Negotiations at COP29 were never going to be easy. The talks culminated in an agreement to triple the flow of climate finance to poorer countries from $100 billion to $300 billion. A step in the right direction, but some way off the $1.3 trillion called for by developing countries. While this deal threatens to cast a shadow over the meeting, as we now look over the two weeks and take stock, there are nevertheless some positive signals that businesses can reflect on. Being present in Baku offered our team of ERM experts the opportunity to engage with companies, regulators, NGOs, and investors. These are our takeaways.
1. Despite headwinds, corporate momentum continues to build
Going into Baku, all the talk was of geopolitics and the potential for near-term elections to alter the long-term trajectory of climate action. As it happens, what quickly became clear is that businesses are continuing to plan, invest and implement in line with their existing climate commitments and energy transition strategies. Across many aspects of the energy transition – the cost of renewables, progress with electric vehicles and battery storage, industry level action in areas such as shipping and steel – momentum now appears unstoppable.
For example, in 2023, renewable energy capacity growth jumped 50 percent to 510 gigawatts. Broader clean technology investments – which also include electric vehicles, grids & storage, and decarbonization solutions – outpace fossil fuel investments 2 to 1. As a member of the Global Renewables Alliance, ERM participated in a roundtable on grids and storage at COP29 and the COP29 presidency introduced an energy storage and grids pledge, which 45 leading global utilities swiftly endorsed.
Across the board, companies are continuing to move forward with plans that have been many years in the making. While there will continue to be some bumps in the road, the overall path we are on seems clear.
2. Company transition planning is moving implementation forward
Transition planning took center stage at COP29. The 195 countries that signed the Paris Agreement need to submit an updated National Determined Contribution (NDC) before February 2025. In essence, the NDC is a national transition plan specifying national carbon emission reduction goals up to 2035 and how countries plan to achieve them. So far, just a handful of countries have submitted their updated NDC.
However, it was evident during COP29 that companies aren’t waiting for updated NDCs to engage with corporate transition planning. Why? Increasing pressure from regulators and investors to disclose implementation plans is certainly spurring action. But also, many companies are discovering that transition planning is an excellent tool for converting broad climate and nature goals into operational action in a systematic way.
That’s because transition planning pushes companies to develop a concrete roadmap by identifying and quantifying risks, dependencies, and commercial opportunities related to climate, nature, and just transition. It can help optimize capital and operational investment decisions by enabling the selection of the best business cases to create value. Finally, transition planning helps companies build a compelling narrative to bring all stakeholders along their transition journey.
To catalyze further action, ERM and WBCSD launched a transition planning primer during a jointly hosted roundtable. A number of business leaders at the event emphasized the importance of an integrated approach—as one participant said, “We don’t do climate on Monday, nature on Tuesday, and just transition on Wednesday.”
3. Corporate innovation is strong
Companies are finding innovative new ways to accelerate the implementation of climate, nature, and social goals – particularly in hard-to-abate sectors.
For example, heavy industries are responsible for roughly a third of global greenhouse gas emissions. Since these sectors can’t easily switch to electricity, success relies heavily on the availability of green hydrogen. The good news is that the number of clean hydrogen projects reaching final investment decision has quadrupled between 2020 and 2024, with total investments growing sevenfold to $75 billion.
However, scaling up and making green hydrogen cost-effective is complex. Discussions during Technology Day highlighted the mix of policy and technology innovations and new partnerships between industries, research institutes, and investors needed to deliver impactful emission reductions in heavy industries. ERM also joined a roundtable hosted by the Alliance for Industry Decarbonization and is collaborating to prepare research on accelerating action due in early 2025.
Applying digital technologies and AI to climate action strategies created a lot of buzz, ranging from exposing polluters (Al Gore’s Climate Trace) and AI-driven weather forecasting to generating high-quality carbon and nature data throughout the value chain to inform corporate decisions. ERM joined a panel on 'the role of digitalization in climate action' to help share our thinking.
Our recent report as part of The Nature Tech Alliance, a collaboration of ERM, Salesforce, Planet, and Nature Metrics, showcases how collaborative technological innovation can accelerate progress. The Alliance aims to achieve high-quality metrics about corporate nature impact, applying technologies such as remote sensing, AI, and environmental DNA to achieve a precise and ongoing picture.
4. Finance flows are uneven, but private capital can lead the way
By 2030, the world will need to invest $6.5 trillion annually in climate action, a fourfold increase from today: $2.4 trillion annually in emerging economies, $2.8 trillion in developed economies, and $1.3 trillion in China. There is a growing expectation that private finance, alongside public finance, is required to meet these levels of investment.
However, the availability and cost of private capital is uneven and there is often a disconnect between available capital and investment in the energy transition. In recent months, ERM has convened a series of conversations between investors and corporates to help bridge this gap. At our most recent discussions at COP29, we heard that to increase investment flows, companies need an integrated and investable transition plan, a strong narrative that communicates that plan effectively to all key stakeholders, and alignment between their public positions and actions on the ground. In turn, investors need to work with companies to better understand investments that require capital over the longer term.
A significant obstacle is that many investors insufficiently quantify climate, nature, and social-related risks and opportunities in their decisions, leaving trillions of commercial potential untapped. Investment company GIC calculated that corporate decarbonization opportunities throughout the supply chain could add $5 trillion to $11 trillion in value globally by 2030 if investors seize them.
To avoid overlooking viable opportunities, investors should start assessing and measuring the value of carbon in the pre-investment stage. ERM and The Private Equity Taskforce (PESMIT), part of the Sustainable Markets Initiative, have developed a methodology that helps investors map the positive value of the carbon emissions their investment would avoid over time or the negative value of emissions it would cause.
5. Confidence in carbon credits is returning
Voluntary carbon markets were in the spotlight at COP29 as a mechanism to unlock private capital flows to emerging economies. After a rough few years, confidence in the voluntary carbon markets is slowly returning thanks to initiatives like the Integrity Council for the Voluntary Carbon Market, Voluntary Carbon Markets Initiative and the COP29 launch of carbon market integrity principles by the UK government.
During COP29, governments finalized rules for carbon markets under the Paris Agreement as specified by Article 6. This enables international carbon trading and lays the groundwork for a globally regulated market in support of climate goals. Although there are still technical details that need to be resolved, this marks a significant step forward and should improve trust in the integrity of carbon credits and expand the market.
Companies with credible and ambitious net zero plans are engaging in the voluntary carbon markets. Ensuring high integrity in these markets is key and ERM has worked with the Natural Climate Solutions Alliance to set out a CEO Guide and an Investor Guide on the voluntary carbon markets – as well as establishing our own end-to-end carbon trading capability.
COP29 was widely seen as an intermediate step between the global stocktake at COP28 in Dubai and COP30 in Belèm, Brazil. However, it’s clear that businesses are not slowing down in their planning and investment. Coming out of Baku, corporate imperatives are clear: get a proper, enterprise-wide transition plan in place; invest in new technologies to accelerate decarbonization; and mobilize finance, including through the carbon markets. As part of that, engaging with national governments on NDCs will also help ensure that both policy and corporate investment work together in unison.
We all need to continue to step up our climate action. Despite some of the gloomier headlines, Baku provided further evidence that many businesses are doing just that.
