Agreements have been signed to pave the way for a United Nations-backed fund for the most climate-vulnerable countries to start project financing in 2025, COP29 host Azerbaijan said Tuesday.
The “loss and damage” fund’s board signed a Trustee Agreement and a Secretariat Hosting Agreement with the World Bank and a Host Country Agreement with the Philippines at a ceremony in Baku.
At the ceremony, part of the 29th Conference of the Parties (COP), Sweden also pledged about $19 million, subject to approval by the Swedish government. This raised commitments to over $720 million, according to a statement on the COP29 website.
France and Italy lead commitments at about $112 million each, followed by Germany and the United Arab Emirates at $100 million each, according to online data from the UN Framework Convention on Climate Change (UNFCCC), the COP convenor.
“The Presidency is working with all countries that have pledged money to complete their contribution agreements as soon as possible”, the statement said.
Azerbaijan, which took over the annual rotating COP presidency from the United Arab Emirates, said it “continues to urge further pledges to the Fund to better meet the needs of communities on the frontlines of climate change”.
The signing of the agreements “will allow us to finally turn pledges into real support”, said COP29 President Mukhtar Babayev, the Eurasian country’s minister of ecology and natural resources. “That means that funding will be able to flow in 2025”.
“It means houses being rebuilt, people being resettled, and lives and livelihoods saved”, Babayev added.
Countries reached the agreement to establish the fund at COP27 in 2022 in Egypt. The text of the decision put needed global investments for the transition to a low-carbon economy at $4 trillion to $6 trillion per year.
“Delivering such funding will require a transformation of the financial system and its structures and processes, engaging governments, central banks, commercial banks, institutional investors and other financial actors”, stated the agreement text published by the UNFCCC.
Latest data from the UNFCCC shows that global climate finance flows in 2021 and 2022 rose 63 percent compared to 2019 and 2020 to reach an annual average of $1.3 trillion. The growth was driven by “key mitigation sectors” including sustainable transport, clean energy systems, and buildings and infrastructure, the UNFCCC said in the “Sixth Biennial Assessment and Overview of Climate Finance Flows”.
However, only 2.6 percent of the total climate finance flows went to least developed countries and one percent to small island developing states. Developing countries excluding China received 15 percent, according to the report.
“Eastern Asia, Northern and Western Europe, and North America continue to account for the majority of global climate finance by region, with 42, 22 and 12 percent of commitments in 2021–2022 respectively, primarily driven by domestic commitments in China, the United States of America and the European Union; while other regions, covering Africa, Asia, Europe, Latin America and the Caribbean, and Oceania, accounted for the remaining less than 25 percent”, the UNFCCC said.
“More than half of global climate finance was provided in the form of debt instruments, while grant finance more than doubled in absolute terms but still accounted for 6 percent of the total flows”, the report stated.