Achieving Sustainability

COP preview: managing expectations

Both the COP 29 annual meeting dedicated to climate action, and its biodiversity counterpart COP 16, take place in the coming weeks. In a year when politics and the impacts of climate change have sometimes conflicted, accelerating global coordination and finance is increasingly urgent. Expectations for both meetings are low, but the potential is huge.

Key takeaways

  • COP 29 and its biodiversity counterpart COP 16 come at a time when new global temperature records have reinforced the urgency of climate action.
  • COP 29 is being billed as the “finance” COP, but expectations of meaningful progress appear modest.
  • Clarification on financing the transition, climate pressures on health, and the role of technology will be key topics.
  • The conference will set the tone for the next wave of sovereigns’ climate action plans.

Last December’s COP 28 preceded confirmation that 2023 was the warmest year in history, and 2024 recorded the warmest summer ever. The UN WMO1 estimates these records will be broken in the next few years, underscoring that acting to limit global temperatures remains critical.

Against this backdrop, COP 29 is being described as the “finance COP”, where the hope is that earlier discussions on the role of finance and Article 6 of the Paris Agreement – where countries can transfer carbon credits to help other countries meet climate targets2 – can be tightened into a clarification of a financing framework for transition to a 1.5°C world.

However, expectations appear modest for COP 29. The SB60 hosted in Bonn3, where technical details are discussed before the conference, was widely considered as disappointing. The UN Climate Change Secretary highlighted a “very steep mountain to climb to achieve ambitious outcomes in Baku” – the location of COP 29.

Climate finance discussions will likely centre on supporting the most vulnerable economies, seeking an agreement on a new collective quantified goal and on how to finance the Loss and Damage4 Fund. At the same time harmonising almost 50 regions’ sustainability taxonomies into a single framework, and mandatory sovereign disclosures are relevant debates to channel capital flows.

With that in mind, we look forward to hearing the impact of a five-yearly series of “global stocktakes5 introduced at COP 28. The outcome of the first global stocktake will inform sovereigns’ updates to their climate action plans (known as Nationally Determined Contributions). These will be communicated in 2025 providing a 10-year plan to 2035.

The location of the conference is likely to be a talking point again, given oil and gas accounts for 47.8% of Azerbaijan’s GDP, and the President of Azerbaijan, Ilham Aliyev, has declared the intention to continue expanding developing gas activities. Meanwhile, six of the G7 countries pledged this year to phase out unabated coal power production in the first half of the 2030s. That said, the country has announced a series of initiatives to decarbonise its energy mix, especially around hydrogen, which makes sense given the country’s gas reserves.

Two topics that are gaining traction stand out on this year’s agenda:
  • Health: this was a central issue at COP 28, with its first dedicated day at the conference and a Ministerial Declaration on Climate and Health endorsed by over 140 member states. As new record temperatures and impacts from climate change put further pressure on an already burdened global health system, we expect this topic to be even more prominent this year.
  • Technology: interest in financing climate solutions at COP 28 was evident, as highlighted in our sustainability themes for 2024. Perhaps creating carbon capture technologies is considered easier than achieving the behavioural change needed for a meaningfully lower footprint. Investments in climate technologies have steadily increased over the last decade through volatile markets, and now account for approximately 10% of all venture capital deal activity.6 If COP 29 can further accelerate and scale up funding for climate solutions, this will help reduce a challenging funding gap. A whole day dedicated to science, technology and innovation could springboard the next wave of climate solution investments. The explicit addition of digitalisation to the agenda, for the first time, signals a clear recognition of its power and the will to leverage it as a catalyst for achieving net zero.
Will COP 16 complement COP 29?

Preceding COP 29 by several weeks, COP 16, otherwise known as the Biodiversity COP, will be the first since the adoption of the Kunming-Montreal Global Biodiversity Framework7 at COP 15 in December 2022. Agreed by 195 countries the framework includes 23 global targets to be achieved for the safeguarding and sustainable use of biodiversity. This year’s conference will be tasked with reviewing progress of the framework’s implementation towards the goal of first halting and then reversing biodiversity loss by 2030.

Almost two years since COP 15, progress has been limited, primarily driven by voluntary actions from businesses, which are insufficient. Only 20 nations8 have published their National Biodiversity Action Plan for 2030, and we hope that more will be announced around the conference.

That said, we have seen some advances, including, more nature pledges from companies, an increase in funding for biodiversity from USD 11.1 billion in 2021 to 15.4 billion in 20229 and establishment of the Global Biodiversity Framework Fund last year. Furthermore, additional scientific research into human impacts on nature has been announced.

Given the accepted interconnectivity between climate change and biodiversity – and the urgency of both – COP 16 has an opportunity to set the tone for COP 29.

