Financing the future: Vera Songwe’s vision for a climate and growth agenda at COP29

By Climate Champions | November 10, 2024

Distinguished economist and finance expert Vera Songwe is a globally leading voice on sustainable development, climate finance, and economic growth in emerging markets. With a wealth of experience, including as Under-Secretary-General of the UN and Executive Secretary of the UN Economic Commission for Africa, Songwe has been instrumental in shaping discussions on Africa’s economic future, and the global climate finance agenda at large.

As co-chair of the International High-Level Expert Group (IHLEG) on climate finance, Songwe advocates for strategies to mobilize public and private financing for climate action. Recently, she co-authored ‘A Climate Finance Framework: Decisive Action to Deliver the Paris Agreement’ with Nicholas Stern and Amar Bhattacharya, calling for a dramatic increase in climate financing to support sustainable development and green industrialization in low-income countries.

On the eve of COP 29 in Baku, Songwe discusses the role of climate finance, green industrialization, and the need for global cooperation to combat the climate crisis. Her vision reflects a unified effort to fund a sustainable, equitable global economy that aligns with urgent climate and nature goals.

COP 29 is known as ‘The finance COP’, what does that signify to you?

We need leaders to come to the table ready to commit the climate finance needed to address the climate crisis and drive sustainable growth.

The Climate Finance Framework report that I co-chaired explains that we need USD 2.4 trillion in financing—USD 1 trillion in external financing excluding China and USD 1.4 trillion in domestic funding annually —by 2030 to support a just energy transition, climate adaptation, and nature protection in emerging economies (excluding China).

The only way to raise this amount of finance is to stimulate domestic growth in low-income countries – by mobilizing domestic resources, creating jobs, and accelerating green industrialization. This vision for green industrialization was endorsed by African leaders at the first Africa Climate Summit last year, and it continued under the COP 28 Presidency.

At COP 29, leaders have a critical task: to bring green industrialization into clear, sharp focus – defining how it can drive inclusive economic growth worldwide. Right now, we have the broad outlines, but the vision remains blurry and mostly benefits the advanced economies. By agreeing on a shared blueprint for green industrialization, we can create a clear, actionable framework that benefits all countries.

A unified commitment to this vision could be the keystone of a compelling global investment story, one rooted in securing the needed USD 2.4 trillion for low income countries. With clearer parameters, this framework can inspire confidence and mobilize the capital needed to make sustainable development a reality.

What outcomes do you hope COP 29 delivers? 

Firstly, the COP must fully fund the loss and damage (L&D) fund created at COP 27 in Egypt. While initial resources were committed at COP 28 in Dubai, and the World Bank has now established the fund’s institutional framework, must ensure it is  fully financed to meet its mandate. Securing this would be a major milestone.

Secondly, I hope COP 29 significantly advances the Global Climate Finance Framework, endorsed as the UAE consensus, that was launched last year to make climate finance accessible and impactful, especially for developing nations. The Framework’s 10-point agenda outlines practical steps to mobilize various financing sources—from crowding in private sector funds with credit enhancements from Multilateral Development Banks (MDBs) and global philanthropy, to loss and damage financing, and biodiversity protection. Key questions should now be answered to bring the framework to life, such as how can we better attract private sector investment to drive growth in emerging economies at scale? Also, how can the developing world alleviate pressure on low income nations that are grappling with debt servicing, to provide them the fiscal space for transition planning? To succeed, no country can be left behind. 

Thirdly, COP 29 should strengthen the global commitment to move away from fossil fuels. In 2022, fossil fuel subsidies reached an astonishing USD 7 trillion, or USD 13 million per minute, according to the IMF—far outpacing the USD 2.4 trillion needed annually to meet global climate goals. Redirecting even half of fossil fuel subsidies to climate finance would yield USD 3.5 trillion, greatly exceeding the financing pledged currently. COP 29 should outline a clear framework for repurposing these resources to drive the green transformation in regions like Africa, Asia and Latin America, while still supporting essential ‘last mile’ fossil fuel subsidies for the poorest populations.

Lastly, COP 29 should confirm what robust transition plans should look like. This is key to determining which transition plans get funded. Whether it’s an African country needing external support or a Gulf nation deploying own resources to manage its transition – clear, well-defined plans are essential. Transitioning involves more than merely halting production; it requires phasing down brown fuels through optimization before closure. The UK recently closed its last coal plant, after 142 years. Obviously, other countries do not have that long, but nevertheless they do need to plan managed transitions, with their existing operations becoming cleaner and more efficient over time, before ultimately shutting down. 

