Transcript provided by Kensho.

Lindsey Hall: Hi. I'm Lindsey Hall, Head of Thought Leadership at S&P Global Sustainable1.

Esther Whieldon: And I'm Esther Whieldon, a Senior Writer on the Sustainable1 Thought Leadership team.

Lindsey Hall: Welcome to ESG Insider, an S&P Global podcast, where Esther and I take you inside the environmental, social and governance issues that are shaping the rapidly evolving sustainability landscape.

Esther Whieldon: If you listen to this podcast, you've probably heard us talk a lot about COP this year. These are the UN's conferences of the parties that bring together world leaders along with civil society, business, indigenous peoples, youth, philanthropy and international organizations for about two weeks.

Lindsey Hall: And the UN's big Annual Climate Change Conference, known as COP29 wrapped up in November 2024 in Baku, Azerbaijan. I had the chance to be there in person, and I spoke to a lot of people while I was there. It's always a challenge to sum up such a sweeping event, but there are a couple of key outcomes we'll be covering in today's episode as well as in some upcoming episodes.

Now this is widely known as the Finance COP. And the key takeaway as we'll hear today was the establishment of a new collective quantified goal, which is a new and awful acronym for our listeners, the NCQG. We'll hear more about this today as well as about other key outcomes related to transparency, adaptation and carbon markets.

And we're going to be hearing about this from Marcos Neto, a leader at the United Nations Development Program, or UNDP. This is a UN agency that operates in about 170 countries and territories working to eradicate poverty while protecting the planet. UNDP helps countries develop policies, skills, partnerships and institutions so they can sustain their progress.

And Marcos has a unique perspective on COP29 as well as on COP30, which takes place next year. It's an event that's already drawing a lot of attention from the public and private sector alike. And as you'll hear, Marcos grew up in the Brazilian town of Belem, which will host next year's Climate COP.

Marcos Neto: So my name is Marcos Neto. I'm an Assistant Secretary General at the United Nations Development Program, UNDP, and the Director of the Bureau of Policy and Program Support. I'm Brazilian ..  born in the city that's going to host the next COP.

Lindsey Hall: You are born -- okay.

Marcos Neto: I was born in Belem in the Amazon region of Brazil. And that has profoundly influenced my trajectory, my thinking in terms of issues on sustainability and things like that, having born and spent my childhood in the Amazon by the river.

Lindsey Hall: Okay. Tell me more about that? How does that influence what you're doing now today?

Marcos Neto:  Well, it's a small town for Brazilian standards, right? And it's a town that it's totally linked to the forest and linked to the Amazon River, right? So we are very close in Belem to the delta of the river, right? So you can -- there's water, just nonstop water everywhere. It's a very famous and a very beautiful -- next year, if you come to COP, you see fish market right by the river called Ver-o-Peso.

I used to go with my grandfather, a lot of Sunday mornings. And you see the fish coming, you see poverty. The Amazon is, one, if not the poorest part of Brazil to this day. And I think this is one of the reasons why the Brazilian government has decided to take the COP to the Amazon, to Belem to show that this is all about finding a way that a country like Brazil, a region like the Amazon can develop economically, socially, while at the same time, preserving the forest and reducing emissions.

But you can't really create a trade-off between the two, right? There are 27 million people living in the Amazon. They needed development. And now the forest has a value standing and my grandfather was an exporter of Brazil nuts. Now if you look for a plantation of Brazil nuts, it's virgin forest because the Brazil nut tree takes decades to grow. So what my grandfather did is he bought virgin forest and capped before anybody was talking about sustainability or any of those issues.

So that's where my influence both seeing poverty -- when I was growing up because he did spite the river and it floods a lot and it rains a lot, right? The poor parts of town are all built on wood shacks on what we call in Portuguese, palafitas, which are basically raised on very narrow pieces of wood to allow the water to flood without getting into the houses, right?

So it was all those things. At the time, I never thought. But when you look back, you realize that they were an influence on what I end up doing with my life. I'm a lawyer from training who has spent the last 30 years working development and climate change and things like that.

