COP28 Financing Highlights: Will Asia Receive Much-needed Support?

The climate crisis and the call for a 1.5°C-aligned energy transition plan have never been more apparent. The year 2023 witnessed the hottest day, month and year in history. So far, the viable solution of addressing the root of the problem in the first place has been consistently ignored. Instead, countries have preferred to raise funds to treat its consequences. While COP28 UAE has achieved some historical wins when it comes to financial pledges, questions on their execution remain.

Financing Pledges at COP28: How Leaders Plan to Help the Most Vulnerable

The COP28 Finance Day ended with over 40 different pledges. The financial assistance comes in all shapes and sizes, including partnerships, loans, grants, debt relief and more. 

Through the promised COP28 financing, countries, development financial institutions, private businesses and philanthropic organisations intend to accelerate the energy transition. As a group, they will help emerging and developing economies mitigate the impacts of climate change, provide breathing space to disaster-struck nations through debt relief, assist vulnerable communities in adapting to a warmer world, improve health, protect nature and more. 

Energy Transition and Climate Technology Investments

The COP28 hosts pledged USD 30 billion to invest in climate-friendly projects worldwide. Around USD 5 billion will go to the Global South. UAE banks pledged to collectively mobilise around USD 270 billion in green finance.

The Asian Development Bank pledged to allocate USD 10 billion for climate investments in the Philippines between 2024 and 2029.

The Danish investment firm Copenhagen Infrastructure Partners announced a target to raise USD 3 billion. The funds will support new renewable energy projects in emerging and middle-income countries. Additionally, the Arab Energy Fund promised to invest up to USD 1 billion in decarbonisation technologies over the next five years.

Norway and Australia joined the Clean Energy Transition Partnership, taking the total of countries committed to phasing out international fossil fuel finance and prioritising clean energy investments to over 40 nations.

The Bezos Earth Fund, alongside the investment arm of the World Bank, promised to provide USD 11 billion to accelerate decarbonisation across developing countries.

Loss and Damage and Disaster Relief

The biggest success of the COP28 Dubai climate conference in assisting disaster-stricken communities was the operationalisation of a Loss and Damage fund on day one. Proposed for the first time at COP27, the fund’s primary goal is to help rescue and aid poor communities suffering from extreme weather impacts. The fund gathered over USD 700 million, with the EU and the UAE the biggest contributors.

A group of countries, including the UAE, united to contribute USD 300 million to a new climate disaster fund.

Furthermore, the World Bank promised to increase climate funding to 45% of its total lending activities from 2025. This marks an annual increase of around USD 9 billion. Moreover, it plans to broaden the scope of the Climate Resilient Debt Clauses (CRDCs) in its loans. This came as a broader initiative from over 70 governments, financing organisations and multilateral development banks. The CRDCs allow disaster-stricken countries to request that their debt be paused to ensure the breathing space to recover.

Adaptation

At COP28 2023, 13 countries launched the Coalition of Ambition on Adaptation Finance, an initiative to reform adaptation finance mechanisms. The coalition’s primary goal is to scale, ease access and optimise the delivery of adaptation finance sources to those in need. This is a welcome development that climate-vulnerable countries have long been calling for.

Green Climate Fund and the Donations of Developed Countries

The Green Climate Fund, the world’s leading global fund supporting climate action across developing countries, received over USD 3.5 billion in new pledges. The US was the leading financier, providing USD 3 billion. The funding comes on top of the USD 9.3 billion that 25 countries pledged in October.

Moreover, the Adaptation Fund mobilised over USD 188 million for the most climate-vulnerable. However, this is lower than the 2023 target of USD 300 million, intended to help fund the USD 425 million in much-needed projects.

Bloomberg Philanthropies, Builders Vision and Oceankind pledged USD 250 million of new climate finance for protecting vulnerable marine areas, ocean-based mitigation efforts and research on climate impacts.

