[Music] hello everyone and welcome to stor to was 2025 my name is anidas Gupta president and CEO of World Resources Institute wri is a global research organization working to improve people's lives protect nature and halt climate change stor show was something we do in the beginning of every year sharing what we think will be the biggest ideas and events that will shape our world over the next next 12 months this year is the 10th anniversary of the historic Paris agreement in 2015 world leaders came together to avert the worst climate impacts agreeing to limit global warming to 1. 5° C many saw this a Beacon of Hope for the planet 10 years later we have mostly failed to implement that ambition the 202 for emission Gap report finds we must reduce R Greenhouse gas emissions by 57% by 2035 this means cutting emission by 7. 5% every year over the next decade however our carbon emissions the main cause of climate change continue to rise the impacts are clear 2024 was the world's warmest year on record yet again one of our stories from last year focus on the dangers of heat in cities which kills thousands already in 2025 California experienced the costliest wildfires in US history and southern Africa continues to face one of the worst droughts in decades despite this we believe today the Paris agreement is even more critical than it was 10 years ago the US leaving Paris will not stop climate impacts from hurting Americans nor will it slow the economic transition already underway but it will keep the us out out of the only venue to influence climate decisions last year's stories to watch focused on election and why they matter politics reshapes international relations and outcomes you can see our take on what actually happened in 2024 on W social channels geopolitics greatly impacts how Finance flows between countries one of the biggest barriers to increasing climate ambition and delivering results on the ground is finance international finance not flowing to the countries and communities that need it most last November in Baku Finance was the main topic of discussion at the cop 29 climate negotiations delegates from across the world wrestles with questions of financing Global Climate action how much money is needed who should pay for the first time in 15 years leaders came together to agree on a new climate Finance goal to deliver at least $300 billion annually by 2035 to developing countries the existing goal was $100 billion per year by 2020 in addition they agreed that all actors should work together to mobilize $1.
3 trillion per year for developing countries by 2035 there was mixed reaction to this negotiated outcome some countries thought it was ambitious but most developing countries were disappointed they thought donor countries did not do enough and they were not clear how they would get the $1. 3 trillion they actually need mobilizing this money and making it flow to developing countries is critical for the global transition but first where does this $1. 3 trillion number come from the UN asked a group of experts what the Global Financial need will be for the economic transition in the next 10 years they projected that the entire world will require about 7.
5 trillion per year by 2035 as you can imagine this is an estimate many things can happen in the next decade out of the 7. 5 trillion 4. 3 trillion of these climate Finance needs will be in China and developed Nations like us and EU these countries are able to finance their own transitions the remaining $3.
2 trillion is needed in developing countries who have far fewer resources the same report estimates that $1. 9 trillion off the 3. 2 trillion can come from public and private domestic resources in developing countries this means developing countries need an additional 1.
3 trillion dollar from external funds to meet the transition goals that's where the 1. 3 trillion dollar number comes from let's think for a minute what will happen if this money does not flow to developing countries first the most vulnerable people who have contributed least to climate change will continue to suffer the most this unjust suffering will exponentially increase in the coming years this is why Finance is fundamentally about Justice second these countries will not decarbonize their economies at the speed and scale needed as a result the whole world will not decarbonize so the finance from richer countries to developing countries is not just charity it's an investment toward a safer world this year is incredibly important year for ambition by cop 13 Brazil all countries are supposed to come back with higher climate Ambitions for 2035 without certainty that adequate finance will be available many developing countries will be reluctant to put forward ambitious plans but if we find ways to ensure climate Finance can flow more countries can join the race to the top increasing finance and growing ambition is a virtual cycle we need to unlock both that's why this year's stories to watch is about how to meet the $1. 