Lindsey Hall: Well, thank you for sharing your personal story, which has clearly colored where you are today. And I do want to come back at the end of our conversation and talk more about Brazil and COP30 next year. But let's talk a little bit about where we are now in COP29 here in Baku. A lot of our audience will not be here. A lot of our audience will have never been to a COP. What should they understand about what's happening here in Baku?

Marcos Neto: Well, there's two ways to answer that question. There's a philosophical way to answer the question, right, which is basically, we are trying to save the future of our kids, right? You have three kids, I have two kids. We are trying to save a meaningful, livable future for them. That's the philosophical answer.

The practical answer, this is the Finance COP, where we hope to get out of this COP is a new collective quantifiable goal for climate finance. In other words, how are we going to collectively -- that's why the goals -- the name says collectively because it belongs to everybody. How are we going to finance the transition to a decarbonized world, while at the same time, helping most vulnerable communities and countries around the world like small island development states to adapt to what is already a reality, right?

Because even if we were to stop emitting greenhouse gas pollutants today, there's enough in the atmosphere to already create the havocs that we've seen. We can make different choices. And that's what COP29 hopefully will deliver to us, which is an agreement that the international community comes to terms that we need to move this transition and we need to move faster and it's going to cost money. But in action, it's going to cost more.

We know from a fact that for every dollar you put it down on prevention, you save $7, right, on responding to a crisis, to an emergency. But we're still not prepared to put the $1 down. And then we'll leave with the consequences in the billions of dollars that have to be to repay, but it's worth than the billions of dollars.

So in the next hours or days, we need to see the international community agree on a globe, which should be in the trillions should count all kinds of resources, public finance, domestic finance, private capital should all be part of this composition of this goal. We've been negotiating for years how the rules are going to work and now text has been agreed for Article 6.2 and Article 6.4.

Now there will be a few works on technical registry, interoperability between different carbon markets, avoidance and all the other technical aspects. But it's very good that we actually now have the rule book that can allow us to recreate a global carbon market because it is part of this collectiveness, right? So certain countries that have more difficulty to decarbonize could be able to actually buy and sell carbon offsets, right?

Now the carbon market and a carbon offset is not a substitute for hard, difficult mitigation or in other words, reduction of emissions, right? The carbon market should be used for residual, not as a replacement, or I don't have to transition to the renewable energy because I can do the carbon offsets. That's not what it should be done. It should be there for what is left, right? But it's great that we have that agreed in Baku.

Lindsey Hall: Quick note here. We're going to dive into carbon markets and specific outcomes from COP29 in more detail in an upcoming episode. For today, we'll just note that a key achievement was that countries agreed on details of how carbon markets will operate under the Paris Agreement.

Marcos just mentioned Article 6.2. And here, the decision out of COP29 provides clarity on how countries will authorize the trade of carbon credits and how registry is tracking this will operate. On Article 6.4, countries agreed standards for a centralized carbon market, which the UN calls good news for developing countries that will benefit from new finance flows.

Esther Whieldon: Now on the financing goal, this was a big number that everyone was holding their breath for towards the end of COP29. And the ultimate number agreed to was one that provided USD 300 billion in public finance annually to developing countries by 2035. The goal also includes a broader investment target of USD 1.3 trillion a year by 2035 from both public and private sources.

So Lindsey, is this viewed as a win then?

Lindsey Hall: Well, it depends who you talk to. I've heard a range of views. On one hand, there are press releases touting the fact that this figure triples finance to developing countries. USD 300 billion is more than the previous goal of USD 100 billion annually to developing countries.

But others say that number falls far short of what's needed. And they're also skeptical because even that smaller $100 billion number was a struggle to achieve. Here's Marcos again, talking about where the money in this new collective quantified goal will come from.

Marcos Neto: Fifty percent of whatever the final number is should be ground based, while the rest could be on concessional loans or international development banks, private capital loans, lending and things like that. Now that ground-based side is where we are looking from a north to south solidarity investment side.

That number is complicated right now because one of the things that it's clear here in Baku is that we can no longer count with the United States of America for the next four years at least, right? So this is putting pressure in the European Union, which doesn't want to be left alone. So there is the need for others to stand up.

Lindsey Hall: Okay. You anticipated one of my questions, which is who pays this fill-in-the-blank trillions of dollars?