Under the Unlocking Blue Pacific Prosperity Plan, the Prime Minister of Tonga announced USD 100 million in financing for Pacific Small Island Developing States, granted by The Bezos Earth Fund. The financial aid aims to protect 30% of the countries’ waters and exclusive economic zones by 2030 and assist the sustainable management of marine ecosystems.

Emissions

The COP28 Presidency contributed USD 100 million to the newly established World Bank methane trust fund. The entity aims to reduce methane emissions.

Moreover, a group of organisations, including the Sequoia Climate Foundation, Bezos Earth Fund and Bloomberg Philanthropies, to name a few, announced a USD 450 million commitment towards reducing methane and other pollutants over the next three years. 

Food

Leaders pledged over USD 7.1 billion to climate-positive action in the food sector. The COP28 Presidency, along with other parties, announced a three-year support package to assist countries in unlocking financial support for farmers, small agricultural businesses, food producers and local communities. The leaders aim to transform food systems and “end hunger for all”, focusing on countries in the Global South.

The Agriculture Innovation Mission for Climate, launched by the UAE and the US at COP26, announced an increased USD 3.4 billion in aggregated funding for climate-smart food systems and agriculture.

A group of philanthropic organisations promised USD 389 million to support food producers and consumers. The Bill and Melinda Gates Foundation and the UAE pledged a combined USD 200 million to tackle food insecurity and help smallholder farmers in sub-Saharan Africa and South Asia build resilience and adapt to climate change.

Furthermore, under the Technical Cooperation Collaborative, an initiative aiming to protect integral food systems and agriculture from climate change, over USD 250 million will be channelled in the next five years through the World Bank’s Food Systems 2030 Trust Fund.

Health 

COP28 became the stage for the first-ever Climate and Health Ministerial. Over 120 countries gathered USD 1 billion in climate health financing.

The Gates Foundation and other partners pledged USD 770 million to support the Reaching the Last Mile Fund. The fund, founded by the UAE, aims to eliminate tropical diseases that are expected to worsen with rising temperatures.

Furthermore, the Global Fund to Fight AIDS, Tuberculosis, and Malaria promised to spend 70% of its budget, or around USD 9 billion, to make an impact across the 50 most climate-vulnerable countries over the next three years.

The UAE announced a new USD 220 million funding package to help Africa drive better health outcomes for youth.

Nature

Parties participating at the COP28’s World Climate Action Summit mobilised USD 2.5 billion for protecting and restoring nature. Next, on the Nature, Land Use and Ocean Day, countries ensured an additional USD 186.6 million of new financing. The funds will support preservation initiatives for forests, mangroves and the ocean.

The UAE, with other partners, announced various initiatives to meet climate and biodiversity goals through an initial USD 1.7 billion pledge.

The Asian Development Bank, the OPEC Fund, the ASEAN Catalytic Green Finance Facility at the Green Climate Fund and other state and non-state partners announced a new initiative to mobilise USD 1 billion. The funding will be followed by USD 2 billion in additional private financing by 2030 for nature-focused climate projects.

Indonesia and Norway struck a USD 100 million partnership to support the country’s pioneering FOLU Net Sink 2030 plan. The program will ensure that carbon sequestration from forestry and other land use is higher than, or at least equal to, its overall emissions by 2030.

Brazil’s national development bank launched a USD 205 million effort to restore over 60,000 square km of affected ecosystems in the Amazon by 2030.

Water Equity raised USD 100 million to leverage impact investments in climate-resilient water infrastructure and enhance the coping capacity for the most vulnerable communities across emerging markets in South and Southeast Asia, sub-Saharan Africa and Latin America.

During the World Climate Action Summit at the start of COP28, the UAE pledged USD 150 million to address water scarcity. 

What This Means For Developing Countries in Southeast Asia

Developing countries in Southeast Asia are among the most exposed to climate change’s impacts globally.