3 trillion per year goal before we get into numbers of billions and trillions our first story is about what is the money for first we need to address the climate impacts that are already here and rapidly escalating Taking Lives and impacting livelihoods by 2030 vulnerable countries could face more than half a trillion dollars in climate related damages each year second we also need to make sure the climate crisis doesn't get worse developing countries need to decarbonize their economies and find a path to low carbon growth and we should not forget the protection and enhancement of nature is a critical component of both building resilience and reducing emissions we are experiencing increasing levels of climate Devastation from floods and droughts to wallf fires and storms last year terrible floods in Spain Bangladesh and Brazil displaced thousands and killed hundreds meanwhile devastating droughts in Africa Europe and South America destroyed Agriculture and pushed up Global food prices but even if climate impacts are happening everywhere suffering is not evenly distributed low-income countries lack the resources to adequately deal with let alone prepare for climate disasters and even for Nations that may be reasonably well off impacts and destroy a huge proportion of the economy to get a better idea of the challenges they face let's go to S Vincent and the Grenadines where we have Courtney Bailey joining us last year hurricane Barrel the earliest Category 5 Atlantic hurricane on record hit my country devastating several Southern Grenadine Islands in Union Island 98% of homes and dwellings were destroyed and the ground was stripped of trees as I stand Here speaking to you 6 months later majority of the island is still without power hurricane Barrel almost completely destroyed several cash crops such as bananas avocados and coconuts leading to food shortages and loss of income for many farmers Finance to prepare for and build resilience of homes critical infrastructure local community and sensitive economic sectors to these extreme weather and slow onset events is critical not just for sustainable development but for survival in places like St Vincent and the Grenadines to recover we utilize post disaster loans which means that more of our income goes to servicing debt the weaker our economic situation the harder it is to proactively invest invest in adaptation that is why influential leaders such as honorable Mia Mutley Prime Minister of Barbados is calling not just for Aid after hurricanes but relief in servicing our debt and longer term lower cost support to our government budgets to build resilience adaptation Finance is a necessity for small island developing states with it we can protect protect our Island our environment our livelihoods and economies from the impacts of climate change the adaptation needs of these islands like my home country shows us why we need climate finance and that's our story to watch for 2025 that was cotney Bailey one of wri's experts on adaptation Finance most vulnerable countries need additional climate Finance to build resilience and minimize future impacts however research shows that less than a fifth of adaptation Finance even reaches local communities that need it most even though these communities are best place to decide how these funds should be used Finance needs to flow to the right places sooner rather than later in some places climate impacts are so devastating that is not possible to adapt anymore when this happens country countries need financial support to get back on their feet this is a separate piece of the puzzle called loss and damage funding of course recovery is always better and less expensive when countries have prepared for a disaster Finance for adaptation saves lives and livelihoods and makes economic sense look at Bangladesh in 1970 Cyclone POA killed at least 300,000 people even though it was only a category 3 storm the country responded by investing in resilience from storm shelters to early Warning Systems when Category 5 Cyclone mocha hit in 2023 only three people were killed in Bangladesh however the world is long way behind where it needs to be on adaptation Finance the targets set during cop 26 in Glasgow was $40 billion per year by 2025 we are actually on track to meet this target but 40 billion is nowhere near enough as you can see in the chart behind me the estimated adaptation Finance Gap is up to $360 billion per year we have established that countries need Finance to build resilience to an already warming world at the same time the world needs to curb greenhouse gas emission at speed and scale to keep the problem from getting worse decarbonizing our Energy System is important for stabilizing our climate it also has many other benefits like cleaning the air re breed and improving energy security but energy investment require very different kinds of Finance than adaptation Investments today emissions remain stubbornly high and if Trends continue they will keep growing countries need to take steps across sectors like energy to bend the curve let's think for a minute where these emissions come from as you can see low and middle- income countries make up to 70% of the emission in particular large developing countries contribute almost half of globous emission we don't just need places like us and you to decarbonize we need China as well as countries like India South Africa Brazil to do the same thanks to Falling cost and government investment wind and solar power are being rapidly deployed around the world but this is not happening at the same rate everywhere countries in Africa only attract around 3% of global