Finance
What the COP29 Climate Finance Deal Means for the World
After more than two weeks of grueling deliberations at this year’s U.N. climate summit in Baku, Azerbaijan—known as COP29—the world’s wealthiest nations agreed to triple their climate finance commitments to developing nations.
For the world’s poorest countries, which are responsible for a minuscule share of global greenhouse gas emissions, securing the necessary financing to cope with a changing climate and shift away from fossil fuels is essential. But how much money they should receive and who should pay are contentious questions that sparked a bitter fight in Baku.
After more than two weeks of grueling deliberations at this year’s U.N. climate summit in Baku, Azerbaijan—known as COP29—the world’s wealthiest nations agreed to triple their climate finance commitments to developing nations.
For the world’s poorest countries, which are responsible for a minuscule share of global greenhouse gas emissions, securing the necessary financing to cope with a changing climate and shift away from fossil fuels is essential. But how much money they should receive and who should pay are contentious questions that sparked a bitter fight in Baku.
Wealthy nations ultimately agreed to commit at least $300 billion in climate finance annually by 2035. That amount eclipses their existing pledge of $100 billion per year, which they had already struggled to meet. Yet it is nowhere near the $1.3 trillion target that developing countries had been pushing for—and even that value likely falls short of their total financial need in confronting climate change.
The resulting agreement drew little fanfare—and in some cases outright dismissal—from developing nations and climate experts, although many said it moved the needle in the right direction.
“The poorest and most vulnerable nations are rightfully disappointed that wealthier countries didn’t put more money on the table when billions of people’s lives are at stake,” said Ani Dasgupta, the president of the World Resources Institute (WRI), a global research nonprofit, but “this deal gets us off the starting block.”
While the negotiation over money was always expected to make this year’s COP difficult, the past two weeks sparked chaotic and often heated debates, heightening fears that this summit could be the first since 2009 to fail to reach an agreement.
In addition to wealthy nations’ $300 billion pledge, the final deal includes vague language that calls on “all public and private sources” to work together to secure $1.3 trillion in climate financing by 2035. But most of that money, if it comes at all, will likely come from private sources—not the kind of public finance or grants that are preferred by developing countries, many of which are worried about taking on more debt.
U.N. Secretary-General António Guterres expressed disappointment in the agreement but said it laid the groundwork for more robust climate action going forward. “I had hoped for a more ambitious outcome—on both finance & mitigation—to meet the scale of the great challenge we face, but the agreement reached provides a base on which to build,” he wrote in a post on X.
Few developing countries celebrated the outcome. Frustrations continued to flare after COP29 President Mukhtar Babayev announced the deal, with the Nigerian delegation’s representative slamming the final text as a “joke” and “an insult to what the [U.N. Framework Convention on Climate Change] says.” Anger was also palpable from the Bolivian negotiator, who said the agreement “enshrines climate injustice” and “consolidates an unfair system.”
Some of the most scathing remarks came from Indian representative Chandni Raina, who railed against the agreement’s “paltry sum” and what she characterized as a “stage-managed” process.
“India opposes the adoption of this document,” she said, which she described as “nothing more than an optical illusion.” “We seek a much higher ambition from the developed countries,” she added.
Beyond the finance targets, one of the most contentious issues during the negotiations was what responsibility major emitters that still qualify as developing countries—such as China and Saudi Arabia—should have to funnel funds to poorer, lower-emitting nations.
China, which came under pressure from the United States, stood by its long-held stance that only developed countries should be obligated to contribute finance. However, the Baku deal includes an option for developing countries to contribute money voluntarily. That was seen as a compromise because it maintains the division between developed and developing countries while also opening the door to new contributions from the latter.
China has provided substantial sums of climate finance to poorer countries in recent years on its own terms, outside the auspices of the United Nations. Recent studies estimate that China’s climate finance flows have reached some $4 billion a year over the last decade, roughly 5 percent of the developed country total, although much of it is in loans, not grants.
China, while still far poorer than Western nations on a per capita basis, exceeded the European Union to become the second-highest cumulative emitter of carbon emissions last year, so it is increasingly under pressure to shoulder more of the burden of climate change. Shuang Liu, WRI’s China finance director, said Beijing sent positive signals about maintaining its commitment to the global energy transition at this year’s COP. “China does not see itself as part of the $300 billion” sum that wealthy nations pledged. “But,” she added, “China is willing to [provide] support with climate-related finance to other countries.”