This discussion should also include financing for emerging green fuels, such as hydrogen, which remain very costly to develop, but are in massive demand from the developed world. Namibia’s significant green hydrogen potential, for instance, highlights the need for substantial investment to make such resources viable. I hope COP 29 advances conversations on transition plans, financing transitions from brown-to-green, and supporting clean technologies.

How can COP 29 catalyze carbon markets?

A clear space to raise finance for low-income countries is carbon markets, so we need the COP conversations to drive progress on Article 6 of the Paris Agreement, to unlock that potential. If structured effectively and transparently, carbon markets can drive a huge part of the revenue needed for green development and climate finance in places like Africa.

To raise integrity, we need to shift from voluntary to compliance-based carbon markets; establishing mandatory rules and standards for measuring, reporting, and verifying emissions reductions. This would reduce risks of greenwashing or inaccurate reporting, helping to ensure that carbon credits genuinely represent measurable emissions reductions, turning them into reliable financial assets.

We also need interoperability so that carbon credits can be priced and traded consistently across regions. Currently, many carbon markets are region-specific: two carbon credits from different regions might be priced differently, not because one is inherently more effective in reducing emissions, but because of regional factors like local demand or market rules. Standardizing carbon credits to reflect the true asset or commodity value, would streamline pricing, making credits more comparable and tradable across global markets. This would allow investors to transparently assess carbon credits – ultimately boosting trust in the carbon market.

How can the  New Collective Quantified Climate Goals (NCQG) unlock stronger action?

One of the key stories of COP 29 will be governance of the New Collective Quantified Climate Goals (NCQG), a new global climate finance goal that leaders shall set from a floor of USD 100 billion per year, prior to 2025. It is crucial that we make significant progress on the NCQGs, as they will underpin many countries’ mitigation and adaptation strategies. Given 80% of emissions come from just 20% of countries, we hope G20 nations will arrive in Baku, firstly, ready to clarify their own paths to net zero, and secondly to outline a framework to support global efforts in a credible and sustainable manner.

Under Brazil’s G20 presidency, considerable work is underway to audit the various climate funds; currently, there’s around 100 such funds. By pooling these resources, we can create a more robust financial foundation, much of which already includes components for loss & damage, and adaptation. We must both leverage existing finance, while also establishing new funding mechanisms. The NCQGs will provide essential clarity, and audits of current practices will ensure that new commitments can be met effectively.

Notably, in 2021, the World Bank introduced a third pillar focused on ‘creating a livable planet,’ to enhance its efforts in addressing climate change, environmental sustainability, and resilience-building in vulnerable communities. The inclusion of the loss and damage fund within this pillar highlights the World Bank’s recognition of the need to support countries facing irreversible impacts of climate change. 

We also need to replenish the International Development Association (IDA), which was established in 1960 by the World Bank, to provide financial assistance to the world’s poorest countries to promote their economic development. 

How will replenishing the International Development Association (IDA) support sustainable growth?

The IDA is the World Bank’s fund for the poorest countries, providing long-term financial support for key issues from girls’ education – to clean water. This enables countries to build pathways out of poverty, rather than only focusing on their immediate survival. IDA grants and low-interest loans are designed to deliver high returns on investment, over long timeframes often spanning 30 years, which is crucial for countries without access to capital markets to grow, while reducing dependency on external finance.

One of IDA’s strengths is its ability to leverage donor contributions by ratios of 4:1 – 10:1, maximizing the impact of each dollar. The high return on investment that IDA achieves shows that good returns are possible – when the right amount of resources goes into the development ‘bucket.’ In other words, countries should get the resources they need, for the growth they deserve.

The IDA plays a critical role in macroeconomic stabilization during crises, such as the COVID-19 pandemic, providing lifelines for regions like Southeast Asia, Africa, and even low-income parts of Southeast Europe. Unfortunately, the fund has seen a decline in resources over the last decade, exacerbated by global crises. As countries face rising poverty levels, a replenishment of the IDA is urgently needed to restore growth and support development. And the same is true for the Africa Development Fund. New capital is needed to unlock an equitable, global transition.

How do you see the role for non-state actors in reshaping the financial system?

Non-State Actors play a crucial role in speaking truth to power, which they do in three important ways.

Firstly, they bring analytical rigour to discussions, drawing on their ground-level experiences to challenge perceived wisdom at the Party level. For instance, the African Group of Negotiators Experts Support (AGNES) provides scientific expertise to inform a common African position in climate negotiations, incorporating perspectives from both scientists and local communities. AGNES fulfils a crucial role in bringing in the perspective of Africans who are closest to the real issues into High-Level conversations.

