COP29 struggles to break climate finance deadlock

Hello from Baku. Officially, this is the last day of COP29. Realistically, it’s almost certainly not. COPs have been getting progressively longer; the excellent team at Carbon Brief extrapolated the trend line, which suggests COP29 will end in the small hours of Sunday morning.

Even that may be optimistic. Chinese negotiators have scheduled their flights home for Tuesday, our colleague Attracta Mooney is reliably informed. It seems quite possible that the gathering in Baku could end without a formal agreement to conclude the conference, as happened at the biodiversity COP in Colombia last month.

One sticking point is over the explicit mention of a transition away from fossil fuels, which appeared for the first time in a COP closing text last year. Developed nations including the EU, as well as developing nations including Peru and Panama, are pushing for this language to be restated in this year’s formal agreements. Russia, China and Arab nations including Saudi Arabia are resisting, arguing that a broader reference to last year’s agreement should be enough.

But, as so often in life, the biggest problem is money: specifically, reaching an agreement on the new finance goal. As I write this, the Azerbaijani presidency has just published a new draft agreement for the goal. It calls for developed countries to “tak[e] the lead” in mobilising $250bn a year by 2035 for developing nations “from a wide variety of sources, public and private, bilateral and multilateral, including alternative sources”.

This is far below what developing countries have been demanding, as was highlighted in a long, testy plenary session yesterday. Nations are in fierce disagreement on this issue — and the nature of their disagreement tells you a lot about the world’s struggle to fund its response to the climate crisis, as I explain below. — Simon Mundy

COP29 in brief

The biggest dollar divides at COP29

With talks seemingly deadlocked at COP28 in Dubai last year, the Emirati hosts drew on Arabian heritage by holding a majlis, with negotiators gathered in a huge circle to thrash out their differences.

Yesterday in Baku, the COP29 presidency followed suit by bringing delegation heads together for a qurultay — a traditional term for a large consultative meeting.

The majlis in Dubai helped negotiators move towards a final text that included an unprecedented global agreement to transition away from fossil fuels. But yesterday’s qurultay, which ran for more than five hours, served to underscore the huge differences that remain between key negotiating blocs on the main issues at COP29, which is now running out of time.

The starkest of those differences are over the new global finance goal which, according to the Paris Agreement, must be agreed at COP29.

Who should pay?

To a large extent, the divide here is between the 24 developed countries that are obliged to contribute international climate finance, and everyone else.

That group of developed countries was defined by the UN convention on climate change in 1992 (Türkiye was initially included, but later removed). Key members of the group are now pushing for other major economies to contribute to the new goal.

“All capable parties need to be accountable for the support goal,” US presidential climate adviser John Podesta told the qurultay. “This is an essential element.”

This suggestion was roundly rejected by other parties. Unsurprisingly, these included “capable parties” that the US would like to see sharing the support burden — notably Saudi Arabia and China. The latter said it was already providing international climate finance on a large scale, but that this “voluntary support” should be considered “different in nature from the obligation of developed countries”.

But Podesta’s argument for widening the donor pool was also dismissed by representatives of some developing countries that stand to receive finance under the new framework — including Ugandan diplomat Adonia Ayebare, speaking for the G77 group of more than 130 developing nations, which is negotiating on this issue in a single bloc with China.

At first sight this could seem surprising: one might expect that lower-income nations would welcome climate finance from as many countries as possible. But some of their representatives have voiced concern that tampering with the existing framework could reduce the pressure on developed nations to stump up cash, and risk creating major delays to the process. The negotiating dynamic is also a reflection of China’s economic and diplomatic clout in developing nations, as this interesting piece in the Africa Report underscores.

What’s the number?

Nations are also far from an agreement on the scale of the new finance goal. The draft text published yesterday by the Azerbaijani COP29 presidency contained two possible framings for the new finance goal: one with a strong emphasis on direct financial support from developed countries, and one that stressed the importance of additional sources of capital. But it didn’t include proposed numbers under either approach.

Uganda’s Ayebare said the G77 and China were calling developed countries to increase their provision of international climate finance by 2030 to $500bn a year. This money would need to catalyse further finance from other sources worth $800bn a year, to provide a total of $1.3tn.

This proposal is an accelerated version of the approach suggested in a report last week from the International High-Level Group on Climate Finance (see our write-up here), which said that developing countries (excluding China) would require $1tn a year in external climate finance by 2030, and $1.3tn by 2035.

