Overview of Major Trends in Sustainability Finance in SEA from AlterCOP29

The following expands on notes from a presentation delivered at AlterCOP29 on 14^th November 2024.  These remain my opinions, as Executive Chairman of Red Sycamore.

The Timeline of Failure and Compromise

November 2023, COP28, Dubai.  The Loss and Damage Fund launched with pledges of just over US$600 million.  This sum was smaller than the cost of building the Dubai Expo City venue hosting the conference itself.  Parties also agreed, for the first time, to transition away from fossil fuels and triple renewable capacity by 2030.  We were there at the launch.

September 2024.  The Loss and Damage Fund’s pledge total reached US$702 million from twenty-three contributors.  France, Italy, Germany, and the UAE each gave at least US$100 million.  Actual need, per UN estimates, was US$300 billion a year by 2030.  The gap between pledge and requirement was already running at 400 to 1.

November 2024, COP29, Baku.  Parties set a new climate finance goal of US$300 billion annually by 2035, against developing countries' own request for US$1.3 trillion.  The Loss and Damage Fund reached full operational status.  COP28’s fossil fuel transition language simply vanished from the final text, a documented reversal of the previous year's hard-won commitment.

5^th November 2024.  The Network for Greening the Financial System published its Phase V climate scenarios, tripling its prior damage estimates.  This detail matters more than any pledge total.  The central banks and regulators who build the models governments and insurers rely on had, until this date, been understating the economic risk by a factor of three.

February 2025.  The United States rescinded US$4 billion in pledges to the Green Climate Fund, the first country ever to formally withdraw a commitment already made.  Germany and Sweden asked wealthier developing nations to help cover the gap.  Saudi Arabia called the request “unacceptable.”

Early 2026.  The United Kingdom halved its own Green Climate Fund pledge, from £1.6 billion to £815 million.

June 2026.  The World Bank dropped its 45 per cent climate co-benefits target, the same month it had already been exceeded at 48 per cent, under pressure from the United States, Russia, and Saudi Arabia.

November 2025, COP30, Belém.  Parties called for mobilising US$1.3 trillion annually by 2035, and confirmed Loss and Damage Fund replenishment cycles.  A planned pledging event for the Least Developed Countries Fund and Special Climate Change Fund was cancelled outright, because of lack of contributor interest.  More than eighty countries backed an explicit fossil fuel phase-out roadmap.  It did not survive the final hours of negotiation.

That is the full arc, in eight steps, across two years: launch, undershoot, reversal, quiet model correction admitting the risk was worse than stated, formal withdrawal, halved commitment, target abandonment, and a cancelled pledging event.  Every step moved in the same direction.

The Cost of Doing Nothing

Planning for the worst case means using the most severe published figures, not the most comfortable ones.  Swiss Re Institute’s own stress test, covering forty-eight economies representing 90 per cent of global output, found that under a 3.2°C warming scenario, the world economy loses 18 per cent of GDP by 2050.  China loses 24 per cent.  Asia’s hardest-hit economies lose up to 26.5 per cent.  Against a 2024 global GDP of US$100 trillion, an 18 per cent loss alone is US$18 trillion.

The NGFS revision of November 2024 is worse.  It found climate damage could reach 15 per cent of global GDP by 2050 from just 2°C of warming, the temperature ceiling the Paris Agreement was built around as a success scenario, not a failure one.  Extended to 2100 under 3°C, the loss reaches 30 per cent, three times the NGFS’s own prior estimate.  These are not fringe activist numbers.  They come from the network of central banks and financial regulators whose models set capital requirements for the global banking system.

Academic modelling goes further still.  Research compiled by CEPR, drawing on multiple published damage functions, finds a plausible range running from 2 per cent to 45 per cent of global output lost by the end of the century, depending entirely on which damage function is used.  Bilal and Känzig’s 2024 modelling found the global economy could grow by only 125 per cent by 2100, after accounting for climate losses, against a hypothetical three hundred per cent growth path with no further warming.  That is not a loss confined to one bad year.  It is a permanently smaller economic trajectory, compounding every year between now and the end of the century.

Even these figures may understate the true tail risk.  The NGFS’s own scarier revision still gives a false sense of accuracy, because standard economic models rely on historical data patterns.  Climate change is invalidating those patterns as it unfolds.  Treating these models as reliable is like assuming the iceberg that sank the Titanic was an ice cube dropped by a previous ship, a known, bounded hazard, when the actual risk profile is less predictable and potentially worse.

