Whether or not you laud the UN Climate Change Conference (COP29) as a success hinges entirely on which side of the carbon divide you find yourself, and in which industry.
For the developed world, COP29 came with a hefty sticker price, with a tripling of their annual climate-related financing commitments to developing countries from US$100-billion to $300-billion annually by 2035. Provision was also made for private sector and multilateral development banks to scale up financing to developing economy countries to $1.3-trillion per year by the same date.
For the emerging-market crowd, the common refrain was that no sum was vast enough to compensate countries for the developmental and social sacrifices of transitioning away from fossil fuels.
In your writer’s humble opinion, this conference remains beset by ironies, beginning with the carbon cost involved in getting around 65,000 corporate virtue-signallers to attend. Early on, there were press rumours of backroom oil deals happening on the fringes of the event— which is more believable than anyone purportedly being shocked by the news.
The event location is in itself ironical. This line, penned by Michele Poletto for International Institute for Democracy and Electoral Assistance, encapsulates the issue: “The 29th Conference of the Parties of the UN Framework Convention on Climate Change, held this year in Azerbaijan, a major oil- and gas-producing authoritarian regime, was inevitably going to be a controversial affair.” Poletto delved into concerns about the number of heads of state who snubbed the event, and bemoaned the deferment of many controversial discussions to the next annual event.
Stake of insurers
Africa Ahead is more concerned about how insurers and reinsurers position around the event. The industry has a major vested interest in the climate change and decarbonisation narratives, both as allocators of capital and as underwriters of risk, responsible for pricing and mitigating climate-related exposures.
Heading into COP29, Nick Faull, head of climate and sustainability risk at Marsh, penned an insightful piece about the industry’s role around four themes that would dominate discussions. “The annual UN conference on climate change takes place against a backdrop of ever-increasing billion-dollar weather events and a hurricane season marked by storms intensifying more quickly with more rainfall than we have seen before,” Faull wrote.
Africa Ahead has bullet-pointed the four themes, quoting Faull in each instance.
- Financing the transition: Insurance is needed to unlock private sector investment by managing the risks involved in projects that can support the drive for net zero, from hydrogen-based fuels to battery energy storage systems and beyond.
- Improving voluntary carbon markets: There is potential for insurance to facilitate the operation of voluntary carbon markets by helping actors to manage risk.
- Boosting the Loss and Damage Fund: While ‘loss and damage’ is fundamentally about transfers from wealthier to poorer nations, risk-sharing approaches can maximise their impact.
- Improving adaptation: This remains a major focus area for Marsh [and likely for other global insurance and reinsurance brands].
From commitments to action
The extent to which insurers influence these themes will emerge over time. For now, the spotlight remains on how nations and industries will turn these commitments into tangible action.
In a post-event media release, UN Climate Change was largely upbeat on COP29 outcomes, welcoming the New Collective Quantified Goal on Climate Finance (NCQG) that they claim was agreed “after two weeks of intensive negotiations and several years of preparatory work”. Some congratulations are surely due, as the agreement required all signatory nations to agree on its every word.
“This new finance goal is an insurance policy for humanity, amid worsening climate impacts hitting every country; but like any insurance policy, it only works if premiums are paid in full, and on time,” said Simon Stiell, executive secretary of UN Climate Change.
“It will keep the clean energy boom growing, helping all countries to share in its huge benefits: more jobs, stronger growth, and cheaper and cleaner energy for all.”
South Africa’s Minister of Forestry, Fisheries and the Environment, Dion George, has welcomed the outcomes of the COP29. George was the leader of the South African delegation to the event.
Baku outcomes
In an official statement, his department said two weeks of intensive negotiations had delivered a Baku Climate Unity Pact consisting of the NCQG on climate finance; a Global Goal on Adaptation; and a Sharm el-Sheikh Mitigation Ambition and Implementation Work Programme. It was also agreed to implement the Paris Agreement’s articles 6.2 and 6.4.
According to the Ministry, “the adoption of article 6.2 and [the] 6.4 decision on carbon markets will allow South Africa and other developing-economy countries to initiate new carbon market projects which will facilitate investments in green technologies and economic opportunities.”
The UN Climate Change presser offered more detail on developments. Article 6.2 deals with country-to-country trading, with the decision out of COP29 providing clarity on how countries will authorise the trade of carbon credits and how registries tracking this will operate.
And article 6.4 involves standards for a centralised carbon market. Agreement around these standards was welcomed as “good news for developing countries, who will benefit from new flows of finance – and particularly good news for least-developed countries, who will get the capacity-building support they need to get a foothold in the market,” the UN Climate Change wrote.
The mechanism – referred to as the Paris Agreement Crediting Mechanism – is underpinned by environmental and human rights protections, and a clear mandate for the UN carbon market to align with science.
Countries across the African continent have been vocal about the need for climate change solutions to recognise countries’ economic and social dependencies on out-of-favour industries – advocating for a just transition away from fossil fuel at every opportunity.
The South African private sector, represented by Business Unity South Africa (BUSA), reiterated some of the challenges in its public messages before and during COP29. In a media statement pre-dating the event, they said that COP29 was taking place at a pivotal moment as regions worldwide grappled with escalating climate impacts and high living costs.
“These challenges are further exacerbated by geopolitical tensions, trade disputes, and growing divisions among parties over issues such as carbon border taxes, particularly between developed and developing countries,” BUSA wrote. The organisation reminded stakeholders that many nations had limited resources to take decisive climate action, and warned against using the conference to reframe discussions around climate finance.
Adaptation challenges
In a voice note issued on November 20, BUSA CEO designate, Khulekani Mathe said, “South Africa faces urgent adaptation challenges, requiring substantial resources to build resilience against climate impacts.” He positioned the private sector as a critical partner in climate change mitigation efforts, but warned that a just transition was non-negotiable to ensure social equity and economic development.
Mathe also repeated calls for global leaders to reconsider their stance on “unilateral trade measures such as the carbon border adjustment mechanisms (CABM), which unfairly burden developing countries.” The preference is for fair grant-based financial mechanisms and robust international partnerships that advance climate action aligned with national development priorities.
Faull concluded his pre-conference article by reminding stakeholders of the value in product innovation. “It is becoming possible, through parametric insurance, to mitigate risks such as too much or too little rain – an example of how the insurance industry is playing its role in responding to the changing climate; we need to see even more innovation, and more urgency, as we grapple with the climate crisis,” he wrote.
At a government level, South Africa accepted the COP29 outcomes as a win. “While we understand the frustration expressed by some parties, we do see the outcomes as a significant step in the right direction as it is more than what we had going into the negotiations and we can now build on that, especially given that South Africa will be the next President of the G20,” George concluded. This G20 Presidency will overlap with COP29, set down for Brazil late in 2025.
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