The effects of climate change are already having a deep negative impact on the gross domestic product of nations across the world, according to Simon Stiell, executive secretary of the United Nations Framework Convention on Climate Change, speaking at a news conference on the second day of the COP29 climate summit in Baku, Azerbaijan.
Stiell noted that, according to the International Energy Agency, $2 trillion will be invested in clean energy and infrastructure this year alone. Yet according to him, this was still “a fraction” of the global economy and remained centralized in the largest markets, echoing findings by MSCI published Nov. 11.
“The climate crisis is fast becoming an economy killer,” Stiell said.
“Unless all countries can slash emissions deeply, every country and every household will be hammered even harder than they currently are. We will be living in a permanent inflationary nightmare," Stiell said.
“This is not some far-off risk. The climate crisis is a cost-of-living crisis right now in every economy across the planet. I say to all nations — let's get a good result. Billions of people cannot afford their governments to leave COP29 without having a strong outcome on finance,” he added
Stiell then went on to address developments related to the Article 6.4 mechanism, also known as the Paris Agreement Crediting Mechanism, which has been an issue of long-standing debate at previous COP conferences.
In the evening on the first day of COP29, the parties agreed to strong standards for a centralized carbon market under the U.N., a key development in pushing forward long-overdue updates for an international carbon market.
“There’s more work to do, but this is a good start — the product of over 10 years of work within the process,” Stiell said.
Also speaking on the second day of COP29 was Antonio Guterres, secretary-general of the U.N.
“With 2024 recording the hottest days and months on record, this is almost certain to be the hottest year on record, and a masterclass in climate destruction," Guterres said at the news conference. "Biodiversity destroyed in sweltering seas, workers and pilgrims collapsing in insufferable heat, floods tearing through communities, and tearing down infrastructure.”
“In our global economy, supply chain shocks raise costs everywhere," Guterres added. "Decimated harvests push up food prices everywhere. Destroyed homes increase insurance premiums everywhere. This is a story of avoidable injustice. The rich cause the problem, the poor pay the highest price.”
An area progress was hoping to be made at COP29 was in forestry, with the establishment of an inaugural Forest Pavilion, which looks to provide a platform to strengthen political commitment and accelerate action to protect forests by all stakeholders.
“You’re seeing big pension funds pivot more and more into the forestry sector," said Ross Hampton, executive director of the International Sustainable Forestry Coalition, who was present at the Forest Pavilion and spoke to Pensions & Investments. "However, for interest to expand further, forestry can’t be seen as risk finance. At the end of the day, there are people’s pensions at stake.”
Hampton also stressed that further investment in forestry as an option within the alternatives sector requires an increase in scale and consistency across jurisdictions related to “land sector guidance,” legislation that explains how companies should account for and report greenhouse gas emissions in forestry and land management.
The second day of COP29 also saw the formal creation of the Loss and Damage Fund, first proposed at COP27 in Sharm El-Sheikh, Egypt. This fund looks to support developing countries that are particularly vulnerable to the adverse effects of climate change.
“We should reflect on what this breakthrough will mean for real people," said Mukhtar Babayev, president of COP29, at the signing of the fund creation. "It means houses being rebuilt, people being resettled, and lives and livelihoods saved. But our mission is not complete. Now the fund needs to identify projects deserving of long-term support.”
At the event, Mattias Frumerie, climate ambassador for Sweden, pledged that the nation would commit a further $19 million to the fund.
However, Pascal Dudle, head of impact and thematic investing at Swiss asset manager Vontobel, which has 226 billion Swiss francs ($251.6 billion) in assets under management, also poured water on any high hopes for the remainder of the COP29 conference: “This year’s climate talks are the most difficult since those held in Paris in 2015. Given the continuing conflicts in Ukraine and the Middle East, I have little optimism about any real progress being made,” he said in emailed comment to P&I.
Also, on the second day of COP29, a blended finance initiative was launched by BlackRock, Monetary Authority of Singapore, International Finance Corp., Mitsubishi UFJ Financial Group, Nippon Insurance, and Hong Kong insurance firm AIA Group.
The bodies signed a statement of intent to collaborate on a project to develop an industrial transformation infrastructure debt program, building on an initiative launched by MAS last year at COP28 in the United Arab Emirates.