While China came under pressure from the United States, U.S. negotiators didn’t have much ground to stand on at this year’s COP. The talks occurred under the shadow of the reelection of former U.S. President Donald Trump, who has long dismissed climate change as a hoax and whose team has signaled that he will again yank the United States out of the Paris climate accord. During his first term, Trump also cut off U.S. funding for the Green Climate Fund, a U.N. program that serves as one of the main climate finance channels.
The United States is “the world’s largest historical emitter and the second-largest emitter after China now,” said Alice Hill, who served as a special assistant to U.S. President Barack Obama and senior director for resilience policy on the National Security Council. “Its position matters as to how much climate change occurs going forward.”
COP29 offered a glimpse into what international climate diplomacy could look like in the years to come, in a world where Washington has again withdrawn from global climate change efforts.
“Despite some blockers intent on disrupting the process, this deal shows that the majority of countries remain committed to multilateralism and tackling the climate crisis,” said Cosima Cassel, a program lead at E3G, a research organization. “We have seen strong leadership from countries such as the U.K. and Brazil, as well as Colombia and Kenya, to push this deal to fruition.”
The world, which has already warmed around 1.3 degrees Celsius above preindustrial levels, is currently on track to heat up by 3.1 degrees Celsius above preindustrial levels by the end of the century, according to the United Nations. That’s more than double the key 1.5-degree target that was set under the 2015 Paris agreement, and scientists stress that every additional increment of warming raises the risks of the severe weather increasingly sweeping the world.
Despite its frustrating outcome, COP29 has, importantly, shaped public perceptions of wealthier nations’ climate finance responsibilities, experts said.
“COP29 has helped mainstream the simple fact that rich countries have a historic obligation to help poorer countries cut emissions and cope with extreme weather, and that doing so will benefit every country on Earth,” said Michael Wilkins, the executive director of the Centre for Climate Finance & Investment at Imperial College London.
Industry leaders, policymakers, and financial institutions gathered to discuss sustainable finance and investment strategies aimed at integrating environmental considerations into economic decision-making. The discussions, held at AFAI national summit and Indian climate leader awards 2025, focused on improving access to green finance, strengthening regulatory frameworks, and fostering private sector participation in sustainable projects.
Speakers included Vivek Kumar Dewangan (CMD, REC Ltd.), Dr Padmanabhan Raja Jaishankar (MD, IIFCL), Sudhendu J Sinha (Advisor, NITI Aayog), and other industry leaders. They stressed the need for green bonds and credit enhancements to support low-impact infrastructure projects.
Panelists highlighted the role of non-banking financial companies (NBFCs) in funding sustainable projects. While the government is the main source of green financing, they emphasized the need for more private investment for long-term sustainability.
Experts also called for businesses to follow environmental, social, and governance (ESG) standards to ensure transparency in green investments.
“Funding will introduce a new equity solution for homeowners that want to unlock equity in their homes.”
TORONTO, March 6, 2025 /CNW/ – The Home Equity Partners (HEQ), a Toronto-based financial solutions provider, has successfully completed its first round of financing. This milestone marks HEQ’s official debut, allowing the company to help homeowners across the Greater Toronto Area access their home equity without taking on new debt.
HEQ specializes in Home Equity Sharing Agreements (HESA)—an innovative solution that enables homeowners to unlock a portion of their home equity without monthly payments or interest charges. A proven model in the United States since the early 2000s, a HESA provides homeowners with immediate financial flexibility by exchanging a share of their property’s future change in value for upfront cash.
“Rising property taxes, increasing cost-of-living pressures, and stagnant wage growth have made it harder for families to stay ahead financially,” said Shael Weinreb, CEO and Founder of The Home Equity Partners. “This financing round allows us to introduce HESA financing, giving Canadian homeowners a debt-free way to access their home equity. We look forward to educating homeowners, addressing growing demand, and building strategic partnerships to maximize our impact.”
