COP28: Finance, Trade, Gender Equality and Accountability

On Monday 4th December 2023, the momentum continued as various pledges and commitments were made for Finance, Trade, Gender Equality and Accountability.

The day marked significant progress to reform the global climate finance architecture by making climate finance available, accessible, and affordable, specifically focusing on supporting low-income and vulnerable countries fight climate change.

Finance and Trade

• The UK, France, World Bank, Inter-American Development Bank (IDB), European Investment Bank (EIB), European Bank for Reconstruction and Development (EBRD) and African Development Bank (AfDB) made new commitments to expand Climate Resilient Debt Clause (CRDCs) in their lending, with the UK announcing the first ever climate-resilient debt clauses in Africa and as many as 73 countries collectively issuing a call to action on the adoption of these clauses.
• The UAE banking sector collectively pledged to mobilize AED 1 trillion, equivalent to nearly $270 billion, in sustainable finance by 2030.
• Renewable energy firm ReNew Energy Global Plc inked an initial pact with the Asian Development Bank (ADB) for a funding of $5.3 billion.
• The Arab Energy Fund, formerly known as APICORP, announced that it will invest up to $1 billion over the next five years in decarbonisation technologies.
• The Asian Development Bank (ADB) promised  $10 billion in climate finance for the Philippines between 2024 and 2029 to help the Philippines implement its commitments to climate action under the Paris Agreement.
• Credit rating agencies such as Fitch Ratings indicated their intention to consider revisions to credit rating criteria for loans to ensure use of CRDCs does not impose a burden for borrower countries.

Annie Lam, Of Counsel, comments:

Regardless of which country you look at, the climate crisis is the greatest security challenge of our age. To collectively manage this crisis, we require both political will and appropriate financial infrastructure. The discussions and proposals at COP28 encompass a wide range of strategies, such as employing carbon credits to phase out coal power, leveraging IMF's special drawing rights for climate initiatives in developing markets, imposing taxes on financial services and global oil and gas profits, utilizing World Bank grants to curb methane emissions, inserting “pause” clauses in loan agreements to delay debt repayments for climate crisis management and adaptation funds among others. Every decision made within the financial sector can also open up new avenues of opportunity.

Meanwhile, Asia is showing promising progress with several initiatives underway. The Monetary Authority of Singapore has paved the way by introducing the region's first multi-sector transition taxonomy. There is also a growing emphasis on the carbon market with Hong Kong Exchanges and Clearing Limited inaugurating its first voluntary carbon credit market in early 2023. The proper financial infrastructure is crucial for executing political will; we anticipate increased international collaboration on green initiatives and climate tools, stricter regulatory oversight to maintain system integrity, and more synchronization of green finance with actual economic activities.

Gender equality

Ministers and high-level officials convened for discussions to advance gender-responsive just transitions to support the implementation of the Paris Agreement. In order to ensure women and girls in climate vulnerable regions are supported, COP28 announced the launch of Gender-Responsive Just Transition and Climate Action Partnership, endorsed by over 60 countries. The new partnership focuses on ensuring women and girls in climate vulnerable regions are supported. The commitment signatories will begin implementation over the next three years before reconvening at COP31.

Accountability

• The Central Bank of the UAE acknowledged that the COP28 action agenda will be a critical guiding principle in scaling up sustainable finance, managing related financial risks, and meeting internationally agreed climate targets, and reaffirmed the UAE's commitment to accelerating sustainable finance.
• The World Bank announced an increase of $9 billion annually to finance climate-related projects. A historic $3.5 billion has been announced to replenish the Green Climate Fund.
• France and Japan announced they will lead in supporting the African Development Bank’s breakthrough facility to leverage Special Drawing Rights (SDRs) for climate and development. SDRs are rainy-day foreign exchange reserves held at the International Monetary Fund, backed by dollars, euros, yen, sterling and yuan.
• A consortium led by the Rockefeller Foundation launched a pilot initiative to use carbon credits to retire a coal power plant in the Philippines before the end of its natural life.
• Canada, Brazil and Egypt announced new methane regulations. As of Monday, 155 countries have signed up as members of the Global Methane Pledge, a voluntary partnership committing countries to collectively reduce methane emissions by 30 per cent from 2020 levels by 2030.
• First of its kind, the Coal to Clean Credit Initiative (CCCI) announced its plans to make use of carbon credits to finance the decommission the South Luzon Thermal Energy. Corporation (SLTEC) plant by as early as 2030, a decade ahead of its current retirement date.
• Over $777 million was pledged to help defeat neglected tropical diseases.