The burning issue ahead of the UN climate summit in November

Greetings from Singapore, where we have just concluded another fascinating edition of the Moral Money Summit Asia. With two days of intense discussions on everything from sustainable agriculture to the race for essential minerals, we gained a wealth of information that will inform our coverage in future editions.

And we’re looking forward to the Moral Money Americas Summit in New York on October 15-16, with world-class speakers including Nobel Prize-winning economist Esther Duflo. Newsletter subscribers can enjoy a 30% discount on a personal pass or attend online for free – click here to register.

Speakers this week included COP29 climate champion Nigar Arpadarai, who described the strong focus on funding we can expect at this year’s UN climate summit. As we discuss below, it has the makings of a difficult assembly.

COP29

A hot topic for the UN climate summit in Azerbaijan

With just a few months to go until the COP29 UN climate change summit kicks off in Azerbaijan, a sure source of tension is clear.

This is the New Collective Quantified Climate Finance Goal, or NCQG – an acronym you might as well get used to now, because you’ll be hearing a lot more about it before the end of the year.

The Azerbaijani presidency of COP29 said an agreement on the NCQG – which would set a new target for climate-related assistance for developing countries – would be a top priority for the summit.

The idea is to replace the 2009 pledge made in Copenhagen, where rich nations agreed to increase their annual provision of climate finance to poorer countries to $100 billion by 2020. The promise has been notoriously missed, although it was finally met in 2022, according to the OECD. estimates.

At COP26 in 2021 in Glasgow, nations promised to decide on a new target by 2024 at the latest – meaning COP29 in Baku will have to be the time and place.

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

One is the scale of funding required. Credible estimates put developing countries’ climate finance needs at several trillion dollars a year, meaning rich countries will need to increase their pledged support by an order of magnitude to make their commitment credible. “The NCQG should be considerably more ambitious than the $100 billion goal, which reflects what was politically possible at the time, not what was needed,” the authors write.

Another is how the support is structured. Echoing calls from many officials in developing countries, the document calls for more international public finance for climate change to come in the form of grants rather than loans which it warns are “exacerbating debt crises in climate-vulnerable countries”.

The authors also warn that new climate finance streams must be additional – rather than taken 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 officials in the rich world, who will worry that it may be impossible to rally domestic voters behind such largesse. But the principle of “common but differentiated responsibility” has been at the heart of the UN climate process for decades. And that means those rich nations whose cumulative per capita emissions far exceed those of the poorest and most vulnerable countries must contribute more. If an agreement on this new framework is to get over the line in November, it will have to take this principle seriously.

Blue ties

Brazil is the world leader in blue bond issuances of more than $100 million

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

Analysts at Sustainable Fitch just issued an update on that market, noting that cumulative issuance of blue-chip bonds reached $12.3 billion in June. This represents less than 1% of the wider green bond market, which covers a wider range of green purposes. And issuance of $1.7 billion in the six months to June suggests this year’s total is likely to fall below last year’s record $5.4 billion.

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

Brazilian companies have played an important role in this year’s activity, including a $254 million issue by São Paulo utility SABESP to finance sustainable water management and four issues totaling $692 million of the Aegea sanitation company. Japan’s Mitsui OSK Lines also got in on the action with a $135 million issue that will help clean up its shipping operations.

Smart reading

New trade barriers erected by the US and the EU have created headaches for Chinese exporters, especially green technology companies. The FT investigates the back doors they use to get around these growing obstacles.