Read more on how energy, healthcare and technology can bring solutions and may offer investment potential
Healthcare: how to live better
Energy transition: time to clear the air
Rewiring technology for sustainable growth

1 World Meteorological Organization, 2024
2 Paris Agreement Crediting Mechanism | UNFCCC, 2024
3 SB60 is the Bonn Climate Change Conference which takes place in June for two weeks to work across a range of issues where progress is needed on the path to COP2, UNCC, June UN Climate Meetings (SB 60), June 2024
4 UNEP, Loss and damage, 2024
5 Global Stocktake | UNFCCC, 2024
6 PwC Analysis, State of Climate Tech, 2023
7 UNEP, 15/4. Kunming-Montreal Global Biodiversity Framework (cbd.int), December 2022
8 As of 18/09/2024
9 OECD Biodiversity and Development Finance 2015-2022, 2024

  • Disclaimer
    Investing involves risk. The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Past performance is not indicative of future performance. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice or a recommendation to buy, sell or hold any security and shall not be deemed an offer to sell or a solicitation of an offer to buy any security.

    The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. Certain data used are derived from various sources believed to be reliable, but the accuracy or completeness of the data is not guaranteed and no liability is assumed for any direct or consequential losses arising from their use. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted.

    This material has not been reviewed by any regulatory authorities. In mainland China, it is for Qualified Domestic Institutional Investors scheme pursuant to applicable rules and regulations and is for information purpose only. This document does not constitute a public offer by virtue of Act Number 26.831 of the Argentine Republic and General Resolution No. 622/2013 of the NSC. This communication’s sole purpose is to inform and does not under any circumstance constitute promotion or publicity of Allianz Global Investors products and/or services in Colombia or to Colombian residents pursuant to part 4 of Decree 2555 of 2010. This communication does not in any way aim to directly or indirectly initiate the purchase of a product or the provision of a service offered by Allianz Global Investors. Via reception of this document, each resident in Colombia acknowledges and accepts to have contacted Allianz Global Investors via their own initiative and that the communication under no circumstances does not arise from any promotional or marketing activities carried out by Allianz Global Investors. Colombian residents accept that accessing any type of social network page of Allianz Global Investors is done under their own responsibility and initiative and are aware that they may access specific information on the products and services of Allianz Global Investors. This communication is strictly private and confidential and may not be reproduced, except for the case of explicit permission by Allianz Global Investors. This communication does not constitute a public offer of securities in Colombia pursuant to the public offer regulation set forth in Decree 2555 of 2010. This communication and the information provided herein should not be considered a solicitation or an offer by Allianz Global Investors or its affiliates to provide any financial products in Brazil, Panama, Peru, and Uruguay. In Australia, this material is presented by Allianz Global Investors Asia Pacific Limited (“AllianzGI AP”) and is intended for the use of investment consultants and other institutional /professional investors only, and is not directed to the public or individual retail investors. AllianzGI AP is not licensed to provide financial services to retail clients in Australia. AllianzGI AP is exempt from the requirement to hold an Australian Foreign Financial Service License under the Corporations Act 2001 (Cth) pursuant to ASIC Class Order (CO 03/1103) with respect to the provision of financial services to wholesale clients only. AllianzGI AP is licensed and regulated by Hong Kong Securities and Futures Commission under Hong Kong laws, which differ from Australian laws.

    This document is being distributed by the following Allianz Global Investors companies: Allianz Global Investors GmbH, an investment company in Germany, authorized by the German Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin); Allianz Global Investors (Schweiz) AG; Allianz Global Investors UK Limited, authorized and regulated by the Financial Conduct Authority; in HK, by Allianz Global Investors Asia Pacific Ltd., licensed by the Hong Kong Securities and Futures Commission; in Singapore, by Allianz Global Investors Singapore Ltd., regulated by the Monetary Authority of Singapore [Company Registration No. 199907169Z]; in Japan, by Allianz Global Investors Japan Co., Ltd., registered in Japan as a Financial Instruments Business Operator [Registered No. The Director of Kanto Local Finance Bureau (Financial Instruments Business Operator), No. 424], Member of Japan Investment Advisers Association, the Investment Trust Association, Japan and Type II Financial Instruments Firms Association; in Taiwan, by Allianz Global Investors Taiwan Ltd., licensed by Financial Supervisory Commission in Taiwan; and in Indonesia, by PT. Allianz Global Investors Asset Management Indonesia licensed by Indonesia Financial Services Authority (OJK).

    3910808

Recent insights

Navigating Rates

With all signs pointing to a Donald Trump win, we expect many of his populist policies to cause ripples, even though markets were largely priced for this outcome. How might investors navigate the election result?

DISCOVER MORE

Navigating Rates

We see the possibility of further yield curve steepening. In outright duration risk, we prefer to stay more tactical on US Treasuries.

Discover more

European Equities Outlook Q4 2024

European markets have, to some extent, decoupled from a weak news flow; despite mediocre PMIs and political uncertainties, European equity markets have delivered double digit returns year to date.

Discover more

Allianz Global Investors

You are leaving this website and being re-directed to the below website. This does not imply any approval or endorsement of the information by Allianz Global Investors Asia Pacific Limited contained in the redirected website nor does Allianz Global Investors Asia Pacific Limited accept any responsibility or liability in connection with this hyperlink and the information contained herein. Please keep in mind that the redirected website may contain funds and strategies not authorized for offering to the public in your jurisdiction. Besides, please also take note on the redirected website’s terms and conditions, privacy and security policies, or other legal information. By clicking “Continue”, you confirm you acknowledge the details mentioned above and would like to continue accessing the redirected website. Please click “Stay here” if you have any concerns.