Marcos Neto: Yes. I think if you look at the United Nations framework, conventional climate change, this is supposed to be paid by Schedule 8 countries, which is the historical emitters, let's put that way, OECD economies. But I think we're in a different world. You have to consider how other emerging economies, which are not in Schedule 8 could contribute. And that's part of the conversation that is happening here.

Lindsey Hall: In Baku, the recent results of the U.S. elections were a backdrop from many discussions. U.S. President-elect Donald Trump pulled out of the Paris Agreement on climate change the last time he was in office and he said he'll do so again. I ask Marcos, how will the political landscape in the U.S. and elsewhere impact global climate action?

Marcos Neto: I think it's reasonable to assume that the United States of America will pull out of the Paris Agreement like it did in 2017, and that creates a vacuum, right, both in terms of finance contribution, but also in terms of leadership. The U.S. has an important leadership and should exercise the leadership. Because in the U.S. vacuum, someone will step up.

Someone will take those vacuum, right? We don't know who is going to fulfill that space or not. The energy transition is irreversible. So it is dangerous for the United States not to be in conversations like this because that is the future, right? You can stay behind, holding your horses into old technology, old fossil fuels, the world will move forward.

One in every two cars sold in China is an electric vehicle. It's a competitive nature of the United States that I think will be jeopardized for the future. Now who else is going to pay? I think Europe obviously sees its responsibilities, other G7 economies. The question is, will some emerging economies show up in the next few hours or days and put some money on the table. We'll see.

Lindsey Hall: Is it their role of these emerging economies to put money forward?

Marcos Neto: No, they have never been. But I think, again, a vacuum is being created. You have to figure out what is the self-interesting of different economies around the world in fulfilling this vacuum or not. I think the entire climate history of negotiations from the 1992 conventions is based on a principle of common but differentiated responsibilities, right? So you have a stock of emissions that pretty much belong to the West.

Now you have a new stock of emissions that have been put out there by new emerging economies. Now they are developing economies. If you look for emissions per capita, the emissions of India are still very small per capita, right? A billion three-hundred million people, their emissions are very small comparing to emissions in the West per capita.

In absolute term, they're catching up, right? So I think the configuration of the conversation eventually is going to have to change. But there's very little trust among the countries right now to actually try to change this configuration now. And a lot of the distrust comes around money, right? The developing countries were promised back in 2009, $100 billion a year, which is billions, by the way, right?

Lindsey Hall: Billions, not trillions.

Marcos Neto: Billions a year. That money never happened. So now you want to convince them that, I don't know, what you -- it's going to happen this time. How? Why? It didn't happen before. But now we're moving to trillions, right? So yes, it's difficult negotiations are very complicated processes.

I think the interesting element here in Baku, and that is where the elements of a deal on the table are, is this balance between the new collective quantifiable goals so the finance goal and mitigation, ambitious mitigation, right? The developing world at the moment is saying, don't ask me to have more ambitions if you are not going to put the money on the table.

And Europe and other industrialized economies are saying, we need more ambition and we need faster ambition, but I don't have the money. The level of mitigation ambition and just to clarify, mitigation in the context of climate change is emission reductions, right, of greenhouse gas equivalent carbon dioxide equivalent. So that is the deal that's going to happen.

Low amount of money, there's going to be low ambitions mitigation. That's a bad deal. Higher amount of money, that will be higher about the mitigation. That's a good deal. Now my experience in those deals is that we have a romantic notion of international cooperation, international diplomacy. We think that those things always end up on a win solution, everybody is happy.

The most likely scenario, it is going to end up on a solution with everybody unhappy. But that's fine because everybody is going to have to give up on something, right? And somebody is going to have to give up on something that's very precious to them and others are going to have to do the same. So you end up with an agreement in which nobody is happy. That's a good sign.

Lindsey Hall: That's a sign that the compromise is working effectively.

Marcos Neto: Yes.

Lindsey Hall: Are there any conversations you've had that you can share with our listeners that have been especially enlightening or interesting to you since you've been here in Baku?

