vulnerable—those categorised as least developed countries (LDCs), small island developing states (SIDS), and fragile states. While framed as a way to improve the focus and effectiveness of climate finance, many developing nations view this as a divisive strategy aimed at excluding larger developing economies from receiving necessary support. This tactic threatens to weaken unity among developing countries, just as it did during the final phases of the NCQG negotiations and the creation of the loss and damage fund at COP28.
There is also growing disagreement over whether the NCQG should include funding for loss and damage. Developing countries, supported by civil society, argue that loss and damage must be treated as a third pillar of climate finance alongside mitigation and adaptation. Their advocacy led to the establishment of the Fund for Responding to Loss and Damage (FRLD) at COP27, which is now a part of the UNFCCC’s financial mechanism. However, wealthy nations continue to resist the inclusion of loss and damage in the NCQG, citing the Paris Agreement’s exclusion of such support. Given the escalating climate-related disasters, this stance is increasingly untenable.
Will COP29 Restore Trust?
Climate finance is not just about future projects; it is a matter of reparations for decades of environmental damage caused by the Global North. A 2023 study published in Nature Sustainability highlights the vast carbon inequalities between the global North and South. According to the study, the United States, Europe, Canada, Israel, and other wealthy nations have overshot their fair share of the remaining carbon budget, with the global North set to overshoot by a factor of three by 2050. This atmospheric appropriation comes at a steep cost: these nations owe approximately $192 trillion to undershooting countries by mid-century, equating to $940 per capita annually. The calls for reparations and compensation for causing the climate crisis are growing louder, but the question remains whether COP29 will finally begin to address this glaring injustice.
The credibility of developed countries hangs by a thread. The promises of climate finance made at previous climate conferences have repeatedly fallen short, treating climate action as an investment rather than a matter of justice. Developing nations have waited too long for the reparations they are owed. If the rich world continues to fail in delivering adequate, accessible, and transparent climate finance, COP29 risks becoming yet another chapter in the long history of broken promises. The future of global climate justice hinges on whether developed nations can live up to their responsibilities or whether their inaction will plunge the world deeper into the climate crisis.
Harjeet Singh is a climate activist and the Global Engagement Director at the Fossil Fuel Treaty initiative. He co-founded a social impact organisation, Satat Sampada. He tweets at @harjeet11. Views expressed are personal.
The second NDR said that climate finance of $5.012-6.852 trillion cumulatively will be required until 2030 to support developing nations to achieve theirNDCs.
Out of sync at COP29: NCQG negotiations still in the red
At the negotiation table, developed and developing nations remain sharply divided over key details of the New Collective Quantified Goal (NCQG) for climate finance. Points of contention include expanding the list of donor countries, determining the fund’s structure, and reaching a consensus on the definition of ‘climate finance‘
Next week, the annual climate negotiations — COP29 — will begin in Baku, Azerbaijan, amidst calls to decide a climate finance quantum that serves the urgent needs of the developing world.
In September, the second Needs Determination Report (NDR) said that climate finance of $5.012-6.852 trillion cumulatively will be required until 2030 to support developing nations to achieve their Nationally Determined Contributions (NDC).
On October 9, the High-level Ministerial Dialogue on the New Collective Quantified Goal on climate finance was held in Baku. The result? Not so encouraging.
The lack of a clear suggestion of a quantum by developed countries continues to delay progress in reaching a meaningful conclusion at COP29. Recently, India’s Minister of Environment, Forest and Climate Change (MoEFCC), Bhupendra Yadav, called for a clear definition of climate finance. This was echoed by other developing countries who also clarified that climate finance is not loans at market rates, private finance under commercial terms and Official Development Assistance (ODA) or domestic resources.
At the NCQG meet in Baku in October, disagreements between the developed and developing countries were reinforced every time a Party took the floor as the Ministers discussed responses to the updated input paper developed by the co-Chairs to advance the draft negotiating text.
The points of contention were multiple— from the actual NCQG number to the inclusion of Loss and Damage in the quantum, contributor base, structure of NCQG i.e. multilayer or single layer and whether to bring in private finance or stick to public finance. But the point of contention that continues to stand out and will be perhaps the toughest to get consensus on is — a clear definition of climate finance.
We outline here the most important themes that emerged in the dialogue.
If we pay, you do too
There were consistent calls on widening the contributor base by the developed world. The UK said it “is ready to be a contributor, but a fit for purpose goal would need a broad range of contributors than is currently the case.” Italy seconded the widening of contributor base as “economies have changed”. Overall, the sentiment from the developed world is that while they are not “shying away from their responsibilities”, NCQG is “a collective goal and should therefore be open to a wider contributor base.”
