The burning issue ahead of November’s UN climate summit #NewsMarket

Hello from Singapore, where we’ve just wrapped up another fascinating edition of the Moral Money Summit Asia. With two days of intense discussion on everything from sustainable agriculture to the race for critical minerals, we got a wealth of insights that will inform our coverage in future editions.

And we’re looking forward to the Moral Money Summit Americas in New York on October 15-16, with top-class speakers including Nobel-winning economist Esther Duflo. Newsletter subscribers can enjoy a 30 per cent discount on an in-person pass or participate online for free — click here to register.

Among the speakers this week was COP29 climate champion Nigar Arpadarai, who described the heavy focus on finance that we can expect at this year’s UN climate summit. As we discuss below, it has the makings of a testy gathering.

COP29

A hot topic for Azerbaijan’s UN climate summit

With just a couple of months ago until the UN COP29 climate summit kicks off in Azerbaijan, one source of certain tension is clear.

That’s the New Collective Quantified Goal on Climate Finance, or NCQG — a mouthful of an acronym that you may as well get used to now, because you’ll be hearing much more of it before the year is out.

The Azeri presidency of COP29 has said a deal on the NCQG — which would set a new target for climate-related assistance to developing nations — will be a top priority for the summit.

The idea is to replace a 2009 pledge made in Copenhagen, where wealthy nations agreed to increase their annual provision of climate finance to poorer countries to $100bn by 2020. That promise was notoriously missed, although it was finally reached in 2022, according to OECD estimates.

At 2021’s COP26 in Glasgow, nations promised to decide on a new goal no later than 2024 — which means COP29 in Baku will need to be the time and the place.

A useful paper published this week by non-profit groups Concern Worldwide, Mercy Corps and Plan International highlights several issues that are likely to prove major bones of contention at the upcoming summit.

One is the sheer scale of the financing required. Credible estimates put developing nations’ climate finance needs at several trillion dollars a year — meaning wealthy countries will need to increase their promised support by an order of magnitude for their pledge to be credible. “The NCQG should be considerably more ambitious than the $100bn goal, which reflected what was politically possible at the time, not what was needed,“ the authors write.

Another is how the support is structured. Echoing the appeals of many developing-nation officials, the paper calls for more international public climate finance to be provided in the form of grants, rather than loans that it warns are “exacerbating debt crises in climate-vulnerable countries”.

The authors also caution that the new flows of climate finance must be additional — rather than siphoned from existing aid budgets, with climate-related support coming at the expense of health or education funding.

All of this will sound politically toxic to some rich-world officials, who will fret that it could be impossible to rally domestic voters behind such generosity. But the principle of “common but differentiated responsibility” is at the core of the decades-long UN climate process. And that means a larger contribution must be made by those wealthy nations whose cumulative per-capita emissions far outweigh those of the poorest, most vulnerable countries. If an agreement on this new framework is to get over the line in November, they’ll need to take that principle seriously.

Blue bonds

Brazil is the world leader in blue bond issuances over $100mn

Back in January we dived into the blue bonds market, which raises money for investment in water-related projects from pollution control to marine conservation.

Analysts at Sustainable Fitch have just published an update on that market, finding that cumulative issuance of blue bonds had reached $12.3bn as of June. That’s less than 1 per cent of the wider market for green bonds, which cover a broader range of environmentally-friendly purposes. And the issuance of $1.7bn in the six months to June suggests that this year’s total is likely to fall short of last year’s record $5.4bn.

But the new report notes that non-financial corporate issuers have now become the dominant issuers of blue bonds — a marked change from a few years ago when activity was led by financial institutions, along with supranational bodies and national governments.

Brazilian companies have loomed large in this year’s activity, including a $254mn issuance by São Paulo utility SABESP to fund sustainable water management, and four issuances totalling $692mn by sanitation company Aegea. Japan’s Mitsui OSK Lines also got in on the watery action with a $135mn issuance that will help clean up its shipping operations.

Smart read

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