energy investment despite being home of 1/5th of global population and 60% of the world's best solar resources South Africa stands out the country has made clear commitments to decarbonized Energy System and has secured International climate Finance to support it here's wrs Katy Ross from the town of kumati to tell us more the enormous concrete cooling towers behind me are what remains of the Kami Coal Fired Power Station this was a calfire Power Station built in the 1960s and for decades it's been a Cornerstone of South Africa's Energy System taking in vast quantities of coal and producing electricity Kami now faces a daunting challenge of phasing out of coal South Africa has one of the world's largest coal reserves and is one of the world's largest coal producers and like many countries around the world it's facing increasing pressure to decarbonize the energy system to tackle climate change millions of dollars in international support have been pledged to help commodity make that transition from coal to renewable energy while supporting the workers and the communities around the power station this is an excellent project it's well conceived but there have been tremendous challenges in its implementation the firstly there's been a significant gap between when the coal plant closed in late 2022 and when the renewable projects are expected to come online sometime in 2025 while many of the workers at karti have found new opportunities at other power stations the communities here in kamti have been left in the Lurch many of the community members have not experienced the benefit of retraining programs or reskilling programs and the economic diversification projects that have been promised are still in the pilot phases there are so many lessons here at karti um the first is around timing you've got to be planning for new projects and New Economic diversification opportunities as soon as the plant is planning to shut down and the second is sequencing these new projects need to be online well before the coal plant is shut down and finally it's about Finance the finance needs to be delivered swiftly transparently and impactfully to support better outcomes for people and the planet kamti shows us the importance of climate finance and this is our story to watch for 2025 that was Katie Ross senior director of climate action Atri large developing countries like South Africa face huge pressures they must reduce emissions while creating jobs and opportunities for the sizable population the challenge is particularly acute in South Africa where the unemployment rate for the last several years has remained stubbornly High over 30% South Africa has committed to Net Zero pathway but they won't be able to transition at the pace necessary without external Finance in the long term most of the money for investing in clean energy can come from private sector as there are clear returns for these Investments but initially public investment necessary to create self- sustaining Market some parts of the energy transition like decommissioning Cal Fire power plants or supporting retraining workers like in katti will still require much more concessional financing South Africa is not the only place that needs Finance for energy transition the International Energy agency estimates annual clean energy investments in developing countries needs to increase more than seven times by 2030 these countries require transition financing not only to decarbonize the Energy System but also to invest in the broader decarbonization of the entire economy including Transportation buildings Agriculture and Industry and if you consider the need for climate adaptation developing countri will need many different kinds of climate Finance to support these diverse investment so what should we watch for this year first the adaptation Finance Gap is increasing at cop 13 bance will negotiate its commit to at least double adaptation Finance from 40 billion to $80 billion per year second in 2023 countries made a historic agreement to establish a loss and damage fund last year countries made critical step in deciding that the fund would be hosted by the World Bank this year will the fund be ready to start dispersing financial support two countries third countries will be updating their ndc's or climate plans this year the deadline to submit is in February but we expect many countries to release their plans as late as this fall ahead of cop 30 in November will we see meaningful ambition on both mitigation and adaptation along with investment plans from adaptation and loss and damage to mitigation the various financing needs in developing countries will remain a critical area of focus in 2025 and beyond our Second Story is about where the money will come from 1.
3 trillion may seem like a very large amount of money but let's put it in perspective our estimates show that the global GDP will be around $150 trillion in 2035 so 1. 3 trillion will be less than 1% of global GDP a more relevant comparison is how much we invest in infrastructure the world invests approximately 10 to 15% of GDP on infrastructure every year $1. 3 trillion will be one10 of that in 2035 now let's go to Nairobi where Melanie Robinson's Global director of our climate economics and finance program is joining us to help us understand how we can get to the $1.