The developing countries, however, remained committed to the UNFCCC’s principles of equity and Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC) as well as the requirement for fair burden sharing by developed countries. India reminded the room that conditionalities of the contributor base do not fall in ambit of the Paris Agreement.
In technical submissions, developed nations like Canada and Switzerland suggested possible criteria, including per capita income or either accumulated or per capita emissions. According to Switzerland, it wants non-developed nations that “are among the ten largest current emitters and have a purchasing power parity adjusted gross national income per capita of more than $22,000″ to contribute as well.
This would add Saudi Arabia, China, and Russia to the list of countries that are required to contribute to climate funding. However, studies that employ different criteria, such as historical emissions, would leave out China and other populous emerging market economies with high emissions.
Responding to the “changing economies call for a wider base” narrative, Brazil said, “We hear from many Parties that the world has changed from when we agreed to the Paris Agreement, but let me remind you the world has changed since 1945 when we decided the international governance and many other forums have not changed the obligations on which Parties are taking their decisions on under those bodies.”
While China, Singapore, and other nations acknowledged that developing nations will continue to make voluntary contributions to climate finance through South-South cooperation pathways, they emphasised that any thought given to broadening the contributor base deviates from the mandate of what is to be delivered under the NCQG.
Moreover, research has found that many developing countries are voluntarily providing climate finance to other developing countries for climate action, but their contributions go largely unrecognised as they do not report on this provision.
Private finance to rescue
When it comes to the structure of the NCQG, the developed world is rallying for a “multilayer structure which attracts private finance”. Developing world, on the other hand, is not so keen. While Congo said that the NCQG needs 60% minimum of public finance, Saudi Arabia “rejected” the private sector.
However, strong differences exist among Parties on how multilayered is understood.
Addressing the discussion on structure and in an attempt to bring focus back to the matter at hand, Brazil said that, “That is a debate we’ll have in another moment when we debate Article 2.1C. That is not the debate we need now.” The country also said that “Article 9 already gives us the structures we need to think about” — at the core of which lies the money given by developed countries to developing countries.
Interventions from developed countries are known to distract the conversation from the topic at hand, in order to delay progress on significant issues like climate finance.
Here come MDBs
Experts said that the intention of the governments from the developed world is to make some core contribution to, say, Multilateral Development Bank (MDBs) or through bilateral channels. Those funds will then be utilised to leverage private sector funds by those multilateral financial institutions.
“Even the previous goal, the whole $100 billion was not totally in grants. About 20-25% only of this is in the form of grants routed through bilateral or multilateral channels. Same thing is likely to happen here. Some core finance will be provided through official development channels and this will be scaled up through the MDBs who will mobilise private sector funds. But this will largely be in the form of loans and debt,” said R R Rashmi, Distinguished Fellow, The Energy and Resources Institute (TERI).
A recent analysis by the International Institute for Environment and Development (IIED) found that the poorest and most climate-vulnerable nations in the world are spending more than twice as much to pay off their debts than they get to combat the climate issue.
Rashmi added that public finance, however, can play a role to make the mobilised finance concessional if it is used imaginatively to create blended financing facilities or instruments, which can bring down the cost of capital. “Whether that will happen or not will depend on whether Baku is willing to address the question of concessionality”.
Despite being called the ‘Finance COP’, top financial bosses from Bank of America, BlackRock, Standard Chartered and Deutsche Bank, among others, are expected to skip COP29, citing fewer business opportunities.
Funds for the “most vulnerable”; Loss and Damage at risk
Many Global North nations including France, Belgium, Ireland and Spain, took to the floor to emphasise that the funds must go to the “most vulnerable” countries first. This seemed like a blast from the past when the EU shared its proposal to set up the Loss and Damage Fund. By offering the fund on such conditions, the developed world can cause friction within developing country blocs with a mix of different-sized economies.
Countries and blocs like Nepal, Gambia, AILAC, G77, among others from the developing world pointed out that just transition and loss and damage, along with mitigation and adaptation, must be included under NCQG. No developed country mentioned Loss and Damage, which could pose a serious risk to the inclusion of loss and damage as a subgoal under the NCQG.
NDCs hang in balance
The latest NDC Synthesis Report said that current national “climate plans fall miles short” of what’s needed. With countries currently working on new NDCs due next year, a fair, effective and equitable climate finance goal as well as the delivery of it is instrumental in making or breaking the course of climate action. Whatever comes out of the NCQG will certainly set the tone for the ambition of the countries and their ability to meet the targets set in the updated NDCs.
An accessible and fair NCQG could potentially build back the lost trust between the Global South and Global North. Whether that happens or not is yet to be seen as the annual negotiations inch closer, with no consensus on NCQG in sight.
