The Countdown to COP30: A Call for Action in Climate Finance

As the world gears up for COP30 in Belém, Brazil, the urgency for climate action has never been more pronounced. With 2024 marking the first full year above the critical 1.5°C threshold, the implications for governments, businesses, and financial institutions are significant.

A Pivotal Moment for Climate Action

Brazilian President Lula da Silva has characterized COP30 as the planet’s “last chance” to avert irreversible climate tipping points. This statement underscores a growing demand for financial systems to translate climate ambitions into tangible actions. The focus is shifting from lofty commitments to measurable outcomes, emphasizing the need for accountability in climate finance.

Financial Sector Expectations at COP30

The financial sector is under intense scrutiny as it approaches COP30. The $1.3 trillion climate finance pledge from COP29 remains a focal point, with stakeholders seeking verifiable evidence of fund mobilization, particularly for adaptation, loss and damage, and nature-based solutions. The choice of the Amazon as the venue for this year’s summit highlights a broader push for climate justice and results-driven finance that transcends traditional multilateral institutions.

Innovative Funding Initiatives

One notable initiative is Brazil’s proposed $125 billion “Tropical Forest Forever” fund, aimed at directing capital market mechanisms toward forest conservation. This initiative reflects an increasing expectation for banks to innovate and deploy financial instruments that yield both economic and environmental benefits. The shift is clear: the focus is now on practical contributions rather than theoretical alignment.

The Importance of Transparency

Transparency in financial disclosures is becoming non-negotiable. With the implementation of IFRS S1 and S2 by some regulators in the Gulf Cooperation Council (GCC), banks are required to disclose not only their climate risks and opportunities but also provide accurate, traceable data on financed emissions and transition plans. There is a growing concern among regulators, investors, and civil society regarding vague decarbonization pathways and the potential for greenwashing. The credibility of financial institutions will hinge on their ability to clearly articulate and substantiate their climate performance.

Addressing Equity in Climate Finance

Equity is another crucial aspect of the climate finance conversation. Emerging markets, which bear a disproportionate share of climate risks, often struggle to access necessary transition finance. Financial institutions are expected to enhance their internal capabilities to support mid-sized, locally grounded climate projects that are frequently overlooked due to perceived complexities or challenges in bankability. Supporting these initiatives is vital for achieving a just transition.

Progress in the Gulf Banking Sector

The Gulf banking sector has made significant strides in recent years. The UAE’s financial sector committed AED 1 trillion to sustainable finance during COP28, followed by the introduction of green and transition sukuks and mandatory ESG reporting frameworks. Saudi Arabia and Oman are also advancing voluntary ESG taxonomies, indicating a regional alignment with global standards.

Infrastructure Developments

On the infrastructure front, climate-linked assets are being developed. Projects such as green hydrogen pilots in the UAE, utility-scale solar initiatives in Bahrain, and Saudi Arabia’s carbon capture and hydrogen megaprojects demonstrate that Gulf capital is not merely promised but actively deployed. These advancements position Gulf banks as regional leaders and potential connectors between developed and developing economies.

Challenges Ahead

Despite notable progress, challenges remain. The lack of a unified, regionally harmonized taxonomy continues to hinder comparability, investment alignment, and cross-border financial flows. Establishing a clear taxonomy would provide financial institutions with a consistent framework for classifying green and transition activities, thereby enhancing transparency and investor confidence.

Gulf banks must also navigate structural hurdles in climate finance, including evolving credit risk frameworks, limited access to data, and the integration of climate risks into existing governance structures. As climate regulations become more sophisticated, banks will need to ensure they are prepared for third-party validation and assurance.

The Road to COP30

COP30 is not merely a global summit; it serves as a credibility test for the financial sector, particularly for institutions in the Gulf. The moment calls for more than mere alignment with global frameworks; it demands transparency in execution, leadership in innovation, and demonstrable impact.

At Mashreq, we acknowledge the complexity of the challenges ahead but also recognize the urgency of the situation. As a bank committed to the region’s long-term prosperity, we are actively working to build our internal capabilities, engage with international best practices, and align our strategies with a just, inclusive, and measurable climate transition.

The emphasis on inclusion and equity at COP30 highlights a growing understanding that effective climate action must be rooted in human-centric values. By centering communities, livelihoods, and local voices in global efforts, the summit offers a hopeful vision for a more equitable and people-driven transition. Let COP30 be remembered not just for its symbolism but as the moment when finance transitioned decisively from promises to proof.