3 trillion so Melanie let's start from Basics what was in the $300 billion goal that countries agreed to in Baku last November well to understand the 300 billion we need to go back to the previous goal of 100 billion and 116 billion was finally delivered in 20122 that was made up of three parts first there was the bilateral part so rich country governments giving to poor countries the multilateral part multilateral development Banks multilateral climate funds and thirdly leverage private Finance now the 300 billion has got the same three parts but expanded especially the MDB pit and it does count money going from uh broader set of countries Melanie thanks we just heard from Courtney and ktie that there are diverse needs for different kinds of investments will this $300 billion goal be able to meet that demand well we don't know exactly what mix of Grants and loans and private Finance is in that 300 billion goal but there will certainly be a good amount which is in long-term loans and private Finance which is so important for funding Investments that have a return like Renewables especially in those richer developing countries but it is so important that in this 300 billion we have enough of that precious Grant and highly concessional cheap loan Finance because that's really important for adaptation loss and damage just transition funding um to to the poorest and most vulnerable countries in particular and that's why it's so important that actually just before the agreement to 300 billion we found out that the fund that the world bank has the fourest and most vulnerable countries was replenished so that they have got a 100 billion to spend over the next three years and do you think the debt burden which is already a significant problem for over 50 countries will become an even bigger issue yeah mdbs are a really amazing leveraging machine for every $1 taxpayers money that goes in there they can turn that into $4 even up to $10 in money provided to developing countries and what they've managed to do over the last few years through some reforms is stretch that money even further so a lot of the MDB growth has come from those reforms from that stretching of the money that they already have now debt is an issue and increasing number of developing countries are in debt distress and that makes it particularly important that there's enough concessional Finance uh that loans are long-term and affordable and ultimately that we find a more effective way to restructure and even relief debt I think restructuring debt needs to again take Center Stage but it hasn't been a big part of the conversation for a while let's assume for a minute that we will be able to get to $300 billion that still doesn't even get us near what we need experts think that half of the $1. 3 trillion needs to be Public Finance what are the other ways we can increase public capital so there are three big ways that we can do it the first is capital increases the multilateral development Banks putting more money into the banks so they can really leverage that uh and provide more to developing countries second is innovative taxes we can tax some of the pluy areas that are under tax at the moment like Aviation Maritime oil and that could raise over 200 billion uh and thirdly we will need to look for other Innovative sources because even that won't be enough thank you Melanie for laying out how we can start building towards a $1. 3 trillion goal let's look at what to watch for in 2025 first will member countries consider more fundings to MDB so they can increase their capacity to finance current political heads may make it difficult but let's remember that the last Capital increase was in 2018 when some of the same headwinds were also at Play second will International taxes gain traction as new sources of climate Finance for example will the international Maritime organization make progress on establishing levies on shipping countries including Kenya Barbados France and Brazil have put together a task force to look at new ways to raise additional Finance through International taxes or livs will there be broad acceptance of The Proposal when they release it at 30 in bam third the finance for development conference will take place in Seville in June this is a gathering of world leaders that takes place every four years to discuss the future of development finance will then make stdes in reforming the Global Financial architecture will they bring climate nature and development Finance together in a more coherent Way fourth just in the past week the US has frozen almost all for foreign assistance including all climate Finance while there will be review over the next 90 days we'll be watching to see how much of this Finance is ultimately cut a us toet treat on development Finance would have serious consequences for the US it could damage key geopolitical relationships leave the country behind in important markets and risk knock on impacts on security and migration for the world this has widespread ramification for people people who rely on life-saving assistance from the US it is still too early to tell what US Cuts will mean for reaching the 300 billion and 1.
3 trillion Golds by 2035 but they may impact the pace of the scale up we must explore multiple Avenues to ensure climate Finance reaches $1. 3 trillion by 2035 this mean recognizing that climate Finance is not a niche concern but an integral part of the broader International Development context and goals in the best case scenario Public Finance will only get us almost halfway to $1. 