Phil Bloomer, Executive Director, Business & Human Rights Resource Centre

The COP29 finance agreement is a major disappointment – and has profound implications for peoples and governments right across the Global South.

Rich countries have failed to deliver the climate finance that is needed to help developing country governments to decarbonise, adapt and repair the loss and damage that is already upon them.

Instead, these countries have committed to “taking the lead” to find £300 billion per year from taxpayers’ money, multilateral development banks and private sources. The further $1 trillion that experts agree is needed will have to come from developing countries’ coffers, or with the help of mystical sources in business and finance.

Climate finance at a crossroads

But what does this mean for the just transition to green economies? The COP29 deal represents a major fork in the road in resourcing this.

It puts multilateral banks and private finance at the centre of the transition. The worry is, very obviously, that neither has a strong track record of upholding human rights and environmental safeguards in their investments.

The clear rationale is that rich countries are placing all their bets on private capital to deliver the transition. They want their finance to be used as a public subsidy to ‘de-risk’ and so ‘crowd-in’ private investment in developing countries to decarbonise economies.

The risks of a “public-private” model

This blended finance model (public and private) holds substantial risks. From a human rights perspective, the first is the undermining of transparency and accountability. Private equity, in particular, reports to no-one but their owners. And the experience of accountability for abuse in blended finance projects is that each party passes the buck to the other – company, investor and government – at the expense of the victims who gain no remedy.

Secondly proponents of blended finance make heroic projections of turning ‘billions into trillions’ – using modest public finance to release ten times the amount of private capital through de-risking.

But the reality is generally far more prosaic. A recent OECD report has calculated that in 2022, the rich nations’ bilateral finance of nearly $92bn mobilised about $22bn in private investment – that’s 24 cents of private finance crowded in for every dollar of public funds spent.

The danger with this model is that to deliver better ratios, desperate governments provide more sweeteners to private finance in tax breaks, confidentiality, and exceptions to national law, undermining their own responsive and accountable government and with it public trust.

A just transition must also be a fair transition

With this level of dependence on private capital confirmed in Baku, rich country governments now have an immediate obligation to at least ensure their business regulations and incentives will ensure that their benefitting companies respect human and environmental rights in developing countries.

The rapid transition to green economies will involve massive change in all our economies. It cannot be delivered with traditional business models that ride roughshod over the rights of communities and workers. The delays from resistance to abuse are already ballooning. If COP29’s agreed strategy is to have a chance of success, governments must direct capital to deliver shared prosperity, corporate human rights and environmental due diligence, and fair negotiations with communities and workers, especially for those most vulnerable to abuse, such as frontline Indigenous Peoples and migrant workers.

Hope for the future

Rich country governments do have the power in markets to deliver adequate regulation. There is hope that the European Union’s Corporate Sustainability Due Diligence Directive will be a case in point. But there are other opportunities next year too.

The review of the International Finance Corporation’s Environmental and Social Performance Standards has the chance to enshrine the regulatory standards that can direct capital to deliver a just transition. The G20 Energy Ministers have announced plans to boost renewable energy, especially in developing and emerging countries, where social justice to underpin public trust can be further embedded.

These are the opportunities for us to press for shared prosperity as move towards the Brazilian COP30 and despite the disappointments of Baku.