COP29: Key Outcomes for Board Directors

From 11 to 22 November 2024, COP29, the second largest ever United Nations climate change summit, took place in Baku, Azerbaijan. Also called the " finance COP ", it focused on new global climate finance and countries' ambitions to tackle climate change.

UN Secretary-General António Guterres opened the negotiations with a direct call to action, saying that global emissions must be reduced by 9% each year and by 43% by 2030 compared to 2019. Guterres also said that the gap between climate adaptation needs and supporting finance could reach $359 billion per year by 2030 and that developed countries must double adaptation finance to at least $40 billion per year by 2025 to close the gap.

Key outcomes of the negotiations include:

The New Collective Quantified Goal on Climate Finance (NCQG): It was agreed to triple funding for developing countries to USD 300 billion a year by 2035, although this is well below the USD 1.3 trillion requested by some countries.
Standards for carbon markets: International standards for carbon markets under the Paris Agreement (Article 6) were adopted, including bilateral agreements between countries, carbon credit mechanisms and non-market-based approaches. This step opens up new opportunities for carbon credit trading and cooperation between countries.
The Fund for responding to Loss and Damage: The documents for the establishment of a Fund for responding to Loss and Damage have been signed, opening the way for concrete funding for the affected regions. The first formal contributions have already been announced by some countries.
Updated Nationally Determined Contributions (NDCs): A limited number of countries have announced updated emission reduction targets. The remaining countries have until March 2025 to submit updated targets.
Baku Declaration on Global Climate Transparency: The Declaration calls on countries to submit transparency reports and emission inventories by the end of 2024, to improve international policy coordination and preparations for COP30 in Brazil.

Key messages for board directors:

The role of the private sector in climate finance: Board directors should assess how their companies contribute to mobilising private capital for climate action and how this is coordinated with public financing. Increased partnership between the public and private sectors can contribute to a balanced flow of finance. Tools such as the Target-Setting Protocol published by the Net-Zero Export Credit Agencies Alliance (NZECA) can help to reduce the risks of investing in new technologies and markets.
Opportunities in carbon markets: New standards for carbon markets allow companies to better comply with international rules and make better use of carbon credits to achieve sustainability goals. Companies should review their strategies related to carbon markets and explore opportunities to optimise practices.
ESG standards and transparency: At COP29, the International Organisation for Standardisation (ISO) launched new international ESG guidelines, the ISO ESG Implementation Principles, which support compliance with disclosure requirements and improve ESG reporting and communication. The guidelines are particularly aimed at improving ESG reporting and practices for small and medium-sized companies, as they represent a significant share of the global corporations that are disproportionately affected by climate change.
Transition planning for a low-carbon economy: initiatives such as the International Transition Plan Network (ITPN) are promoting the development of strategies for the transition to sustainable business. Companies need to assess their readiness to make real emission reductions and improve resilience.
Climate resilience and adaptation: Under the Race to Resilience campaign, adaptation plans have already reached 2 billion people and the goal is to increase the resilience of 3.2 billion people by 2030. Board directors should explore how their companies can contribute to these goals.
Increasing ambition and resilience: Evidence shows that current corporate ambition is not sufficient to limit global warming to 1.5°C. Board directors should assess whether corporate ambition needs to be increased and consider options to improve resilience to climate risks, particularly across supply chains.

After the conference, the Slovenian Minister of Environment, Climate and Energy, Bojan Kumer, who as head of the Slovenian delegation attended the climate conference and actively participated in the negotiations, expressed mixed feelings about the conclusions reached. Among the main issues he highlighted was the financial target of USD 300 billion to be allocated by developed countries to developing countries. At the same time, he warned that existing agreements were not sufficient to limit global warming to 1.5 degrees Celsius, as current policies pointed to a path towards 3 degrees Celsius warming by the end of the century. The Minister expressed disappointment at the lack of concrete commitments to accelerate the reduction of greenhouse gas emissions and phase out fossil fuels, but stressed the importance of continuing to work with countries in the "High Ambition Coalition" to achieve better results. [1]

COP29 shows clearly that the transition to sustainable business is closely linked to reforms in financing, improved ESG practices, and better transparency of carbon markets. Board directors have a key role to play in developing strategies that will enable companies to adapt to new rules, take advantage of opportunities in carbon markets, and become more resilient to climate risks. COP30 will take place next year in Brazil and will be the next critical milestone for new global climate agreements.