As always with COP meetings, deadlines come and go before final agreements are made, and COP29 in Baku proved no different.
Ultimately, the conference agreed to the Baku Finance Goal (BFG), a new commitment to channel US$1.3-trillion of climate finance to the developing world each year. The Goal contains a core target for developed countries to take the lead on mobilising at least US$300-billion per year for developing countries by 2035. This represents a $50-billion increase on the previous draft text. It pays special consideration to support the least-developed countries and small island developing states, with provisions on accessibility and transparency.
COP29 also ended the decade-long wait for the conclusion of Article 6 negotiations on high integrity carbon markets under the UN. Financial flows from compliant carbon markets could reach $1-trillion per year by 2050. They also have the potential to reduce the cost of implementing national climate plans by $250-billion per year.
The COP29 Presidency also succeeded in getting the Fund for Loss and Damage up and running and ready to distribute money in 2025. This decision was long awaited by developing countries, including small island states, least-developed countries and African nations.
Concerns amid several wins
Not all of this was welcomed by climate activists or by many African experts who said the money is too little, too late and that they were worried that the carbon markets agreement would be misused by carbon emitters.
The Global Campaign to Demand Climate Justice, for example, said, “There is an increasing body of evidence demonstrating the failure of such schemes to reduce emissions, all while increasingly being linked to great harm caused to frontline communities and ecosystems.”
It warned, “The carbon offset schemes lead to land grabs, severing access to forests for indigenous peoples and forest communities, resulting in human rights violations, gender violence, loss of biodiversity and threatening of food sovereignty.”
Insurance in focus
Turning to insurance, Butch Bacani, head of insurance at the UN Environment Programme (UNEP) and lead of the UN Principles for Sustainable Insurance Initiative (PSI), said activities at COP29 included:
- Launching the first global guide on transition plans for insurers produced by the UN Forum for Insurance Transition to Net Zero
- Promoting a pioneering global guide on priority actions by insurers to support a nature-positive economy produced by the UN PSI
- Promoting the work of the PSI-managed Vulnerable Twenty Group of Finance Ministers Sustainable Insurance Facility in scaling up climate risk insurance for micro, small and medium-sized enterprises
Bacani also spoke at the launch of a research paper by The African Climate Foundation in climate risk insurance solutions in Kenya, Malawi and South Africa. The Foundation also launched the African Energy Futures Initiative (AEFI), a new funding platform focused on African-led and African-designed energy transition solutions. Seeded with a $2.1-million grant from The Rockefeller Foundation, AEFI aims to provide multi-year funding to centres of excellence for energy systems modelling and analysis in Africa.
Back to insurance and panellists joining an event held by Africa Risk Capacity Ltd (ARC Ltd) discussed “game-changing” approaches to disaster risk financing and resilience-building. They unpacked the urgent need for prearranged financing rather than relying on reactive, ad-hoc responses, which often divert national funds intended for essential sectors like health and education.
Targeting impactful sectors
Albano Manjate, who heads up the Climate Finance Unit at Mozambique’s Ministry of Economy and Finance, explained that resources must be channelled directly to impactful sectors – especially those supporting communities and small businesses – to enable quick, effective resilience measures.
Manjate pointed out that when resources are made available, directing them to vulnerable, low-income populations remains challenging. World Bank lead financial sector specialist, Fiona Stewart, said that standards are being established to guide these efforts, and financing programmes are underway to ensure different needs are covered by an appropriate mechanism and ready to act when needed. She briefly unpacked the World Bank’s crisis response toolkit, which is one of these initiatives being put in place to support countries.
Financing instruments should be matched to risks, the panellists agreed, and they should be used in a creative and collective manner. The conversation spotlighted the Regional Emergency Preparedness and Inclusive Recovery (REPAIR) Programme, a new initiative from ARC Ltd., the World Bank, Global Shield, and other partners, that does exactly this.
Insurance role in creating resilience
Meanwhile, the COP29 session on “Disaster Risk Financing Mechanisms for Successful Climate Change Adaptation in Africa” highlighted the transformative role of insurance in creating resilience.
“It transforms your funding from being based on moral obligations to being based on a contractual obligation,” explained ARC Ltd’s CEO, Lesley Ndlovu, who participated in the panel discussion. This means governments and communities can shift from unpredictable funding to pre-arranged solutions, allowing for better planning and quicker responses to crises.
In the past decade, ARC Ltd. has disbursed more than $230-million in claims, with $70-million recently reaching Southern Africa, including Zimbabwe. “ARC provides 85% of all pre-arranged financing on the African continent. We are a critical part of the disaster risk financing landscape,” Ndlovu emphasised.
This is particularly evident in The Gambia, where a pilot micro-insurance initiative is transforming disaster preparedness and response for local farmers.
“It’s not just about the finance,” explained Bubacar Zaidi Jallow, deputy permanent secretary at The Gambia’s Ministry of Environment, Climate Change and Natural Resources. “The technical capacity building that they [ARC Ltd. and the Global Shield] have done really helps us work on our parameterisation for drought. They’ve provided us with tailor-made tools that we can use at a national level with the technology we have available already.”
The session concluded that, by combining technical expertise, financial tools, insurance, and collaboration with organisations like Global Shield, African countries will be able to identify risks better and then predict the most adequate mitigation measure.
Translating pledges into action
Meanwhile, Hope Murera, Zep-Re, managing director and CEO, stressed “As COP29 unfolds, it is exciting to see the global community taking steps to translate pledges into meaningful actions and reflect on COP28.
“The big question,” she asked, “is how do we ensure commitments evolve into systems-level change? The answers lie in inclusive financing, innovation, partnerships and community-driven solutions.”
In a panel discussion at COP29, panellists highlighted the bureaucratic bottlenecks, including funding requirements that can exceed direct donor standards. There was consensus that while standards are necessary, the structure of these funds often hampers agility, hindering pools’ ability to disburse resources when they are needed most.
The panel also suggested some solutions, such as introducing dedicated channels for disaster financing that leverage pools’ existing compliance frameworks, allowing for faster fund deployment without redundant compliance checks.
Meanwhile, Ndlovu added this warning: “In this world of increasing frequency and severity [of extreme weather events], if the only tool we have is to raise prices, we’re going to get to a point where the risks are uninsurable.”
Key takeaways from a World Green Economy Organisation panel discussion included the need for better risk assessment, increased access to insurance and strong public-private partnerships.
Carbon trading
Finally, back to carbon trading, with McKinsey which said in its series of events throughout the conference, voluntary carbon markets could help close a portion of the climate financing gap—but they would need significant growth compared with today.
Experts underscored that greater transparency and globally consistent regulation could help create the right conditions to build trust and participation in voluntary carbon markets. The new UNFCCC standards may support progress on that front.
They also agreed that regulated depositories could play a significant role in scaling the markets, as they do in other securities markets, but they would need clarity on issues such as which credits can be counted as collateral, the role of insurance in providing capital relief, and transparency on the quality of credits.
Panellists discussed the benefits of a minimum standard of quality, supported by a clear auditing process, as a promising approach.
However, it remains unclear what the level of demand will be at the price of higher-quality, better-regulated credits, and whether that demand will be more diversified than it has been to date.
Ultimately, it left three questions for leaders:
- How do the carbon market announcements affect my investment portfolio and criteria?
- How can my organisation help unlock and access the new sources of capital (including both public and blended finance) for both mitigation and adaptation?
- How do I incorporate adaptation in my organisation’s business decisions (including strategic planning, capital allocation and operations)?
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