This Justifies the Secondary Market Argument

Article 6’s rulebook, finalised at COP29, and the Paris Agreement Crediting Mechanism, operational following COP30, remain the only mechanism in this entire timeline that grew stronger rather than weaker across these two years.  The EU Emissions Trading System has already proven the model at scale, cutting covered emissions 51 per cent since 2005 while raising over €265 billion in revenue, funded by market pricing rather than pledge conferences.  Sustainability finance needs to be democratised specifically because every government-pledge mechanism examined in this timeline has moved backwards, while the one market-based mechanism built on private capital and enforceable pricing has moved forward.

Compliance Carbon Credits as a Financial Instrument

A secondary market needs more than good intentions and a UN logo.  It needs standardised units, verified supply, a registry preventing duplication, and price discovery liquid enough for institutional capital to enter without fear of buying nothing.  Article 6 has spent two years building parts of this.  The weakest part sits at the very first step: verification.

Verification Fails before a Credit Ever Reaches the Market

Verra, the world’s largest voluntary carbon credit registry, does not employ its own auditors.  Project developers hire and pay their own validation and verification bodies directly, the same firms responsible for confirming the developer’s own claimed emission reductions.  A Science magazine editorial, “Auditors Can’t Save Carbon Offsets,” said, “Auditors are unlikely to stay in business if they disapprove credits at the high rates that research suggests would be appropriate today.”  A researcher reviewing 95 Verra-certified projects later found to have overstated their climate benefit found that twenty-one of the thirty-three accredited auditors active in 2024 had signed off on one or more of those projects.  This is not a handful of bad actors.  It is a structural feature of a system where the auditor’s own revenue depends on the developer’s continued business.

Transparency International US described the resulting arrangement: “Some of the project developers, seeking maximum value for their work, also sit on the Boards of Directors of the standard setters.  It is as if the students are designing their own assignments and grading their own papers.”  Verra itself was founded in 2007 by the International Emissions Trading Association, the World Economic Forum, the World Business Council for Sustainable Development, and the Climate Group, organisations Transparency International notes carried strong ties to high-emitting industries from the outset.  In 2024, Brazilian police arrested five people linked to Verra-certified Amazon projects following a raid, one of several enforcement actions exposing how far this conflict can run in practice.

The Myanmar cookstove case fits this pattern.  Verification could not conduct site visits due to security concerns; the project operated through institutions controlled by the military junta, and Carbon Market Watch found it was approved for seven times more credits than its actual emission reductions warranted.  PACM’s own Article 6.4 Supervisory Body is closer to Verra’s model than to an independent auditor, since it inherited both the CDM’s institutional legacy and a similar reliance on accredited third-party validators chosen and engaged by the project itself.  Building a secondary market on top of this verification layer, without an independent check on the check, means institutional capital would be pricing a UN registry entry rather than a verified tonne.

The Mechanism Gaps

Four gaps remain before compliance carbon credits function as a genuine financial instrument.

First, standardised secondary trading venues, exchanges, or clearing platforms where credits trade with published, continuous pricing rather than bilateral, opaque deals negotiated project by project.

Second, and most urgently given the verification problem above, independent credit rating infrastructure, genuinely separate from both the registry and the project developer, scoring permanence and additionality risk the way a bond rating agency scores default risk, without being paid by the entity it is rating.

Third, derivative instruments, futures and forwards referencing credit prices, giving buyers and developers a way to hedge exposure the way any mature commodity market allows.

Fourth, custody infrastructure letting credits sit inside a regulated financial account, transferable and reportable, rather than existing only inside a registry interface built for compliance reporting rather than portfolio management.

Every credit traded under Article 6.2 must carry a corresponding adjustment, a formal acknowledgement from the host country that the transfer has been recorded in its own national emissions inventory, preventing the same reduction from being claimed twice.  A host country must also issue a Letter of Authorisation naming the specific project before a credit can be sold and retired internationally.  Both steps function as legal title clearance.  Neither one checks whether the underlying tonne was ever avoided in the first place.  We are far from a verified secondary market to address the gap in the Loss and Damage Fund.

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Terence Nunis | Executive Chairman, Equinox Zenith & Red Sycamore | Author, The 1% Playbook: The Billionaire Cheat Code