Since its inception, HEQ has built a strong pipeline of interested homeowners, demonstrating a significant demand for alternative financial solutions. By offering a debt-free way to tap into home equity, a HESA empowers homeowners to consolidate high-interest debt, fund home renovations, provide a post-secondary education for a child or grandchild, start a business or achieve other financial goals.
Opportunities for Collaboration
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For Strategic Partners: HEQ is seeking collaborations with real estate professionals, investors, and home improvement companies to expand its impact.
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For Homeowners: To learn more about HESA and how The Home Equity Partners can help you unlock your home equity, visit The Home Equity Partners to register today or contact info@theheqpartners.com
About The Home Equity Partners
The Home Equity Partners is a Toronto-based financial solutions company dedicated to helping homeowners access their home equity with transparency and flexibility. Through its signature Home Equity Sharing Agreement (HESA), HEQ provides homeowners with a unique opportunity to achieve their financial goals while securing a brighter, debt-free future.
Access to finance is essential for firm growth, yet women-led businesses often face significant barriers. Both demand-side barriers, such as social and cultural norms affecting female entrepreneurs’ ability to apply for credit, and supply-side barriers, including loan officers’ implicit biases against women, contribute to these gender gaps (Asiedu et al. 2013, Alesina et al. 2013). Additionally, contextual factors such as regulatory and legal restrictions, social perceptions, and gender-based violence further constrain the growth of women-led firms (Ubfal 2023). This column summarises the findings of our recent paper (Grover and Viollaz 2025) that systematically documents the financial constraints faced by women-managed firms and their broader implications for capital misallocation.
Using micro-data from the World Bank Enterprise Surveys (2008–2023) covering 61 countries, our analysis examines formal firms with at least five employees, focusing on both extensive and intensive margins of credit access. Countries are classified as ‘more traditional’ or ‘less traditional’ based on social perceptions about women’s roles from the World Values Survey. Specifically, countries where more adults agree that “[w]hen jobs are scarce, men should have more right to a job than women” are deemed more traditional.
Gender differences in opportunities and constraints breed inequalities, which have significant implications for allocative efficiency (Pan et al. 2025), capital misallocation (Morazzoni and Sy 2022, Ranasinghe 2024), and aggregate productivity (Goldberg and Chiplunker 2021). Following this literature, we construct two empirical indicators of capital misallocation – average return to capital and a measure based on the marginal revenue product of capital – to help assess whether women-led firms operate with sub-optimal levels of capital compared to their male counterparts.
There are no gender gaps in financial access on the extensive margin
Women-managed formal firms do not face credit constraints on the extensive margin, as they are equally likely to apply for credit and are 5 percentage points less likely to have their applications rejected compared to firms mamanged by men (Panel A of Figure 1). This lack of a gender gap in the likelihood of applying for credit holds across different social and cultural norms. However, in traditional countries, women-led firms are 12 percentage points less likely to face credit application rejection.
Prima facie, this is a surprising finding. However, this may be the result of a stronger selection process, where only the most capable women in traditional countries become managers of formal firms. This aligns with the findings of Morazzoni and Sy (2022) for the US, who show that only the most capable women enter entrepreneurship.
Figure 1 Gender gaps in financial access
Notes: Panel A shows the estimated gender gap in credit application and credit rejection in percentage points, while Panel B shows the gender gap in the amount of debt in percentages. Dark colours reflect results that are statistically significant at the 10% or lower level; light colours, those that are not.
Gender gaps in financial access are significant on the intensive margin, especially in countries with stringent social norms
Women-managed firms are credit-constrained on the intensive margin, receiving 39% lower loan amounts than firms managed by men, conditional on credit applications being approved (Panel B of Figure 1). In traditional countries with stricter social and cultural norms, this gender gap increases to 54%, while in less traditional countries, the gap is 32%. Cultural barriers, including explicit discrimination in credit allocation and implicit biases that demand additional guarantors (e.g. Brock and De Haas 2023) or limit access to information and networks, may explain these results.
These differences are not explained by underlying performance metrics or risk profile
This disparity in the amount of credit received is not explained by gender differences in firms’ risk profiles, profitability, or productivity. In fact, women-managed firms are, on average, more profitable than those managed by men, which may help explain the lower credit-application rejection rates for women-managed firms (Figure 2). Women-managed firms do have lower sales per worker, thereby suggesting higher friction in accessing product and labour markets for better firm-to-worker matches.