There’s huge disagreement, too, over the structure of the goal. Developed countries are pushing for the text to emphasise the importance of mobilising finance from a wide range of sources, including private-sector capital. Developing nations want to ensure that there’s a heavy focus on the provision of public funds by rich-world governments.

Rich nations including Japan and Norway said yesterday that they would need greater clarity on how the goal was to be designed before they could make specific pledges towards it. But their failure to come up with numbers was condemned by developing-nation counterparts. “We are negotiating on nothing,” said Colombian environment minister Susana Muhamad.

How will the money be allocated?

There was also conspicuous disagreement between developing nations over how the money should be disbursed. Two negotiating groups, in particular, are pushing for specific “minimum allocation floors” for their members, on the grounds that they face particularly stark financial needs.

Samoa, speaking for the Alliance of Small Island States, said that this matter was a “red line” for its members. Malawi, speaking for the 45-member Least Developed Countries group, said its members were demanding a special allocation of $220bn per year.

But these demands got short shrift from some other developing nations. “Any specific allocation to any specific group of countries [would be] exclusionary” and restrict access to other vulnerable developing countries, argued Pakistan’s representative. (Simon Mundy)

Quote of the day

[Climate change] mitigation is not just about adopting renewable energy or improving energy efficiency. It is fundamentally about phasing out fossil fuels. It is troubling to witness both silence and outright resistance on this critical issue.

— Juan Carlos Monterrey Gómez, Panama’s special representative for climate change, at yesterday’s qurultay plenary session.

Beyond COP29: Food company shareholders aim to spark ‘nutrition arms race’

PepsiCo, Coca-Cola and Mondelez are among the major listed companies coming under pressure from shareholders to better disclose the health risks of their food and drink products.

Thirty-one asset managers collectively managing $3tn, including UK-based Legal and General Investment Management, Switzerland’s Pictet Asset Management and NEST (National Employment Savings Trust), a UK pension scheme, yesterday wrote to the chief executives of major food companies, asking them to improve transparency on health risks such as obesity. Sales of less healthy products led to “sicker societies”, they argued, threatening financial returns, for example by reducing worker productivity.

If prevention and treatment do not improve, obesity is projected to cost the global economy $4tn each year by 2035, or about 3 per cent of GDP, similar to the impact of the Covid-19 pandemic in 2020, according to the non-profit World Obesity Federation.

The investors, co-ordinated by advocacy group ShareAction, asked food and beverage executives to adopt international nutrition standards for publicly reporting the healthiness of their sales, rather than using “in-house” nutrition models. Available standards include the Health Star Rating designed by the Australian and New Zealand governments.

When food and beverage companies design their own models, this “essentially amounts to them marking their own homework”, Thomas Abrams, ShareAction’s co-head of health, told Moral Money.

Many of these companies now state in their annual or ESG reports the proportion of their sales that are “healthier”— the very definition of which is contested. Using a public methodology to assess 30 of the world’s largest food and beverage manufacturers, the non-profit Access to Nutrition Initiative has come up with much lower proportions of “healthier” sales.

Mondelez, whose divisions include the Cadbury chocolate business, claims 38 per cent of its sales are “healthier”, while ATNI puts the number at 11 per cent. Coca-Cola reports about 71 per cent of its sales are healthier, while ATNI puts the figure at about half that much.

“The big gaps between company estimates and independent assessments stem from how companies define ‘healthier’,” ShareAction said, with some assessments failing to penalise nutrients such as excess sugar, sodium and saturated fat.

Investor signatories to ShareAction’s broader Long-term Investors in People’s Health campaign include Aviva Investors, HSBC Asset Management and Columbia Threadneedle. 

The objective of ShareAction’s push for transparency and standardisation, Abrams said, is that “disclosure would kick-start a ‘nutrition arms race’ in which manufacturers would vie with each other to make their products better for health”.

That possibility seems far off, however, since only a minority of shareholders have supported similar efforts at food and beverage companies. Partly at issue is the still-shaky case for how the sale of unhealthy foods could pose a longer-term risk to companies.

In April, just 11 per cent of shareholders at Nestlé backed a resolution from LGIM and others that would have forced the consumer goods company to cut back on its use of salt, sugar and fats. (Lee Harris)

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