Secondly, given the diversity of the Non-State Entity landscape, when they forge common ground on core issues, this lends major credibility. For example, despite the many varied Indigenous Communities, and their myriad respective challenges, these groups are united in their commitment to protect nature for future generations. This brings real weight. Indigenous Communities are often excluded from G20 discussions, but at the COPs they have a space to bring their perspectives, to argue with real fervour on issues, such as deforestation, that are innate to their daily livelihoods, and also to the continued existence of humanity as a whole.  

Lastly, amid politically fraught environments, Non-State Actors align around a shared purpose, maintaining focus on the climate agenda. Despite the urgency for action on climate and nature, inevitably, in some countries, national leadership temporarily disappears. When this happens, non-State actors continue to keep the conversation alive. We’ve seen this in Brazil, with the Brazilian Coalition on Climate, Forests, and Agriculture, a powerful network of over 300 businesses, NGOs, and research institutions. And in the United States with the ‘We Are Still In’ coalition formed in 2016. When there is backsliding on climate policy, groups like this keep the baton of leadership moving, until National leaders pick it up again. 

How can climate project pipelines be accelerated?

The COP 28 Climate Champion, Dr. Mahmoud and his team under the Egyptian Presidency, made impressive strides with economic commissions to develop a pipeline of viable projects. Notably, over 70% of African projects that advanced to the second review phase have now been picked up, either for further studies or actual investments needed to initiate project development.

Building a robust pipeline supports two key challenges: discovery and scale. In Africa, many projects are relatively small, making it hard for large investors to identify and support them without assistance. Initiatives like Allied Climate Partners (ACP) help bridge this gap by providing early-stage capital and expertise to regional managers, building an aggregated investment platform of USD 825 million to fund high-risk, early-stage climate projects.

Egypt’s comprehensive energy transition program and Brazil’s National Energy Transition Policy showcase the effectiveness of government-backed, systematic project pipelines. Such frameworks draw private sector interest more readily and should be widely replicated. Philanthropic groups like the Bezos Fund and Rockefeller Foundation also play an increasing role, partnering with MDBs to facilitate this work.

Globally, debt obligations to foreign entities have more than doubled since 2008.  How can the financial system be reformed?

I had the privilege of authoring the ‘Bridge Proposal’ on Sovereign debt with the Nobel Laureate, Joseph Stigletz; Ishac Diwan; and Martin Kesler – which distinguishes countries that are in debt crisis, from those that just need liquidity. Debt distress is a severe inability to meet debt obligations, often requiring restructuring or relief. Liquidity distress is a short-term cash shortage, where temporary funding can typically bridge immediate financial needs without impacting long-term solvency. 

If countries lack liquidity for long enough, they fall into debt – leading to a period of two to three years of resolution under the G20 common framework, which helps low-income countries to restructure unsustainable debt, but takes a long time to resolve. Each year that countries wait for resolution, growth is deferred – and growth deferred is poverty created. 

Around 30 countries are in liquidity distress, as their tax revenues are not sufficient to honour their debt service obligations. But, they are not insolvent and they have long-term positive growth prospects. It’s like waiting for your salary to be paid into your bank on the 30th day of the month, but needing to honour a payment obligation on the 16th. We are urging institutions, particularly the MDBs, the World Bank and the IMF – to urgently provide resources to triage countries in liquidity distress by providing additional liquidity. 

We now face a moment of truth in regard to the world economy. Do we want to continue with the current low growth, high debt environment – or do we want to provide low income countries with some liquidity and additional resources – to finally allow them to access global markets, creating a rising tide that would lift all boats?

How can we bring the growth and climate story together on a global scale?

In almost every sphere, there are opportunities that lead to achieving global climate goals, while also increasing incomes and development goals. And vice versa.

For example, an enormous cause of deforestation is due to people cutting down trees for cooking fuel, which also causes millions of early deaths, mostly among women, due to air pollution. By providing access to clean cooking we can save lives, while preserving forests and their capacity to support food systems and livelihoods, while also absorbing dangerous greenhouse gases.

Or take the food sector, the growth models are in efficiency measures, such as shifting to better water systems, or returning to domestically-produced, that are more resilient seeds and also preserve the soil, as opposed to imported seeds. This adds up to higher returns. 

Also, we know that recent pandemics are often linked to disruptions in natural ecosystems, which can be caused by human activities such as deforestation, urbanization, and habitat destruction. By recovering our natural ecosystems, which are critically diminished, we can regain equilibrium, bringing myriad benefits from sectors to healthcare, to food and tourism.

The global growth thesis of the future is a thesis to address the climate and nature crises. We’ll publish the executive summary of the next Songwe, Stern and Bhattacharya report on the 14th November, which will further break down the implementation of the needed financing to build that future.