COP29 Update: Climate Investment Opportunities for Financial Institutions in Indonesia

Key takeaways from Tri Hita Consulting regarding COP29 highlight the growing urgency for climate finance and the significant opportunities it presents for financial institutions. At COP29, The New Collective Quantified Goal (NCQG), triples the previous USD 100 billion annual commitment to USD 300 billion, with a broader aim to mobilize USD 1.3 trillion annually by 2035 (UNFCCC, 2024).

Rooted in the 2015 Paris Agreement, the NCQG supports developing countries in their climate actions. According to an OECD report, developed nations surpassed their initial USD 100 billion pledge in 2022, reaching USD 115.9 billion (Abnett, 2024).

This new ambitious target underscores the global urgency to support both developed and developing nations in transitioning to low-carbon economies. Notably, as Ernst & Young (2024) highlighted, Asia is expected to receive the majority of the announced climate funding.

Two financing mechanisms Asian financial institutions should watch out for: 

• Blended finance. This approach, combining public and private resources, is essential in bridging the funding gap needed to meet global climate targets. By leveraging the strengths of both sectors, financial institutions can invest in climate solutions that may have previously been seen as too risky or costly.
• Insurance. Traditionally known for risk mitigation, insurers are now seen as pivotal players in facilitating climate adaptation and resilience. There are significant opportunities for insurers to innovate, creating new products that not only help businesses and governments manage climate risks but also drive long-term environmental sustainability.

Given these developments, financial institutions in Indonesia must enhance their capacity in climate finance, foster strategic partnerships, and stay informed on international and national advancements. Consistent reporting on Climate Risk Management And Scenario Analysis (CRMS) is essential, alongside exploring innovative financial mechanisms to support climate finance and carbon markets. Engaging in strategic dialogue with international and public institutions will also help advance blended finance initiatives.

At Tri Hita Consulting, we are ready to help navigate this evolving landscape for our clients. We offer insights and guidance to ensure that your financial institution makes the most of these opportunities and contributes to a more sustainable future. Feel free to contact us at info@trihita-consulting.com for more information on how we can collaborate in this exciting new market.

References:

1. Abnett, Kate (2024) ‘Wealthy Countries Met Global Climate Finance Goal Two Years Late, OECD Says’, Reuters, 29 May. Available at: https://www.reuters.com/business/environment/wealthy-countries-met-global-climate-finance-goal-two-years-late-oecd-says-2024-05-29/  (Accessed 16 December 2024).
2. Ernst & Young (2024) [LinkedIn] ‘COP 29: A Summary of Finance Day for Financial Services. Available at: https://www.linkedin.com/posts/ernstandyoung_cop29-finance-day-summary-activity-7264940629137178625-wnMb?utm_source=share&utm_medium=member_desktop (Accessed 5 December 2024).
3. United Nations Framework Convention on Climate Change (UNFCCC) (2004) ‘COP29 UN Climate Conference Agrees to Triple Finance to Developing Countries, Protecting Lives and Livelihoods’, UNFCCC News, 24 November. Available at: https://unfccc.int/news/cop29-un-climate-conference-agrees-to-triple-finance-to-developing-countries-protecting-lives-and (Accessed 16 December 2024).