COP29 and COP16: a regulatory perspective

COP29 on climate change was held in Baku from 11-22 November. The climate COP is an annual, global event that brings together leaders from the public and private sectors, as well as civil society, to help advance climate action and review progress against the Paris Agreement.

COP29 was described as the “Finance COP”. Developed countries agreed to support developing countries with at least USD 300bn of public finance per year by 2035. This New Collective Quantified Goal tripled the previous finance goal but fell short of what developing countries had been calling for. There was also an agreement for all actors to work together to scale up finance to developing countries, from public and private sources, to USD 1.3 trillion per year by 2035. Global investment requirements for climate action are estimated at USD 3.1-3.5 trillion for emerging markets and developing countries (excluding China) by 2035, according to the Independent High-level Expert Group on Climate Finance.

COP29 followed COP16 on biological diversity, which took place in Cali from 21 October to 1 November. COP16 had an ambitious agenda, covering a wide range of critical topics to halt and reverse biodiversity loss by 2030. There was notable engagement from the business and finance sectors and increased media attention in comparison to previous years. However, limited progress was made on key negotiations, highlighting the need for continued efforts.

In addition to the negotiations between the parties, regulators, standard setters and other regulatory bodies also made announcements at COP29 and COP16 to support the climate and nature agendas.

What stood out for us from a regulatory perspective?

COP29 on climate change
 

• COP29 took an important step towards regulating future global carbon markets, with an agreement reached on Article 6 under the Paris Agreement. There was also meaningful progress on integrity initiatives, with good practice principles for voluntary carbon markets published by the International Organization of Securities Commissions and principles for credit users published by the UK Government.
• Policymakers see transition planning as a tool to address the climate finance gap. Policymakers are turning their attention to where additional guidance is needed, such as on adaptation, or for certain sectors. The Transition Plan Taskforce Disclosure Framework is increasingly being viewed as a global standard.
• On corporate reporting, standard setters are continuing to make progress in supporting companies as they navigate the various sustainability reporting frameworks. This includes providing guidance and committing to greater collaboration and alignment between these frameworks. Simultaneously, taxonomies are being developed worldwide, with standard setters aiming to improve their future interoperability on a global scale.

COP16 on biological diversity
 

• COP16 reached a landmark agreement on a new genetic data fund, encouraging certain companies to pay to access genetic data. While progress was made on national biodiversity plans, 152 (out of 196) countries did not update their strategies and no agreement was made on how plans will be assessed and monitored going forward.
• New data published by the Taskforce on Nature-related Financial Disclosures (TNFD) and CDP revealed that corporate reporting on nature-related issues is gaining momentum, but challenges remain in quantifying financial impacts and driving concrete action. The Glasgow Financial Alliance for Net Zero and TNFD published complementary draft guidance to support companies to integrate nature into transition planning.
• The TNFD announced a roadmap to address gaps in nature data and a partnership with the World Wide Fund for Nature (WWF) for "geospatial ESG" integration. The European Investment Bank and WWF are collaborating to accelerate investment in nature-based solutions for climate adaptation.

The agreements at COPs can be high-level and can take time to filter through to national agendas and regulation. Likewise, some of the announcements from international standard-setting bodies may not generate immediate actions for financial services firms and other companies. Nevertheless, they set the direction of travel and, taken together, the policy developments create a complex regulatory picture that financial services firms and other companies will need to navigate.

For a deeper understanding of these developments and their implications for your organisation, please refer to the accompanying slide decks.