Marcos Neto: I think perhaps a couple of things I would highlight. One is a piece of work of us, the United Nations Development Program, UNDP, where we are very involved is on the support to governments to prepare what is called a nationally determined contribution. So the Paris Agreement was revolutionary in terms of how international negotiations and treated happen.

Until the Paris Agreement, most international agreements and targets and things like that were agreed centrally and then going down to the countries. Paris Agreement says each country goes on, goes home and prepares NDC and tells in your own reality how you are advancing towards staying within 1.5 degrees Celsius and so on and so forth, right? So it's a bottom-up process.

The Paris Agreement also realized that back 10 years ago, almost next year will be 10 years of the agreement that you would not get immediately the degrees of ambitions. So it built in a ratchet mechanism of the NDCs every five years. The first generation of NDCs, which were presented right in Paris, when you added all them up, they put us in a trajectory of 3.5 degrees Celsius, way too high.

Now the second generation, which was presented in Glasgow, put us on a 2.5 trajectory. Now by November, a year from now, a COP30 in Brazil, it is the third generation of NDCs. The expectation and the thing that we at UNDP are doing everywhere in the world is to make sure that we get to the lane and then the trajectory is 10 years after the Paris Agreement within 1.5 degree.

That for me, there's a lot of passion in Baku about the NDCs. If we can get a finance goal, I think we're going to be in good shape because as I told you, we, as UNDP, we've been asked by the UN Secretary General to lead the entire UN system in putting those NDCs together and helping countries put those NDCs together. At an ambition level, which is 1.5 degree aligned as an investment plan.

So we're actually trying to bring cost to the NDCs because they didn't have. So how much is it going to cost the next five years to implement those? What are the financial strategy? How much of this money is going to be publicly domestic resources, how much is going to be international, how much is going to be private capital? So trying to put beginnings of financial strategy together with the NDCs.

And the third pillar that is essential on our own because we actually supported 128 countries in writing the second generation of NDCs. So we've learned a lot of what works, what it doesn't work. And the third pillar is very important because what we learn is that ambition is directly correlated with inclusivity. The more participatory the NDC processes are, business, women, indigenous peoples, local communities, whole of government, the higher the ambitions are, youth groups.

So in our technical assistance in our work with governments, we always try to say, look, let's convene and let's bring as much of society as possible to do this. The second conversation that I get really excited about here is a realization after 32 years that the three real conventions need to come closer together. You can't fight the climate crisis without biodiversity.

And you can't preserve biodiversity in a world that is raging with climate crisis. And then there is a third convention that was signed up in Rio in '92, which people forget, which is a conventional desertification and land management. So I was in Cali just about a month ago on the biodiversity convention. I'm in Baku, and I'm going to Riyadh in Saudi Arabia for the desertification convention.

Lindsey Hall: I should note here that the COP process is not without its critics. During COP29, for example, a group of former leaders and prominent climate experts signed an open letter calling for reform of the COP process, which they said is no longer fit for purpose, and they called for a fundamental overhaul of the COP.

They said, "We need a shift from negotiation to implementation, enabling the COP to deliver on agreed commitments and ensure the urgent energy transition and phaseout of fossil energy." Here's Marcos again talking about how the three different COP processes work together. That's climate, biodiversity and desertification. And you'll hear him introduce another gnarly acronym, NBSAP. That's the National Biodiversity Strategy and Action Plan. Okay, here he is.

Marcos Neto: What happened this year is that they were never put so close together. Literally, from the time that Cali began to the time Riyadh is going to end, is seven weeks, eight weeks. It's not even two months. Maybe two months, right? So that has created this perception, which excites me that we have to look at those things in an integrated fashion, in an integrated way, right?

So again, I told you about the work that we do as UNDP on the NDCs. We do a similar work with around 90 countries around the world on the equivalent of the -- to an NDC to the biodiversity convention, which is the whole acronym it's called NBSAPs.

Lindsey Hall: I actually just wrote that down today. I've been trying to brush up on all my new acronyms. That is a tricky one.

Marcos Neto So one of the things we are advising governments now is unify the processes, do an NBSAP and an NDC together. Now you still have to present two documents because they are two different conventions. But don't do them in isolation, do them together. Now in Riyadh, we're going to get a land restoration or land management target to basically restore 1.5 billion hectares of degraded land.

