Mobilising private sector finance to help tackle the climate crisis and prepare for a greener future was a central theme at the COP29 climate summit that is currently drawing to an end in Azerbaijan’s capital Baku. 

As of early on November 22, the final day of the event, delegates were still trying to hammer out a New Collective Quantified Goal (NCQG) on climate finance, aimed at setting a new financial target to support developing countries in their climate actions. 

Earlier in the two-week event, a group of multilateral development banks (MDBs) including the European Bank for Reconstruction and Development (EBRD) issued a joint statement detailing their commitment to providing financial support and other resources to help nations achieve ambitious climate goals. Addressing the climate finance gap requires leveraging private sector capital, a recurring theme at COP29. Public funding alone cannot bridge the divide, meaning mobilising private sector resources is essential.

“This was ultimately the finance COP,” said Gianpiero Nacci, the EBRD’s director of sustainable business and infrastructure, said in a video interview with bne IntelliNews from Baku. 

Referring to discussions at COP29, Nacci commented: “As MDBs, we collectively decided that one of our priority areas of focus is going to be private sector mobilisation”. 

“There is no alternative to trying to bring in the private sector, at scale and at pace,” Nacci said. 

“It is clear that public funding and the MDBs will not be able to bridge this gap. The question now is how to make climate investments interesting for private capital, create instruments to reduce some of the risks and generate the returns that the private sector wants to see,” he added. 

Nacci, who has 25 years’ experience in climate finance, pointed to the results already achieved, as the amount of private capital mobilised is already “very substantial”. There is, however, a clear different between the funding MDBs have been able to mobilise in higher income countries, compared to lower and middle income countries. 

“That is something we are working to try to rectify. On 12 November, we formulated a clear expectation about what we believe we will be able to mobilise towards this market for lower and medium income countries,” he said. 

By 2030, MDBs anticipate their collective annual climate financing for low- and middle-income nations will reach $120bn. This includes $42bn earmarked for adaptation measures, alongside efforts to leverage $65bn from private sector investments. For high-income countries, MDBs project their annual climate financing to rise to $50bn by 2030, with $7bn allocated for adaptation and an additional $65bn expected to come from private sector contributions.

Delving into specific actions that need to be taken to facilitate private sector involvement, Nacci detailed the need for regulatory certainty, market instruments that deliver on investments, the legal and contractual framework for renewable energy investments. 

Another dimension, according to Nacci is to identify instruments where MDBs can bring in the private sector, with one existing example being the issuance of green bonds.

Emerging themes

Commenting on the themes discussed at COP29, Nacci pointed to several agendas that have emerged strongly, including local level actions, as well as scaling up renewable energy deployment and decarbonising existing energy assets. Another critical issue was the need to expand electricity grids and storage capacities to accommodate clean energy sources.

“Other topics like climate action in the agri-food system are gradually emerging. We can see a trend towards recognising not only the impact of the food system on climate change, but also solutions that can be considered. There is a substantial financing gap in all sectors, but this is particularly acute when comes to the agri-food sector,” said Nacci. 

“Other topics that remain super central are the deployment of renewable energy and decarbonisation of energy assets. In that context, the expansion of electricity grids and deployment of storage capacity are becoming more critical,” he added. 

In addition, adaptation measures, long recognised but often overshadowed by mitigation efforts, emerged as a unifying theme. With climate impacts becoming more disruptive – such as the recent flooding in Spain – there is growing convergence among parties on the urgent need for interventions like early warning systems.

The growing focus on adaptation stems not only from the visible impacts of climate change but also from its economic implications. Nacci pointed out that climate-related events are increasingly disruptive – not just in terms of loss of lives and assets, but also in making certain geographies less attractive to investors. 

Including fossil fuel producers 

Hosting COP29 in Azerbaijan, a fossil fuel-producing nation, raised eyebrows. However, the Nacci stressed the importance of involving all countries in the global climate dialogue.

“If you want to address climate change, you can’t exclude fossil fuel producers,” they argued. “Engaging these countries raises awareness and encourages decarbonisation.”

Indeed the development bank is working with countries across Emerging Europe and North Africa – a number of them with large oil, gas and coal sectors – on their path to decarbonisation. Efforts also extend to hard-to-abate sectors like cement, fertilisers and steel.

“In Azerbaijan, for instance, we supported the development of a national hydrogen strategy. This was a way to raise awareness of the country and what it takes to build a hydrogen-based economy, taking advantage of the country’s geographical position to produce renewable energy competitively,” he told bne IntelliNews. 

On November 21, the EBRD announced that it is financing Azerbaijan’s largest ever solar projects alongside the Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB). The three multilateral development banks will each provide $160bn for the two utility-scale solar power plants.