This year, like every year, global leaders are preparing to convene for the 29th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP 29), a pivotal international summit on climate change. Taking place in Baku, Azerbaijan, from November 11 to 22, COP 29 is a critical platform for nations to collectively chart and negotiate a course of action on climate change.

Alongside other negotiations, this year’s COP will especially focus on establishing a new era in climate finance with the New Collective Quantified Goal (NCQG), which will determine the financial support that developed countries provide developing nations for climate action. The goal builds upon a previous commitment made by developed countries in 2009 to mobilise $100 billion per year by 2020. This target was met for the first time in 2022, albeit with ongoing debates about its accuracy, adequacy and effectiveness.

The NCQG is not merely a financial instrument; it embodies accountability, equity and justice principles. Developed countries bear historical responsibility for the climate crisis, while developing countries, often disproportionately vulnerable to its impacts, require significant support to mitigate risks and adapt to a changing climate. The devasting floods ravaged Nepal in the last week of September, claiming more than 200 lives and causing widespread destruction with estimated economic losses of Rs17 billion. This reminds us of this vulnerability and the urgent need for increased investment in climate adaptation measures.

Importantly, the floods also highlight the escalating intensity of climate impacts and the skyrocketing demand for climate finance, particularly for adaptation. Yet, the disbursement of funds falls far short of what is required, and access to existing funds remains a significant challenge for vulnerable nations. For instance, a 2024 report by OECD/IEA reveals that of the $1,265 billion tracked in global climate mitigation and adaptation finance between 2021-22, developing countries received only an average of $179 billion, with just $30 billion going to the least developed countries (LDCs). These figures are despite the claims of overreporting of climate finance funds from developed countries, meaning that actual amounts could be even less. This illustrates the meagre reach of climate finance for low-income and least developed nations.

The modality of climate finance disbursement is another contentious issue. A report by Climate Policy Initiative in 2023 shows that 61 percent of financial flows are in the form of debt instruments, while 33 percent are in the form of equity, and only 5 percent are in the form of grants. Approximately $561 billion was provided at market rates of the total debt, making up 53 percent of total tracked climate finance. This heavy dependence on debt as finance disbursement modalities to developing nations further exacerbates their financial burdens, many of which already face stagnant economies highly reliant on vulnerable sectors such as agriculture. Extreme weather events can further strain their resources, forcing them to divert significant portions of their budgets towards debt repayment instead of crucial adaptation and resilience-building measures.

Charting a new course

A decisive shift is needed in how we approach climate finance. Given the increasing urgency to invest in climate action, the role of negotiators from LDCs like Nepal at COP29 can be instrumental in shaping the NCQG. To ensure that no nation is left behind in the fight against climate change, the NCQG should prioritise the following things.

It is unacceptable that only 2 percent of global climate finance reached LDCs in 2021-22. The core challenges hindering LDCs from accessing climate finance include a lack of technical resources for project preparation, limited project management capacity, burdensome and inconsistent financier requirements, an inability to coordinate effectively with donors and financiers, weak public financial management practices and insufficient technical expertise in climate change programming. Therefore, when setting targets, the NCQG should incorporate elements that make finance more approachable and accessible for LDCs, considering the challenges they already endure.

Climate finance has disproportionately focused on mitigation rather than adaptation for far too long. Despite global climate finance surpassing $1 trillion for the first time in 2021–22, only $63 billion (5 percent) was tracked as adaptation finance. The Adaptation Finance Gap 2023 estimates that the financial gap of adaptation is projected to reach as high as $415 annually by 2030. Closing this gap is where the NCQG could set strong targets, potentially leading to estimating and creating binding agreements to bridge the adaptation finance gap.

Business, as usual, is fueling a climate catastrophe. The total cost of inaction could cost the global economy $1,266 trillion by the end of the century, according to the State of the Global Climate 2023 report. This is even if warming is limited to the ambitious target of 1.5 degrees Celcius. Annual climate finance will need to grow more than six-fold, reaching nearly $9 trillion by 2030 and further increasing to $10 trillion by 2050. In light of this, the NCQG must act as a catalyst for the urgent mobilisation of resources for adaptation and mitigation. Every dollar invested today will save countless dollars—and lives—tomorrow.

While the need for increased climate finance is undeniable, ensuring it is fairly distributed and reaches the needy is equally crucial. Developing countries, often lacking the capacity to navigate complex funding mechanisms, are either being left behind or are struggling for years to access urgently required climate finance. The NCQG must champion equity, accessibility and faster disbursement, empowering vulnerable nations to take ownership. This means simplifying procedures and ensuring that funding reaches local communities where it can make the biggest difference.

The World Economic Forum emphasises that the climate crisis is too big, too serious and too urgent to rely solely on the resources of public institutions. The NCQG negotiations must incentivise private sector involvement by creating an enabling environment in climate-friendly initiatives such as clean energy, sustainable transport, green infrastructure and climate-resilient agriculture. Although climate investments often require a long-term perspective, such projects’ social benefits and sustainability can offer a win-win for both the private sector and society.

Finally, transparency is the bedrock of effective climate action. This means accurately tracking climate finance and distinguishing it from traditional development aid. Furthermore, innovative and equitable mechanisms are needed to maximise the impact of limited funds. By promoting greater transparency and developing innovative mechanisms to measure the effectiveness of climate investments, we may be able to ensure that these limited funds can be meaningfully used to achieve a sustainable future. This requires robust monitoring and evaluation frameworks that track progress, identify challenges and inform adaptive management strategies.

These considerations are just the tip of the iceberg. Addressing the climate crisis demands a long-term commitment to transformative change, encompassing financial mechanisms, technological innovation, policy reforms and shifts in societal behaviour. The NCQG negotiations at COP29 represent a critical opportunity to lay the foundation for this transformative change, which is crucial for tackling the climate crisis.