3 trillion so how do we get the remaining 700 billion experts suggest this will need to be filled with International Private Capital which brings us to our next story this story is about making private Capital flow attracting International Private capital for climate investment has been extremely difficult for developing countries investors believe that projects in these countries would be high-risk Investments it is still much more expensive to borrow money to invest in clean energy in most developing countries than it is in Europe or in the United States for example the same Pro in Germany will require 8% in equity returns compared to in Zambia which will require 51% in Returns the World Bank and other development Finance institutions have instruments that absorb some of the initial risk from projects by providing guarantees but there's not enough public resources to De $700 billion of private Capital needed per year by 2035 among developing countries India is a critical outlier having attracted significant private capital for clean energy investments in recent years to help us understand what's going on there let's go to bangaluru and meet Pavan mulukutla from wri India every country faces challenge in attracting climate Finance here in India we know Public Finance isn't enough to meet the climate Finance needs of hundred billion each year we also need private capital and and there has been a lot of hard work to create a more welcoming environment for private Capital that is now paying dividend meaning more money for new facilities such as the solar array of kagoda International Airport here in bangaluru first of all the government is setting ambitious targets indicating to the private sector they are serious about making the switch and that India is a market worth investing in they have set out clear goals and sectoral targets India's national electricity plan aims at achieving 500 gaw of clean energy by 2030 and 600 by 2032 there is also a target for states to reach 43% share of renewable electricity by 2030 but they haven't just set goals they also have a strategic road map for how they will support the shift towards clean energy through a series of nudges from India's policy makers this Pro provides investors with the predictable incentives that give them the confidence they need the government has also signaled support for Greening the economy through budgetary allocations and subsidies in both existing and new areas this is also aimed at building investor confidence and building momentum alongside the national government's ratcheting up of ambition when it works it's not the government that has to put in the money instead it makes it easier and more profitable for private Capital to invest in India's transition third government at both National and state level has made it clear that the transition to clean energy is all about competitive Advantage about building strong and prosperous economies for the future here in India we are seeing progress in how a country can attract more private climate Finance but it needs to build upon its successes to bring the money needed but the example of India shows us what can be done to make the engine of private climate Finance work so much more effective and that's a key part of our story to watch for 2025 that was span mutla WR India's executive director for integrated Transportation clean air hydrogen of course India has advantages including its growing economy his deep pools of domestic private capital and the size of internal Market but there are few things that India did that all developing countries need to do to attract International Private Finance as pava noted India started by setting clear sectoral targets which should be connected to each country's ndcs then India put in place supportive National and state level policies to nudge private sector in addition the government and the domestic Banks introduced new instruments to enable sustainable financing to flow more freely and more efficiently critically the government of India has significantly ramped up its investment of public capital in the sector between 2004 and 2014 the government spent less than $700 million however in 2024 alone the government budget for the sector increased to $2.
4 billion growing the cont confidence of private investors most importantly we see how some of the missing private Finance in the $1. 3 trillion needed can be mobilized with policies and targeted use of public Capital Public private partnership will be the key to drisk and attract sufficient private Capital we have seen effective examples of this holistic approach from China's green industrial policy and the United States inflation reduction Act while few countries will have this kind of Firepower at their disposal the lesson about setting clear ambition and backing it with strong public policy and Public Finance is relevant everywhere for example in 2019 the African Development Bank loaned funds to Morocco to support coordinated domestic climate policies by 2021 this funding offered guarantees to nearly 50,000 th000 medium and small Enterprises supported 1100 projects led by women and helped realize approximately $300 million in private Equity investment so what should we watch for this year first keep an eye out for Country platforms these are country-driven initiatives to bring different pieces of public and private Capital together behind priority investment for example Colombia just launched its country platform we'll be watching how many new ones are launched how the existing platforms get underway and whether they enable countries to rapidly scale up private investment in climate action second following the recent us election six Banks pulled out of the Net Zero banking Alliance will backlash against ESG initiatives slow climate Investments or will Net Zero transition plans and increasing risk disclosures in Europe Japan and other countries continue to drive green Investments third credit rating agencies have been criticized for overestimating the risk of investment in developing countries will leaders at the finance for development conference agree to evaluate this risk differently fourth the annual Finance common Summit in Cape Town will bring together 500 public development Banks representing $23 trillion in assets as we saw in India Public development Banks can act as a critical bridge for climate related investment within countries will all banks Embrace this as a central Mission with International Private Capital expected to fill half of the $1. 3 trillion in climate Finance needs by 201 35 countries must work together to drastically scale up International flows our fourth story is about Innovation we can't predict exactly how much of the $1.
