Thursday 21 / November / 2024
Baku: Azerbaijan has announced the Climate Finance Action Fund (CFAF) to invest in climate action in the developing world. CFAF will become operational at the conclusion of the initial fundraising round, which seeks to capitalise the fund with $1 billion, and when 10 contributing countries committed as shareholders
CFAF will be capitalised with contributions from fossil fuel producing countries and companies across oil, gas and coal, and Azerbaijan will be a founding contributor. Members will commit to transfer annual contributions as a fixed-sum or based on volume of production.
CFAF is one initiative within a package of 14 announced on Friday in Azerbaijan as part of the COP29 action agenda to enhance ambition and enable action.
CFAF will be a catalytic public-private partnership fund, mobilising the private sector and de-risking investment. The fund will also contain special facilities with concessional and grant-based support to rapidly address the consequences of natural disasters in the developing countries in need.
CFAF will provide off-take agreement guarantees for small and medium-sized renewable energy producers and first-loss capital for green industrial projects. The fund will also have a focus on the food and agriculture sector as a priority to protect livelihoods and achieve net zero. Profits generated from projects will be reinvested in the fund.
CFAF will become operational at the conclusion of the initial fundraising round, which seeks to capitalise the fund with $1 billion, and when 10 contributing countries committed as shareholders.
Fifty percent of the capital will be directed towards climate projects in developing countries that rely on support, across mitigation, adaptation, and research and development. These will promote the adoption of clean energy technologies, improve energy efficiency, strengthen climate resilience of vulnerable populations, and facilitate the development of cutting-edge technologies.
Fifty percent of the contributions will be allocated to helping meeting members’ the next generation of Nationally Determined Contributions (NDCs) to keep the 1.5C temperature target within reach. Azerbaijan has committed to leading by example, it is working to submit a 1.5-aligned NDC, and the COP29 Presidency is encouraging all Parties to come forward with similar plans.
Twenty percent of the revenues generated from investments will be deposited in a Rapid Response Funding Facility (2R2F) providing highly concessional and grant-based support. This facility will offer immediately accessible funding to address the consequences of natural disasters in Small Island Developing States, Least Developed Countries, and to other vulnerable developing communities as needed.
The fund will be headquartered with its secretariat in Baku, Azerbaijan, its board of directors will include representatives from contributors, and an independent audit committee will publish quarterly data including financial reports and project evaluations. Shareholders will collectively make decisions and a working group is being established with international financial experts to further develop the management model and funding mechanism.
“Enabling action is an essential part of the COP29 agenda and we are committed to leading by example. I am grateful for the direction and support that I have received from the President of Azerbaijan, H.E. Mr. Ilham Aliyev, that countries rich in natural resources should be at the forefront of those addressing climate change,” said COP29 President-Designate Mukhtar Babayev. “We have heard that communities want action not words, and today by launching the Climate Finance Action Fund we are taking a significant step. We are calling on donors to join us so that we can fulfil the COP29 plan to enhance ambition and enable action.”
“This process of intergovernmental cooperation, and each year’s COP, is of vast significance. It is humanity’s best hope to avert the global climate crisis, and spread the huge benefits of decarbonization and climate resilience,” said UNFCCC Executive Secretary, Simon Stiell. “A successful COP in Baku is more important than ever. But this process is not easy and there is much to do. I am grateful for the hard work of the incoming COP President, his team, and the initiatives they are spearheading to create the grounds for success.”
COP29 Chief Negotiator Yalchin Rafiyev said, “We have assessed the shortcomings in financial markets and carefully listened to the concerns of communities. This will be the first fund with both fossil fuel producing countries and companies across oil, gas and coal. It will be the first to both provide investment and to address the consequences of natural disasters. And it will be the first to receive annual transfers from its contributors. We also have given special attention to accessibility and speed when addressing the consequences of natural disasters and to ensuring that shareholders collectively make decisions.”
CFAF was launched within a package of 14 initiatives under the framework of the COP29 thematic days (see notes to editors below). Introducing the initiatives, Babayev said, “every action matters, because every fraction of a degree matters.”
The initiatives are designed to drive action across all climate pillars, involve global, regional, national and subnational groups, take a holistic view of sustainable development, and include all demographics within an inclusive process that delivers inclusive outcomes. Babayev announced that the COP29 Presidency would send a formal communication to Parties and Constituencies to the UNFCCC containing further information on the COP29 action agenda and its initiatives in due course.
