COP28 held in the UAE addressed crucial issues and decisions, with a primary focus on the future role of fossil fuels and pivotal topics such as addressing climate finance disparities and establishing the Loss and Damage Fund. This fund serves as a mechanism to compensate developing countries for the tangible losses inflicted by climate change on communities, nations, and ecosystems.

Against the backdrop of declining funding into Climate Tech due to market downturns, COP28 brought forth positive developments. Notably, there were announcements of several Climate Tech-focused funds, including a significant $30 billion fund from the UAE and other funds based in the MENA region. There was also some positive news with the introduction of a framework to standardise the voluntary carbon credit markets and the acknowledgment of food systems and their growing impact on climate change.

Roundup of funding, regulatory, and technology initiatives

Private equity funds announcements

The UAE announced a substantial $30 billion investment in climate-related initiatives, directing these funds through a dedicated private fund named ALTERRA, established by Lunate. Of this amount, $25 billion will go to ALTERRA Acceleration, a program focused on making climate investments at scale. The remaining $5 billion will go to the ALTERRA Transformation program focused on supporting the Global [1].

Within ALTERRA’s framework, $6 billion has been allocated to climate funds managed by leading firms, including TPG, Brookfield Asset Management, and BlackRock. This allocation incorporates a record single LP commitment of $2 billion to Brookfield’s Global Transition Fund II and anchor commitments to new funds targeting emerging markets spearheaded by these firms.

The European Investment Fund (EIF) committed €2 billion to bolster energy efficiency and climate action investments. As part of this commitment, the EIF has announced new allocations totalling €200 million to enable four private equity funds – Tikehau, SDCL Green, Munich VP, and SET Ventures – to invest €2 billion in climate action and environmental sustainability.

In addition to these investment initiatives, several funds actively seek fresh capital for climate tech solutions. Notably, the Mubadala-backed Investcorp’s Climate Solutions Investment Platform, a $750 million fund, is dedicated to investments in decarbonisation solutions. Neovision has set up a new $250 million fund specifically for investments in carbon credits. Furthermore, leading investment firm KKR is raising $7 billion for a global climate fund, targeting companies and technologies essential to the climate transition, including sectors like energy storage.

Regulatory initiatives & frameworks announced

COP28 made significant strides on other fronts as well such as introducing a joint framework to consolidate and rebuild trust among investors in voluntary carbon trading markets which was a crucial step in the right direction. The framework encompasses standards for both the demand side, represented by SBTi and VCMI, and the supply side, represented by ICVCM. Six major carbon crediting programs, accounting for over 90% of issued carbon credits, pledged to collaborate with the framework. In parallel, the CFTC unveiled draft regulations for carbon credits traded on.[2]

More than 150 countries came together in acknowledgment of the escalating influence of climate change on agriculture and food security. They issued the “emirates declaration” outlining their intention to amplify efforts in adaptation and resilience, aiming to diminish the susceptibility of farmers and other food producers to climate change impacts. The declaration also included a commitment to reinforce the integrated management of water resources in agricultural and food systems and assist agricultural and food system workers, particularly women and youth, whose livelihoods are at risk due to climate change.[3] However, Edward Mukiibi, President of NGO Slow Food, expressed concerns over the lack of concrete targets and objectives for real change in the food industry and climate impact, highlighting food access and entitlement issues.[4]

The event also saw the launch of flagship initiatives aimed at unlocking the climate and socio-economic benefits of hydrogen. The High-Level Ministerial-CEO Roundtable on Hydrogen produced key initiatives to speed up the commercialization of hydrogen projects. These initiatives will be crucial for advancing the net-zero transition and unlocking the climate and socio-economic benefits of cross-border supply chains. A notable outcome of this roundtable was the introduction of the Declaration of Intent on Mutual Recognition of Certification Schemes for Hydrogen and its Derivatives, coupled with the ISO methodology for assessing hydrogen’s GHG emissions.[5]

Multilateral funds activity

While the private sector pledged billions, governments made less ambitious financial commitments to address immediate climate needs and build long-term resilience. The Green Climate Fund (GCF), the primary channel for global climate finance, also received a significant boost. The second replenishment target of $3.5 billion was met, with substantial contributions from countries such as the US, Australia, Portugal, and Switzerland, bringing the total committed funds to $13 billion over the next four years.

Another pivotal outcome was the establishment of the Loss and Damage fund, despite pledges falling below expectations – only a $725 million was pledged ($100 million from the UAE, $245 million from the EU, $51 million from Great Britain, and a modest $18 million from the US). The fund aims to help alleviate the most devastating impacts of climate change on developing nations. To achieve this, the fund will use various mechanisms to provide assistance, including conventional financial instruments such as catastrophe insurance and bonds and contingency financing for immediate responses. It will also explore non-conventional approaches like debt-for-relief swaps, showcasing a commitment to unconventional solutions.

In addition, World Bank President Ajay Banga announced that 45% of the bank’s financing will go towards climate-related projects by 2025. Capping off these achievements was the establishment of a $1.2 billion Climate Relief, Recovery, and Peace Fund. The fund enshrines a collective commitment to increase investment and actions to drive resilience in countries and communities affected by conflict, fragility, or humanitarian crises.

Green shoots but no full bloom

COP28 can be viewed as a step in the right direction rather than an unqualified success. It was the first time the world addressed the future of fossil fuels, calling out for the “transition away” from fossil fuels in energy systems. Nevertheless, the agreement stopped short of explicitly calling for a “phase out” of fossil fuels. Moreover, similar to previous COP meetings, certain areas remain inadequately addressed, such as the vague evaluation of food and agriculture and the insufficient allocation of funds for the loss and damage fund.

While financial pledges reached record amounts, there was recognition of the considerable gap in funding needed for clean energy transitions. According to the Adaptation Gap Report 2023 by the UN, the financing needs of developing countries is at least 10-18x as big as the international public finance flows, with the current adaptation finance gap standing at $194-366 billion per year.[6]

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