3 trillion in financing will be generated through Innovation but we do know that we won't succeed without it we need innovation in financial instrument across public and private Capital financing nature is a very good example where vast Financial Innovation needed there is overwhelming evidence that biodiversity is very connected to climate outcomes nature is critical for mitigating climate change sustaining biodiversity cleaning our air and water and helping us adapt to climate impacts some estimate 55% of global GDP depends on nature for example food medical advances and clean water all depend on high functioning biodiversity however it has been very difficult to finance the protection of Nature and we're losing it quickly according to the global Forest watch tropical primary Forest loss in 2023 was 3. 7 million hectares equivalent to losing 10 football fields per minute the current economic incentive is to chop down forest and overfish the ocean it is incredibly difficult to finance nature because we have failed to put an economic value on all the services ecosystems provide Brazil has come up with one Innovative initiative to scale up nature Finance let's go to sa Paulo where Mela sandrini can tell us more how do you put a price on nature the whole world needs to protect its forests the oceans and its habitats but how do you make nature finest work here in Brazil we know our tropical forests bring Global benefits like absorbing carbon preserving biodiversity and regulating rain patterns but they are also a Local Economic resources and there is money to be made from extractive uses like logging mining or farming cleared land the question is how can the world pay so the forests here are protected not exploited one Innovative idea here in Brazil might have found a way to meet the challenge the tropical forest forever facility or TF aims at paying out the predictable annual figure of around $4 for every hectare of preserved tropical forest year after year the idea initiated by the Brazilian government and the World Bank is that rich countries and philanthropies initially invested $25 billion do this then brings in a further $100 billion dollar from private investor making the biggest Single part of money aimed at fighting climate change and biodiversity loss once invested this money would provide the returns for those predictable payments for intact tropical forest there would also be a penalty of $400 for any hectar that is lost all verified by satell the key things with the TF is that none of the money from rich countries philanthropies or private investor is the nation it would be returned after 20 years with interest slightly higher than government bonds that makes this a new and Innovative way to raise Finance for nature and it would make a real difference to protecting our forest there is still a lot to do to get the tref up and running this is a vital year to see if the financing the monitoring and the governance can be sorted out in the run up to the Belling copy 30 and that's why this is part ofri storage to water for 2025 that was Mera sandrini who leads WR Brazil so there's long way to go with TF but if it does work then could change the way we're able to provide Finance for Forest the key word is ambition being able to mobilize enough money to make a difference and protect nature at the level we need there won't be a silver bullet that solves nature Finance we need further Innovations better policies standards and regulations as well as high quality carbon and biodiversity markets there's a place for Innovation such as natural Capital asset companies land Banks as well as more traditional Blended Finance so what should we watch for this year first as merila said there's lot to make t f work in 2025 we'll be watching for Progress will the Brazilian government be able to assemble the finance to get it started and will this join private capital in addition last October world leaders met in KH Colombia for the cop 16 biodiversity conference to find ways to save and restore nature but they walked away without a financial deal will leaders strike an ambitious nature Finance deal when cop 16 talks resume in Rome in February in particular you're watching to see how they bring together biodiversity and climate Finance carbon markets have existed for some time but they have yet to meet their full potential when the voluntary current market was at all-time high of about $2 billion per year in 2021 many thought it would grow at least 10 billion by 2030 but the markets have fallen significantly and such growth now seems unlikely high integrity high value curent markets can still play important role in financing nature will new Integrity standards and increasing signals from government boost investor confidence in carbon markets will debt for nature swaps become a growing Trend Barbados recently used guarantees from mdbs to reduce his debt payments in return for conservation Investments Ecuador is using one of these to help conserve Galapagos National Park committing to spend $18 million annually over 20 years will we see a more systemic approach to dat restructuring and relief to support n nature and climate investment at scale finally will there be reforms of subsidary regimes more than $635 billion is spent on agriculture subsidy annually placing immense pressure on natural ecosystems worldwide as cop 16's discussion resume countries are calling for the redirection of at least $500 billion in subsidies harmful to biodiversity Denmark approved a new policy in 2024 aiming to better balance Agriculture and nature and the UK is starting to reconfigure agriculture subsidy to pay Farmers for ecosystem services will other countries follow it's not only imperative that climate and nature Finance work together but it's an opportunity to innovate our approach and find new Pathways of financing nature I hope you have enjoyed this journey to the intricacies of Finance the $ 1. 3 trillion is possible to reach but many things need to happen to make it Flow by 2035 some of it is already in play including the 300 billion agreed at the last call some of it is still in the idea stage such as the Maritime Taxes and TF additional Innovation also need to be developed the biggest challenge will be mobilizing $700 billion in private Capital while developing countries can try to deris this Capital with better policies and co-investments richer countries also have to provide incentives to ensure private Capital flows to these countries this year will be an important year to start moving towards this goal the 1.
3 trillion will be catalytic for developing countries equipping them with resources to finish the job themselves each part of the $1. 3 trillion is connected like a pieces of a puzzle one element of the 1. 3 trillion can leverage and mobilize another piece however today the different elements are governed by different regimes that's why the biggest thing to watch in 2025 is how we'll bring all these pieces together for maximum leverage and efficiency we need to draw on all sources of finance and make it work together as a system and that requires the Deep involvement of Finance ministers and even heads of state from countries across the world there are many things to watch over the next year November will be a key month at cop 1 Brazil we need a deal that shows that the 1.
