The Climate of Business #141: Special Edition on COP29: Outcomes for Businesses

COP29 Concludes: Key Outcomes and Immediate Actions for Businesses

The 29th United Nations Climate Change Conference (COP29) in Baku, Azerbaijan, concluded with significant developments that hold substantial implications for the business community.

1. New Collective Quantified Goal (NCQG) on Climate Finance

Developed nations committed to tripling climate finance to developing countries, setting a target of $300 billion annually by 2035. This goal encompasses mitigation, adaptation, and just transition efforts. However, it falls short of the $1.3 trillion per year identified by the UN Independent High-Level Expert Group on Climate Finance as necessary by 2035.

The agreement lacks clarity on the distribution of contributions between public and private sectors, as well as the balance between grants and loans. Notably, major economies like China and other states, especially those dependent on oil and gas, are not mandated contributors but may participate voluntarily. The emphasis on blended finance to attract private capital through de-risking mechanisms underscores the critical role of businesses in mobilising funds for climate action.

2. Operationalisation of Article 6 on Carbon Markets

After nearly a decade of negotiations, COP29 finalised the framework for global carbon markets under Article 6 of the Paris Agreement.

This development enables countries and companies to trade carbon credits, facilitating the offsetting of emissions and promoting investment in emission reduction projects.The establishment of a standardised carbon crediting mechanism is expected to enhance market transparency and integrity, presenting new opportunities for businesses engaged in sustainable practices.

3. Upcoming Updates to Nationally Determined Contributions (NDCs)

Countries are expected to submit updated NDCs by February 2025, with an emphasis on increased ambition, credibility, and investment potential. These updates aim to close existing policy gaps and create an enabling environment for businesses and households to invest in and scale up climate finance. Companies should prepare for potential policy shifts and align their strategies with national climate commitments to remain competitive and compliant.

4. Baku to Belém Roadmap to $1.3 Trillion

Recognising the shortfall in the current climate finance goal, COP29 introduced the "Baku to Belém Roadmap to $1.3 Trillion."This initiative aims to scale up climate finance, with bold negotiations anticipated in the coming months. Businesses should monitor these developments closely, as they may influence future funding opportunities and regulatory landscapes.

Immediate Actions for Businesses Before Year-End

In light of COP29's outcomes, businesses should consider the following actions before the end of the year to align with emerging climate policies and market opportunities:

Assess Carbon Footprint and Set Reduction Targets

Conduct a Comprehensive Carbon Audit: Evaluate your company's greenhouse gas emissions across all operations to establish a baseline.

Establish Science-Based Targets: Set ambitious emission reduction goals in line with the Paris Agreement's 1.5°C target.

Understand Carbon Markets

Explore Participation in Carbon Trading: Investigate opportunities to trade carbon credits under the newly operational Article 6 framework.

Invest in Emission Reduction Projects: Consider funding or partnering in projects that reduce emissions in the company's own value chain and could now or down the line generate carbon credits (insetting), such as renewable energy or reforestation initiatives.

Align with National Climate Policies

Stay Informed on NDC Updates: Monitor upcoming changes to Nationally Determined Contributions and assess their impact on your industry. History shows governmental level policies get more specific with each COP and eventually if not immediately impact cost-wise more stringent rules for industry participant.

Advocate for Supportive Policies: Engage with policymakers to promote regulations that facilitate a just transition to a low-carbon economy.

Leverage Blended Finance Opportunities

Seek Public-Private Partnerships: Explore collaborations that utilise de-risking mechanisms to attract private investment in climate projects.

Access Climate Finance Instruments: Identify and apply for funding from climate finance facilities aimed at supporting sustainable business initiatives.

Enhance Climate Risk Disclosure

Adopt TCFD Recommendations: Implement the Task Force on Climate-related Financial Disclosures framework to improve transparency.

Communicate Climate Strategies: Regularly update stakeholders on your company's climate action plans and progress.

Invest in Climate Resilience

Assess Supply Chain Vulnerabilities: Identify and mitigate risks posed by climate change to your supply chain. Cost savings could vary between 20% to 50% of overall costs.

Develop Adaptation Strategies: Implement measures to enhance the resilience of your operations against climate impacts.

By proactively addressing these areas, businesses can position themselves to capitalise on emerging opportunities and mitigate risks associated with the evolving climate policy landscape. Learn how to reduce costs by pioneering sustainability for your business here.