COP30 continues: Financial stability warning, solidarity levies and a just transition
As COP30 enters its final stages, warnings have intensified that aligning portfolios with a sustainable transition is a core fiduciary duty and “no longer optional” due to the escalating risks outlined at the climate change conference.
There has been a number of key announcements over the past week, including the $1.3trn Baku to Belem Climate Finance Roadmap, and the activation of the $250m start-up phase for the Loss & Damage Fund, which was set up in previous COPs, on 15 December.
See also: COP30 so far: ‘Defeat the climate deniers’, UK’s ‘moral failure’ and calls for real implementation
COP30 also saw the launch of the Principles for Taxonomy Interoperability to help align sustainable finance rules across countries, and a major push for solidarity levies – ie new international taxes/levies – as a source of non-debt climate finance.
Meanwhile, the first Asset Owners Summit was held with asset owners running $10trn in pensions funds, insurance pots and sovereign wealth represented, while the Network for Greening the Financial System (NGFS) issued a warning that delayed climate action is not just an environmental risk, but a major macroeconomic/financial risk that central banks and supervisors must take seriously. It highlighted the cost of transitioning to a low-carbon economy could increase substantially from 0.5% to 1.3% of global GDP by 2030 under a three-year delay scenario.
Climate-related shocks, such as disruptions to food systems, volatility in emerging markets and stress on supply chains will also spill over into economies and prompt financial instability, especially in more vulnerable economies, raising systemic risk for the global financial system.
Allegra Ianiri, research analyst at ESG advisory and analytics firm, MainStreetPartners, commented on the progress so far: “On the negotiated side, parties are still wrestling with the formal architecture of public climate finance, obligations under Article 9.1, the new collective quantified goal (NCQG), and the role of existing funds. In parallel, a set of initiatives is testing how innovative levies, country platforms, taxonomies and private capital can be mobilised at greater scale and with stronger alignment to climate goals.
“The first Asset Owners Summit under the official COP agenda, representing roughly $10trn in AUM, highlighted growing consensus that aligning portfolios with credible transition pathways is increasingly viewed as part of core fiduciary duty. COP30 is also advancing work on taxonomy interoperability, with new principles and mapping tools intended to ease cross-border capital flows and improve comparability of climate-related disclosures.”
“As debate over the relevance of COPs resurfaces, COP30 is a reminder that – imperfect as they are – these forums remain indispensable,” Ianiri continued.
“They are the only global platform where 198 parties, along with business and civil society, can set collective ambition, negotiate rules and coordinate climate action at scale. Progress is necessarily incremental, but the impact is real: today’s global temperature projections are lower than they were before the Paris Agreement, demonstrating the value of sustained multilateral cooperation. Still, the pace and depth of action fall short of what is required to meet global climate objectives.”
See more: PA Future coverage of COP30 so far
Other initiatives announced this past week include new ‘Climate & Nature Country Platforms’, which have been developed with the Green Climate Fund to help countries such as Cambodia, Colombia, India, Nigeria and South Africa coordinate and attract investment, and Africa used Finance Day to call for the reform of global financial architecture.
Teresa Anderson, ActionAid’s global lead on climate justice, commented: “Negotiations on just transition have moved quickly in just one week and represent real hope for both climate action and people. There is growing recognition that taking shortcuts in social justice makes the climate journey longer. However, the second biggest polluter, and the world’s biggest employer – agriculture – is still missing from the just transition text. COP30 needs to address this gap in a global approach to just transition.
“At the same time, rich countries’ refusal to provide more grant-based climate finance is really taking the wind out of the sails of climate negotiations. After the woefully insufficient climate finance goal agreed at COP29 in Baku last year, African countries at COP30 have started to worry that the longed-for Global Goal on Adaptation could end up becoming a rod for their backs if not accompanied by the climate finance they need to implement actions. Adaptation risks becoming the first victim of the bitter harvest from Baku.”
See also: From Baku to Belem: The road to COP 30
Image © UN Climate Change/Kiara Worth/Flickr