Air and water pollution, agricultural land damage and loss of livelihood for coastal communities are just some of the many consequences that Southeast Asian countries have to deal with.

The climate hazards that have been tormenting Asian nations in the past few years include storms, wildfires, rising sea levels and coastal flooding. As a result, the region is now at the top of the list when it comes to financial support needs.

While the pledges made during COP28 are positive, questions remain.

Getting the Financial Support to its Target Recipients

Until the pledges materialise and reach those in need, they remain as empty promises. A case in point is the USD 100 billion in annual financial assistance promised at COP15. Developed nations have stated that they “likely met” this amount in 2022. However, developing countries have questioned the proof behind the claim.

According to estimates, just 7% of the financing promised to Indigenous people at COP26 has actually reached them.

Insufficient Financing

Leading financial experts warn that despite global climate investment increasing, it still isn’t on track to deliver on the Paris Agreement. They estimate the needs of developing countries, excluding China, at USD 1 trillion in 2025 and USD 2.4 trillion by 2030.

Moreover, providing such financing requires collaboration from various parties, including developed nations, MDBs, the private sector and philanthropic organisations.

Since many of the initial pledges made at COP28 fall short of what is needed, many developing nations, including those in Southeast Asia, might not receive enough support.

Domestic Reforms Needed

In several instances, COP28 leaders have clarified that financial support for the energy transition will be granted to developing nations that have demonstrated clear determination and are blocked by the lack of financial resources. For example, Sequoia Climate Foundation noted that its three-year package of USD 500 million for accelerating the clean energy transition in developing nations will only support existing projects. 

In the context of Southeast Asia, countries will have to reconsider their plans to pursue questionable technologies like CCS, hydrogen and ammonia, which experts see as being “killed by the economic reality”. Instead, they should focus their efforts on solar and wind, which financing mechanisms will prioritise. 

Developing Asia might also have to halt its fossil fuel expansion plans to benefit from the energy transition financing.

For example, Vietnam, one of the three countries that have struck a JETP, is facing mounting pressure from the international community on two fronts. At COP28, it launched its Resource Mobilisation Plan (RMP). The plan identifies priority investments to peak emissions and coal capacity by 2030. The RMP includes an explicit declaration for a “coal power plant phaseout” and aims to create a Coal-Fired Power Plant Retirement Roadmap. However, according to E3G, the country intends to keep coal with ammonia co-firing technology well into the 2040s, along with LNG plans. The country’s plans have attracted criticism from environmentalists.

Furthermore, NGOs campaigned against Vietnam’s actions to imprison climate activists, opposing the country’s energy policy. The mounting pressure can be a potential red flag for Vietnam’s global partners. As a result, they might force the country, which ranks among the five most likely to be most affected by climate change, to rethink its energy transition mechanisms to benefit from the promised financial support.

Asian Financial Institutions Risk Falling Behind Their Peers

At COP28, the UNEP’s Finance Initiative (UNEPFI) and the International Labor Organisation released the first roadmap for the financial sector in promoting a just energy transition to low-carbon, resource-efficient and resilient economies. Its goal is to ensure that UNEPFI members and the broader financial industry prioritise a climate transition that leaves no one behind when conducting their operations.

Focused primarily on the social impacts, risks and opportunities arising from climate change, the guidance highlights the need to scale down oil and gas investments in favour of renewables. It also urges critical evaluation of “which fossil fuel resources should be responsibly retired, kept in the ground or developed in the short-term”. 

This is yet another call for Asian banks, which remain among the top financiers of fossil fuel projects, to rethink their approach.

Looking Ahead

While ambitious, the financing pledges at COP28 still fall somewhat short of what is needed to reduce greenhouse gas emissions, tame the impacts of the climate crisis and accelerate the energy transition in developing and low-income countries. Furthermore, more work needs to be done so that the financial support starts flowing towards the right destinations at the pace and scale required. The top priority is to ensure the pledges evolve into more than just empty promises.