Following two weeks of discussions at COP29 in Baku, an agreement on climate finance was reached early Sunday morning. This funding is crucial for addressing climate change impacts and implementing mitigation strategies. However, as delegates departed from the Azerbaijani capital, optimism was scarce regarding the compromise’s benefits for Africa.

“We leave Baku without a significant climate finance target, lacking concrete strategies to restrict global temperature rise to 1.5°C, and without the urgent and comprehensive support needed for adaptation and loss and damage,” stated Evans Njewa, chair of the Least Developed Countries bloc at COP29. “This is not simply a setback; it constitutes a betrayal.”

The agreed text establishes a target for developed countries to supply at least $300 billion annually in climate finance to developing nations by 2035. While this figure represents a proposed tripling of existing commitments, many recognize it as only a small portion of what is required to support the countries most affected by climate change, despite contributing the least to it.

The newly introduced “new collective quantified goal on climate finance” (NCQG) was meant to be determined by necessity. Governments undertook an extensive evaluation of their financial needs for mitigation and adaptation efforts. Based on this assessment, developing countries advocated for the NCQG to reach $1.3 trillion annually.

However, the anticipation that global policymakers would adopt a robust needs-based strategy clashed with the financial limitations of developed nations, which initially suggested a target of only $250 billion. After a walk-out by the Alliance of Small Island States, the proposal was improved to $300 billion, accompanied by an ambiguous reference to “scaling up” funding to $1.3 trillion in the text.

“A genuine disaster”

The results of the NCQG negotiations provoked significant outrage among NGOs in Africa.

The $300 billion agreement is “unserious and dangerous,” asserted David Abudho, climate justice lead for Oxfam in Africa, in an interview with African Business. He remarked that poorer nations were “bullied” into accepting this outcome, describing the text as “a soulless victory for the wealthy, but a true calamity for our planet and communities facing the devastating impacts of climate breakdown, such as flooding, hunger, and displacement.”

“And as for any commitments for future funding? They are as hollow as the agreement itself.”

Indeed, significant uncertainty surrounds the means of achieving the objectives set forth in Baku. The outcome was an agreed text, rather than a legally binding agreement compelling specific actors to undertake designated actions.

The route to securing $300 billion remains unclear, let alone the ambitious goal of $1.3 trillion. There is no transparency regarding how climate finance commitments will be distributed among developed nations, and it’s even ambiguous which countries are classified as “developed” and thus responsible for providing financial support. For example, Western governments contend that China, the largest emitter globally, should also contribute. While the text states that financing will derive “from a wide variety of sources,” including the private sector, it fails to specify how or through whom this private finance will be mobilized.

Oxfam estimates that the actual climate finance requirements for the Global South are approximately $1.5 trillion annually by 2030. The organization argues that most of this funding should be offered as grants, especially for adaptation purposes, to avoid further escalating debt levels in developing countries. Although the COP29 text acknowledges the need for grant funding in certain scenarios, it does not eliminate the possibility of classifying interest-bearing loans as climate finance.

COP-out?

Even prior to the Baku discussions, there were growing concerns regarding the ongoing relevance of the annual COP meetings. This situation was further complicated by Donald Trump’s recent re-election, who had previously withdrawn the U.S. from the critical Paris Agreement aimed at regulating global temperature increases.

During the summit, a coalition of climate leaders issued a robust call for reforms within the COP process, which included the establishment of a mechanism to track climate finance disbursements. The dissatisfaction surrounding the NCQG is likely to heighten demands for a review of how global governments tackle climate change.

South African entrepreneur Ivor Ichikowitz described the COP29 agreement as a “complete con.” He conveyed to African Business that the nations with the highest emissions dominate the negotiation process, hindering the flow of climate finance due to significant conflicts of interest.

Expressing frustration at hearing the “same rhetoric” in Baku as in previous COPs, Ichikowitz stressed that African and other Global South nations must take the reins of the process. “The only way to resolve this is for the affected countries to assert themselves, stop being compliant, resist coercion into unfavorable agreements, and instead lead the process.”

Mobilising private finance

The discussions surrounding the future of the climate agenda are bound to escalate. For now, however, the primary responsibility for delivering climate finance falls to development finance institutions.

Marco Serena, chief sustainable impact officer at the Private Infrastructure Development Group (PIDG), a donor-supported infrastructure finance organization, acknowledges that Africa “cannot see COP as a complete victory.”

Nonetheless, he believes this deal serves as “a foundation to build upon.” The $300 billion target, while inadequate to meet the needs of developing countries, is viewed by him as “a starting point,” emphasizing the urgent need to devise plans for the rapid deployment of these funds.

Serena indicates that PIDG—committed to climate action—aims to mobilize private finance for infrastructure by mitigating risks within the project pipeline. This includes investing in blended capital structures and funding projects that are in their early high-risk development phases.

In light of financial constraints in Western nations, the outcome of COP29 suggests it is unrealistic to anticipate a significant increase in public finance directed toward climate initiatives in Africa.

Holger Rothenbusch, managing director and head of infrastructure and climate at British International Investment, the UK’s development finance institution (DFI), concurs that mobilizing private capital is critical for institutions aiming to support Africa in harnessing renewable energy.

“Our focus increasingly rests on how to utilize our balance sheet and capital more effectively to attract commercial investment alongside our contributions,” he notes. While DFIs have traditionally employed a “patient capital” approach, Rothenbusch mentions that BII is making efforts to “innovate in recycling capital more swiftly, thus leveraging the same dollar multiple times.”

However, Rothenbusch contends that public funding must play a role in adaptation efforts.

“Adaptation is where scarcity will become most pronounced, as it requires grants and highly subsidized funding, which is a severely limited resource,” he observes.

“This type of funding is not suitable for commercial investment, as many of the requirements will pertain to public goods, like the construction of sea walls, for example,” Rothenbusch concludes. “This necessitates donor funding and substantial public sector backing on a large scale.”