That target needs to be put together into an NDC and NBSAP. Land becomes the common denominator, right? Land, huge amount of biodiversity on land, forest. Everything is on land, right? If you look at the perception of a trade-off between agriculture and forest -- again, I come from the Amazon in Brazil, that is a reality, right? But there are 30 million hectares of degraded land in Brazil.

You don't need to cut tree down. You just need to restore that 30 million hectares of land and let agriculture go there, right? So we can do those things. We can fit 8 billion people, preserve the Amazon, right, maintain biodiversity and manage the climate crisis through land. So I got very excited, and there's a lot of conversation. There was a decision of the COP in Cali asking for synergies between the three conventions.

There should be a decision similar here in Baku, reaffirming Cali's request for synergy and one in Riyadh in 10 days' time, reaffirming that. And we, as UNDP, we are in the primary position of advising the government involving NBSAPs and NDCs and then to actually make this work on the ground. And then it's not that you need less money, you still need a lot of amount of money.

But what you can do is that you can multiply the impact of every dollar. So if you invest in land restoration, you're actually investing in agriculture, you're actually investing in reducing the forestation. You're actually investing in biodiversity conservation. That for me is where the magic is going to be that synergy, that integration. And you can even look at the three real conventions and find the synergy and then extrapolate the synergy to the sustainable development goals and deal with inequality, deal with gender.

And it is important. Women suffers more than men, the results of the climate crisis, disproportionately affected. But I would argue, you cannot solve this crisis forgoing 50% of the world's population. We need the ingenuity, the business acumen, active participation of women into the solution of this problem.

Lindsey Hall: Marcos mentioned gender, and this was the focus of one of the thematic days at COP29. In Baku, countries reaffirmed the importance of gender equality and agreed to develop a new gender action plan for adoption at COP30. But according to Marcos, this represented very little progress.

Marcos Neto: There's a text that came out yesterday on gender. It's not -- it's pretty much a status quo context on gender issues. There's very little progress, if you want, from the current framework that exists. It's a sign of the times of live-in. There has been a backlash on gender empowerment throughout the world. So it's sad to say that we might not see progress on the gender text, but at least we might not see regression. Sad because we should always be seeing progress in those conversations.

Lindsey Hall: You talked about NDCs and mitigation. I just wanted to ask about adaptation and national adaptation plans. Where do they fit into this whole landscape that we're talking about?

Marcos Neto: Again, we as UNDP are supporting about 50 other countries preparing the national adaptation plans, including the Azerbaijan government who presented its NAP as it's called in the beginning of the COP. Now the national adaptation plan is a part of the NDC. So the NDC needs to cover both adaptation and mitigation. And again, part of this integration, you need to make sure that the national adaptation plans are not things that are sitting on the side in isolation from the NDCs.

They actually need to be tied to the indices. So that's how they fit in that. The other interesting thing that this COP is the first COP that we are seeing the implementation of what is called the enhanced transparency framework of the Paris Agreement. So for the first time, countries are presenting what is called the biannual transparency report, right, which is basically how they've been implementing the NDC.

This is very important because it's a process of learning, right? So we are advising 45 countries in preparing their BTRs. And Azerbaijan and others have already presented their BTRs here in Baku. These BTRs are becoming invaluable data points, lessons learned points to the NDCs 3.0. So the NDCs 3.0 is going to be put together almost like a jigsaw puzzle. You've got BTRs, you've got NAPs, you've got net-zero targets for 2050.

All of those things are going to come together ideally in an inclusive process, call of society process to end up with ambitions 1.5 aligned NDCs. And I'm proud of my team. I'm very proud of UNDP's role with our sister agencies of the UN and other partners in doing the lifting, if you want, between -- the NDCs are supposed to be presenting in February next year.

Our expectation is about 20% of the countries might come to February. And then we move to September, and that is when they really need to be in because our colleagues at the Secretary of the Climate Change Convention then do a synthesis report.

