World leaders gather for COP29 in Baku next month and the stakes could not be higher. Climate change is no longer an abstract issue confined to future projections – it is hitting home now. Extreme weather events—super-charged storms, wildfires, floods, unprecedented droughts—are becoming more frequent and more destructive, impacting not just the environment but economies, societies, and businesses across the globe. The risks are real, and they are escalating.
From a business perspective, climate change has become a material risk. No longer is it just an environmental or ethical concern—it’s a financial one. The concept of the return on responsibility – where businesses invest in climate-related efforts not only because they’re good, but because they’re good for business – is central to how businesses are increasingly viewing climate risks and the long-term economic imperative of climate action.
But companies, even with their significant influence, cannot solve the climate crisis alone. The transition to a low-carbon economy requires strong, consistent regulatory frameworks that bring everyone—governments, companies, and individuals—along for the ride.
While the science is clear, and the path forward has been widely recognised, meaningful action has lagged behind. At COP28, governments from around the world committed to a series of vital steps aimed at keeping the 1.5C global warming limit within reach. These commitments include transitioning away from fossil fuels, tripling renewable energy capacity, and doubling energy efficiency by 2030. Hundreds of companies, aware of the financial and reputational risks of inaction, have also publicly supported these goals.
Yet, despite these encouraging signals, the world remains at a turning point. The decisions made and actions taken—or not taken—over the next few years will determine whether we secure a liveable planet for future generations. Translating these promises into reality requires a coordinated effort to scale up the necessary action and investment, particularly when it comes to transitioning from fossil fuels to clean energy sources. For this to happen, two key things are essential: ambitious, investable climate plans backed by clear policies and sufficient public financing to drive the transition forward.
The first priority for governments is to ensure their national climate plans (NDCs), due by early 2025, accelerate the transition from fossil fuels to clean energy. These plans must close the gap between current policies and the goal of limiting global warming to 1.5C. Crucially, they need to set sector-specific targets, such as increasing clean energy capacity, improving energy efficiency, phasing out unabated fossil fuels, and halting deforestation. Governments made important agreements in Dubai, but the challenge now lies in turning those agreements into actionable, measurable outcomes.
But it’s not just about having the right targets – without the right financial and regulatory frameworks, the private sector will continue to struggle to invest at the scale needed in developing countries. Public finance is needed to de-risk private investments and create enabling environments for the private sector to scale up its involvement.
A critical element of this financial framework is expected to be thrashed out at COP29 in Baku, where the new global climate finance goal will be on the agenda. This new goal (called NCQG) will set the baseline for public climate finance flows to developing countries from 2026 onward. These funds are essential not just for achieving the goals of the Paris Agreement but also for catalysing further private investment in the transition to a low-carbon economy.
The outcome of the negotiations in Baku will be of immense importance for developing nations. But it will also be of great relevance to businesses around the world, particularly those that rely on global supply chains. Many companies either have headquarters or operate supply chains in developing countries. An agreement on climate finance that includes adequate levels of mitigation and adaptation finance will be crucial for these businesses, as it will support developing nations to transition from fossil fuels to clean energy while also building resilience to climate impacts.
Mitigation finance, which supports the reduction of greenhouse gas emissions, is directly tied to business interests. Adequate flows of finance for mitigation can help expand renewable energy access, improve grid infrastructure, and enhance energy efficiency in developing countries. These improvements would lower operational costs and help businesses meet their own climate commitments. Companies are increasingly seeking opportunities to clean up their operations, and a robust public climate finance framework will help create the conditions for them to invest more heavily in the fossil-to-clean transition in the Global South.
Equally important is adaptation finance, which is designed to help countries build resilience to the effects of climate change. For businesses, the ability of developing countries to adapt to rising sea levels, more frequent storms, and extreme temperatures is critical. Supply chains are highly vulnerable to climate impacts, and when harvests are destroyed, production is halted, or transportation routes are disrupted, the economic consequences are felt globally. Without sufficient adaptation finance, businesses will face higher costs, more frequent disruptions, and greater uncertainty.
The world is watching, and the decisions made at COP29 will have long-lasting implications. A strong climate finance agreement in Baku which adequately addresses both mitigation and adaptation needs, could unlock the necessary investments for a just and equitable transition to a low-carbon economy. It will also help create the stable policy environments needed to de-risk private investments and enable businesses to scale their involvement in the clean energy transition in developing countries.
As we look toward COP29, world leaders must recognise that the time for incremental progress has passed. The urgency of the climate crisis requires nothing short of transformational action, backed by strong policies and financial commitments. The cost of inaction is too high—both for our planet and for our global economy. It is time for bold leadership, clear accountability, and coordinated global effort. Only then can we hope to secure a sustainable future for all.
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