As the global community comes together at COP29, this year’s conference, also known as the ‘Finance COP’, seeks to confront one of the most formidable barriers in our collective climate efforts – the daunting climate financing gap. Aligning climate finance with global needs is not merely a strategic objective but a fundamental necessity. The New Collective Quantified Goal (NCQG), to be negotiated this year, will replace the previously set USD 100 billion annual target for 2020.¹ However, there are many challenges related to setting new targets, and who will pay, and for what exact measures.

The primary objective of NCQG is to provide a framework for channeling climate finance globally to bridge some of the climate financing gaps. However, disputes over many of its core components have hindered progress, making COP29 critical for forging a unified path forward. If adequate financial resources are not allocated in a timely manner, any blueprint for climate change mitigation and reducing GHG emissions will be unsuccessful. Key decisions would also need to be taken on allocation of resources for specific pillars of climate action, including climate adaptation, and loss and damage.

For instance, India equires USD 10.1 trillion to meet its sustainability targets by 2050 and achieve net-zero by 2070.² Channeling such an enormous value is a tremendous challenge and will require active engagement and commitment from the public sector, private sector and development agencies. Collaborative efforts would need to be made to develop effective and scalable climate finance mechanisms.

The role of the central bank, regulators, and policymakers is important for cultivating an enabling environment which can catalyse the flow of climate finance through various sources and instruments. The role of policymakers is also important to ensure that investable climate opportunities can be recognised and realised.

As corporate commitments towards climate action and ESG increase, the private sector has become an essential player in financing the green transition. The role of financial institutions (FIs) – banks non-banking financial companies, and asset management companies, has also evolved as they are considering nonfinancial aspects like carbon emissions for their projects. To demonstrate their commitment towards climate action, FIs around the world have come together to form coalitions such as Net Zero Banking Alliance and Climate Action 100+ among others. Through sustainable lending practices, FIs can enable the development of climate resilient low-carbon economies.

Private enterprise across various sectors will require adequate investments to transition to greener, climate resilient technologies. Whether it is for renewable energy projects, energy-efficient manufacturing processes, or any other geoengineering-based sustainability solutions, the private sector will be central to the scale up climate finance. Corporates can also leverage the growing sustainable finance market by availing instruments such as green bonds, sustainability-linked loans and other innovative financial products to mobilise capital for their climate initiatives.

At COP29, the international community has an opportunity to address the urgent need for scaling up climate finance. Redirecting capital for fast and meaningful action requires efforts from all stakeholders. Governments must commit to their climate finance targets, and recognise and reduce the barriers to climate investments. The private sector must intensify its efforts to fund strategic innovation to move to greener business models while continuing with climate mitigation and adaptation measures. The role of developmental banks and agencies becomes even more important as the conversation on ‘just transition’ picks pace. Not only will these agencies need to provide the financial backbone necessary to bridge the gap, they will also have to ensure that funds flow in a manner that which protects vulnerable communities.

Addressing the climate financing gap is an extraordinary challenge, and this year’s COP offers a critical platform to discuss and find solutions for this problem. By securing commitments from the public and private sectors, the global community can make significant progress toward a sustainable future. The time for action is now. The success of COP29 will be a defining moment in our collective fight against climate change, and the world is watching.