And that is when I am optimistic that history will be made in my hometown because that is the moment that the world can -- despite all the geopolitical troubles, despite the wars, despite everything else and some questions about the value of multilateralism, we have an opportunity in November next year to show that the UN matters, the multilateralism matters. And yes, it took 10 years, could have been faster, but the world has finally arrived at a trajectory of 1.5 degrees Celsius. Now if it doesn't happen, then I think we are about to lose the Paris Agreement.

Lindsey Hall: Lose, how so?

Marcos Neto: What is the value? Why -- if we have an agreement that 10 years on cannot put us on the trajectory of 1.5 degrees, right? Is it still credible, right? Somebody said something this week in one of the -- I don't know, how many meetings I attended -- that the challenge of climate change is we are not really negotiating climate change. We're negotiating our entire way of life.

We've built an economy based on fossil fuel. And we are asking all of us to walk away from that to a new economy, which we are still building. And that is where it's very difficult because you are negotiating your entire structure by which we've organized our lives since the industrial revolution. It's not easy. But we have no choice. There's no second planet, right?

You and I have grown up the last 500 years or -- we're not that old, but the last 500 years with climate and the physical forces on the planet earth helping us, right? They've helped us. They have been benign, but they don't have to be benign. The history of this planet before humans was plenty of volcanic eruptions and tectonic shifts and these and that, right?

We are now at the risk of creating a much more inhospitable planet for us and for our children and for their children. On top of everything else, AI and disruption in the economy and geopolitics and war, we are settling the future generations with an environment that is not going to be as benign as the environment the generations past have had, right? And climate change is going to become a direct link to conflicts, transboundary wars because of water and droughts and -- will lead to migration. So it doesn't have to be like that. But that is -- if we do nothing, that's the path.

Lindsey Hall: So today, we've heard discussion about some key outcomes from COP29. As we heard, the NCQG decision calls for all actors in the global financial landscape to scale up total financing to USD 1.3 trillion per year by 2035. And that's through a mix of both public and private sources. And that includes the so-called Baku to Belem road map to $1.3 trillion.

This was agreed at COP29. And over the next year, it aims to scale up climate finance to developing countries to support low greenhouse gas emissions and climate resilient development pathways and also to implement nationally determined contributions or NDCs and national adaptation plans.

Esther Whieldon: Already a year out, there's a lot of focus on the road to COP30. As we'll hear in upcoming episodes, the private sector is increasingly showing up to these conversations. And also, a lot has changed in the carbon markets and in sustainable finance. We'll also look at how different stakeholders across the private and public sector are collaborating to drive climate action. So please stay tuned.

Lindsey Hall: Thanks so much for listening to this episode of ESG Insider. If you like what you heard today, please subscribe, share and leave us a review wherever you get your podcast. 

Esther Whieldon: And a special thanks to our agency partner, The 199. See you next time.

Copyright ©2024 by S&P Global  

This piece was published by S&P Global Sustainable1, a part of S&P Global.     

DISCLAIMER  

By accessing this Podcast, I acknowledge that S&P GLOBAL makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in this Podcast. The information, opinions, and recommendations presented in this Podcast are for general information only and any reliance on the information provided in this Podcast is done at your own risk. This Podcast should not be considered professional advice. Unless specifically stated otherwise, S&P GLOBAL does not endorse, approve, recommend, or certify any information, product, process, service, or organization presented or mentioned in this Podcast, and information from this Podcast should not be referenced in any way to imply such approval or endorsement. The third party materials or content of any third party site referenced in this Podcast do not necessarily reflect the opinions, standards or policies of S&P GLOBAL. S&P GLOBAL assumes no responsibility or liability for the accuracy or completeness of the content contained in third party materials or on third party sites referenced in this Podcast or the compliance with applicable laws of such materials and/or links referenced herein. Moreover, S&P GLOBAL makes no warranty that this Podcast, or the server that makes it available, is free of viruses, worms, or other elements or codes that manifest contaminating or destructive properties.  

S&P GLOBAL EXPRESSLY DISCLAIMS ANY AND ALL LIABILITY OR RESPONSIBILITY FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR OTHER DAMAGES ARISING OUT OF ANY INDIVIDUAL'S USE OF, REFERENCE TO, RELIANCE ON, OR INABILITY TO USE, THIS PODCAST OR THE INFORMATION PRESENTED IN THIS PODCAST.