1. The just transition is an imperative, this is now the consensus.
Just transition safeguards sustainable development and the necessary buy-in for rapid climate action. Capital markets can be mobilised to finance the just transition. With the LSE, we launched the first stage of our project Mobilising global debt markets for a just transition on COP28’s finance day.
2. Resilience is now firmly on everyone’s agenda.
Markets and wider society are waking up to the reality of a changing climate and to the realisation that climate resilience is both an inevitable and necessary priority. In one survey, 75% of major financial institutions said they will migrate more money to adaptation in the coming years, with the primary objective of promoting and facilitating the much-needed investment in climate resilience through capital markets. Climate Bonds is developing a Resilience Taxonomy to help define credible adaptation investments.
3. Taxomania continues to spread!
COP28 saw the launch of Singapore and Rwanda’s taxonomies, both supported by Climate Bonds. This takes the total number of countries with a published taxonomy to 17, with 30 more in the works. In Rwanda, the taxonomy is adapted to the country’s economic characteristics, including provisions for smallholder farmers, while being interoperable with the EU taxonomy to facilitate cross-border capital flows.
4. Sovereign issuance of sustainable bonds is a trigger to accelerate market development, and demand is strong.
Shortly before COP28, Brazil became the 50th sovereign to issue a GSS+ bond. There is a high unmet demand for 1.5°C-aligned green bonds and they have consistently achieved higher oversubscription compared to vanilla equivalents in the primary market for 7 years.
5. A record USD12.8bn of public finance is now committed to the Green Climate Fund, but private finance will need to step up.
Public finance alone can’t meet the scale of climate investment needs: the Green Climate Fund (GCF) aims to re-risk climate projects to support the crowding in of private finance. Blended finance helps to finance where traditional capital will not go alone. It is a powerful tool for ensuring climate action, and DFIs globally will need to play their part.
6. Investors and banks are calling for transition plans from all companies, describing it as a baseline requirement.
This shows they are streamlining climate considerations across investments and considering it their responsibility to finance the transition. They also called for countries to develop taxonomies to enable sustainable investment, recognising the role of science in determining where investment needs to flow.
7. Hard-to-abate sectors are moving, supported by enabling government policies.
In particular, the steel sector is at a fork in the road as 71% of existing coal-based blast furnaces, the most polluting steelmaking assets, will require major reinvestment by 2030. Climate Bonds is among the signatories of the Steel Standards Principles, which will ensure consistency and alignment across the various standards and definitions for low-carbon steel. In addition, large economies are committing to leverage their spending to support innovation in high-polluting sectors like steel and cement. Canada, Germany, the UK, and the US committed to ambitious green public procurement policies. For example, Canada has committed to a 30% reduction in the embodied carbon of public construction projects from 2025. In addition, 155 countries have pledged to reduce methane emissions by 30% by 2030, driving further actions and initiatives for methane abatement.
8. Trade policy is a key trigger for decarbonisation.
This is demonstrated by the launch of the Net-Zero Export Credit Agencies Alliance . The EU Carbon Border Adjustment Mechanism this year has shown trade policy to be a key lever to trigger decarbonisation well beyond a country’s borders. Earlier this year, Germany, released draft guidelines for export credit guarantees, aligned with the EU taxonomy, that will see green projects receive better coverage while preventing support for nearly all new fossil fuel projects. Its export credit agency provided over EUR100 billion in support for German exporters in 2022, more than any other agency globally.
9. Ahead of its presidency of the G20 and COP30, Brazil shows the way: using financial innovation and strong cooperation to deliver conservation and sustainable development in the Amazon.
The Green Coalition for the Amazon is an alliance of regional development banks working to ensure complementary investment in development. This includes innovations in blended finance to deliver a USD10-50bn increase in financing for the Amazon by 2030. BNDES launched the Arc of Reforestation programme at COP to restore six million hectares of degraded forest by 2030, working with farmers to restore the forest.
'Til Next Time,