COP26 kicked off today with several world leaders expressing the need for urgent action to address global climate change. While remarks from many world leaders speaking today focused on a general need for action, India’s Prime Minister Narendra Modi emphasized the need for developed countries to fund developing countries’ transitions to green energy. Prime Minister Modi’s statements foreshadow what is likely to be a focal point of negotiations during COP26—climate finance. World leaders at prior COP conferences set a US$100 billion per year target to address the climate change needs of developing countries with funding to come from public, private, bilateral, multilateral, and alternative sources.
While the US$100 billion target has not yet been met, world leaders are expected to negotiate new climate finance commitments during COP26 with a target date of 2025. Climate finance is an important issue to business because investors are already flocking to invest in green assets, with the expectation that they will deliver superior returns in the long run. Nevertheless, the COP26 climate finance agreement is likely to accelerate the green finance market. This means capital will increasingly flow toward greener companies and countries, putting polluting business models at heightened risk.