Figure 2 Gender gaps in risk appetite and performance
Notes: Estimated gender gaps in leverage and profits-to-revenue ratio, in standard deviations from each country’s mean value. Estimated gender gap in sales per worker in percentages. Dark colours reflect results that are statistically significant at the 10% or lower level; light colours, those that are not.
Gender gaps in credit may breed capital misallocation
Despite women-managed firms being comparably risky and productive and, in fact, more profitable than their counterparts managed by men, they operate with lower credit levels, indicating potential sub-optimal credit allocation. While our data do not allow us to precisely identify the source of sub-optimal credit allocation, they suggest a potential misallocation of capital, particularly when considering the higher profitability of firms managed by females compared to male-managed firms.
We examine empirical indicators of capital misallocation to test whether accessing lower amounts of credit has an impact on the allocation of resources between firms managed by women and men. Our results show that women-managed firms have a 14.7% higher average return to capital, an empirical measure of capital misallocation (Figure 3). By comparison, Morazzoni and Sy (2022) estimate this difference to be 12% for the US.
Figure 3 Gender gaps in capital misallocation
Notes: The figure shows the estimated gender gap in the average return to capital in percentages. Dark colours reflect results that are statistically significant at the 10% or lower level; light colours, those that are not.
The gender difference in the average return to capital is heightened in more traditional countries, where women-managed firms have a 29.6% higher return to capital compared firms managed by men. Our findings may be interpreted as a sign of capital misallocation; that is, women-managed firms could potentially benefit from increased levels of capital to align their relative returns with those of firms managed by men.
If discrimination on the intensive margin partly explains the extent of capital misallocation, then the difference in the empirical indicator would be stronger for firms that receive credit. In fact, this appears to be particularly true for traditional countries (Figure 3). We show that being able to borrow more could relax the credit constraint of firms and reduce capital misallocation for women-managed firms in more traditional countries.
Discussion
Our results show that women-led firms are not any less profitable or riskier than firms managed by men and yet are discriminated in allocation to credit. Policy options to address these disparities include blended finance solutions that mitigate inequalities in lending to female entrepreneurs (Aydin et al. 2024), gender-inclusive financial products, enhanced market access for women entrepreneurs, and fair lending practices. Legal and regulatory reforms that address the barriers women entrepreneurs face are also crucial. Fostering an inclusive financial environment can unlock the full potential of women-led firms, contributing to more efficient resource allocation.
Editors’ note: This column is published in collaboration with the International Economic Associations’ Women in Leadership in Economics initiative, which aims to enhance the role of women in economics through research, building partnerships, and amplifying voices.
References
Alesina, A, F Lotti, and P Mistrulli (2013), “Do women pay more for credit? Evidence from Italy”, Journal of the European Economic Association 11: 45–66.
Asiedu, E, I Kalonda-Kanyama, N Leonce, and A Nti-Addae (2013), “Access to credit by firms in sub-Saharan Africa: How relevant is gender?”, American Economic Review 103: 293–97.
Aydin, H I, C Bircan, and R De Haas (2024), “Blended finance and female entrepreneurs”, VoxEU.org, 30 January.
Brock, J M, and R De Haas (2023), “Discriminatory lending: Evidence from bankers in the lab”, American Economic Journal: Applied Economics 15: 31–68.
Goldberg, P, and G Chiplunkar (2021), “Aggregate implications of barriers to female entrepreneurship”, VoxEU.org, 19 April.
Grover, A, and M Viollaz (2025), “The gendered impact of social norms on financial access and capital misallocation”, World Bank Policy Research Working Paper 11041.
Morazzoni, M, and A Sy (2022), “Female entrepreneurship, financial frictions and capital misallocation in the US”, Journal of Monetary Economics 129: 93–118.
Pan, J, C Olivetti, and B Petrangolo (2025), “The evolution of gender in the labour market”, VoxEU.org, 20 January.
Ranasinghe, A (2024), “Misallocation across establishment gender”, Journal of Comparative Economics.
Ubfal, D J (2023), “What works in supporting women-led businesses?”, World Bank Gender Thematic Policy Notes Series: Evidence and Practice Note.
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