On 30 November, world leaders, policymakers, and climate experts will gather in Dubai for two weeks of high-stakes climate negotiations at COP28. This year’s conference falls midway between the Paris Agreement coming into force—a legally binding global climate treaty—and the 2030 deadline for delivering on climate commitments.
A key feature of COP28 will be the first-ever global stocktake. The aim: assess where the world stands in limiting global warming to 1.5°C and identify gaps that must be addressed to keep the planet on track.
One major gap is climate finance. Building sustainable societies while helping communities adapt to climate impacts requires massive public and private investment. Yet progress in mobilising private finance has been slow. Private finance currently accounts for only 40% of climate mitigation investment—far short of the 80% needed by 2030. Initiatives like the Glasgow Financial Alliance for Net Zero (GFANZ) have largely failed to translate pledges into real-world action. Meanwhile, the 60 largest banks still hold around $1.35 trillion in fossil fuel assets.
With 2030 approaching fast, it’s clear: if private finance is to step up, voluntary incentives won’t be enough. Governments must act decisively.
Finance Watch has outlined five reforms that COP28 officials should embrace to ensure private finance fulfills its climate commitments:
1. Get Real About Climate Scenarios
Private finance will only respond when economic models reflect the scientific reality of climate change. Current economic models often treat climate risk like traditional financial risk, underestimating the scale, unpredictability, and permanence of climate-related losses.
Climate scientists warn of tipping points around 2°C warming and catastrophic consequences above 3°C—threatening over 3 billion people living in highly vulnerable regions. To drive meaningful change, policymakers must integrate these risks into legislation and financial scenarios, making the true economic stakes visible.
2. Get Serious About Climate Risk
The financial system can’t remain stable if banks and insurers ignore climate risks. Extreme weather events can affect borrowers’ ability to repay loans, while fossil fuel investments risk becoming stranded assets during the transition to net zero.
The solution: mandate higher capital requirements for banks and insurers exposed to climate risk. This ensures institutions have enough funds to cover potential losses, preventing taxpayer-funded bailouts and safeguarding the broader financial system.
3. Make “Net Zero Alignment” Meaningful
Private finance can only drive real-world decarbonisation when net-zero targets are credible and enforceable. Transition plans must be mandatory for all financial and economic actors and closely supervised.
Financial institutions should only claim “sustainable” or “net-zero” status if they sell science-aligned products, invest in companies with robust net-zero plans, and actively ensure their clients meet credible transition targets. Carbon offsets and “avoided emissions” outside the value chain should be limited, and scope 3 reporting should be mandatory.
4. Incentivise Corporate Change
Private finance will support sustainability only if corporate behaviour shifts. Voluntary targets and transparency aren’t enough. Governments should:
- Align a portion of executives’ remuneration with sustainability targets rather than purely financial performance.
- Make directors legally accountable for environmental impacts in their supply chain.
These measures create real incentives for companies to achieve meaningful progress toward net-zero.
5. End Greenwashing
Greenwashing undermines climate action, wastes resources, and rewards the least committed actors. Policymakers must:
- Clarify what qualifies as sustainable investment.
- Establish science-based taxonomies, labels, and standards for companies and financial products.
- Require consistent, comparable reporting on sustainability performance, risks, and impacts.
- Disaggregate ESG ratings to show whether they reflect financial materiality or environmental impact.
These steps will create a level playing field and ensure that capital flows to genuinely sustainable activities.
With these reforms, private finance can move from pledges to real, measurable climate action. COP28 presents a crucial opportunity: the world needs policymakers to act boldly, holding the financial sector accountable and ensuring that the climate finance gap is finally closed.
