An orderly transition to net zero also needs to be equitable and inclusive. Beyond its toll on the planet and its people, climate change exacerbates existing inequalities.
For example, emerging economies face a disproportionate share of the impact of warming temperatures, but have fewer resources to respond. Estimates suggest that climate change has worsened inequality between developed and developing nations by 25 percent since 1960, and climate change could push an additional 132 million people into poverty by 2030, mostly in emerging economies.
Importantly, emerging markets also have unique opportunities, skills, and resources to advance an inclusive net-zero transition. For instance, Africa’s transition toward a greener energy mix presents a significant opportunity for investors seeking to play a meaningful role in supporting the move to renewables and driving development in the region.
Similarly, women and children are often more vulnerable to the impact and shocks associated with climate change, as they can have less access to, and control over, the resources needed for resilience and recovery. This is particularly relevant in emerging markets, where 85 percent of the world’s children live.
Today, which is Youth, Children, Education and Skills day at COP28, we recap the announcements that focus on ensuring the transition is delivered in a way that protects emerging economies and vulnerable populations—and ensure a broader set of voices are heard in climate decision making.
News and announcements
Engaging a broader set of voices
- Enhancing youth participation: The International Youth Climate Program was announced to enhance youth participation in COP. Additionally, the Youth Climate Champion was introduced, intended to amplify voices of people under the age of 35, with an emphasis on youth from the most vulnerable communities such as Indigenous Peoples and those with disabilities.
- Indigenous-led finance: The Podong Indigenous Peoples Initiative aims to increase direct finance access for Indigenous peoples and organizations and to support their leadership on climate, nature, biodiversity, and planetary health challenges. Indigenous Peoples make up 6 percent of the world’s population and account for 19 percent of the extreme poor, yet only receive 3 percent of international climate finance, despite being highly vulnerable to shocks and long-term stresses from climate change. The initiative aims to mobilize $200 million in funding and ensure 85 percent of it goes directly to indigenous territories and communities.
- Enhancing female representation: The Gender-Responsive Just Transitions & Climate Action Partnership was launched and endorsed by over 60 countries. 80 percent of people displaced by climate change are women, yet women are underrepresented in positions of power, holding only 22 percent of seats in national parliaments and 25 percent of managerial positions in the private sector. The partnership aims to improve gender and climate data and ensure the data is used in decision making by public and private leaders.
Finance for emerging economies
Emerging markets’ financial needs are not being met by the current climate finance system. For adaptation, UNEP estimates that finance needs of emerging economies are 10 to 18 times bigger than current international public-finance flows. For mitigation, it is likely that some emerging economies will require up to 14 percent of GDP annually to 2030 in order to deliver net zero, but these investments can also contribute to raising living standards and securing economic empowerment. A number of COP28 announcements aim to address this gap.
- Disaster resilience and recovery: National governments committed a total of $725 million to a new Loss and Damage fund, which will direct funding toward countries most vulnerable to the effects of extreme weather events, including droughts, flooding, and rising seas.
- Emerging market investment funds: A $30 billion climate fund called ALTÉRRA will focus on scaling solutions, including in emerging economies. The fund aims to support the further mobilization of up to $250 billion in investment by 2030 and has funding earmarked for emerging economies. Other emerging-market funds include the Arab Coordination Group plan to direct $10 billion in funding until 2030 towards energy transition projects in developing countries, and Copenhagen Investment Partners announcing $3 billion for green field renewable investment projects in emerging markets.
- Climate Tech innovation for emerging markets: Masdar City, Tencent, and Catalyst launched Innovate for Climate Tech coalition. This will connect and strengthen climate tech ecosystems in emerging markets by scaling climate tech solutions, democratizing access to knowledge, and investing in capacity building. The platform aims to leverage around $750 million in financing to deliver its goals.
- SME decarbonization: In the lead up to COP28, the COP28 & SME Climate Hub for MENA was launched, which includes resources and tools to help small and medium enterprises (SMEs) make a net-zero commitment, calculate their emissions baseline, and measure their progress toward emissions reduction. SMEs are estimated to make up over 90 percent of all businesses globally, yet are underserved in terms of financial support for reducing emissions.
- Preserving nature in emerging markets: There have been numerous pledges for funding to conserve nature in emerging markets. Forest conservation in Indonesia, preserving the Congo Basin, increasing conservation areas in Papua New Guinea, and nature-based solutions in Ghana have each received up to $110 million.
McKinsey at COP28: Insights from our events
How can emerging economies come out of COP28 equipped to bring the net-zero transition and climate adaptation to scale?
As the global focus intensifies on combating climate change, emerging economies find themselves at the forefront of a crucial transition towards decarbonization and adaptation.
- Leveraging the strengths of each country and region. McKinsey senior partner Tarek El Sayed led a discussion between three government officials on challenges they face leading a country to net zero. “Leaders want to drive social and economic development, but cannot follow the high-carbon path already traveled by developed economies,” he said. “Instead, they seek a new path that leverages their unique set of nature, tech, and human resources.”
- Understanding inclusion. McKinsey’s Mekala Krishnan and Kartik Jayaram hosted a panel on how stakeholders can best drive adaptation and an inclusive transition. Mekala stated: “We don’t yet have a universalized definition for what an inclusive transition actually means. Once this definition is in place, we can start to measure the transition at multiple levels of granularity, looking at both governments and communities globally.”
How to empower women to lead the net-zero transition?
“As we have seen throughout countless industries, women play a crucial role in improving family health, education, and economic outcomes—why can’t the same be true within sustainability?” asked McKinsey’s Laura Corb during a Clinton Global Initiative roundtable led by Secretary Hillary Rodham Clinton. Not tapping into the talent pool of women and bringing their perspectives into the climate agenda can hold back progress. During the event, a group of chief sustainability officers discussed the intersection of gender equality and climate and how to ensure women are leading through the net-zero transition.
How can partnerships help unlock an inclusive transition?
- Measuring the socioeconomic impacts of the transition. McKinsey’s Cindy Levy and Kartik Jayaram hosted a roundtable discussion with business and civil-society leaders to collect feedback on a newly developed framework for measuring the socioeconomic impacts of the transition. As Cindy explained, creating common definitions and metrics will allow leaders to “understand the challenges ahead, and align on a global acceptance of a common transition impact framework that will encourage more thoughtful, coordinated action that addresses the unique needs of countries and communities.”
- Prioritizing collaboration: McKinsey’s global managing partner, Bob Sternfels, convened senior private- and social-sector leaders to discuss how to address climate adaptation and the transition inclusively. Panelist Ron O’Hanley, CEO of State Street, urged collaboration across countries and communities. “The atmosphere knows no national borders,” he said.
Chart of the day
Source: “From poverty to empowerment: Raising the bar for sustainable and inclusive growth,” McKinsey, September 18, 2023.
Questions for leaders:
- What opportunities are there to build partnerships with public and private organizations to maximize inclusive growth outcomes for society?
- Has my organization fully understood its reliance on supply chains in emerging economies? Can my organization improve resilience in our supply chains by investing in adaptation in vulnerable countries and communities?
- Does my organization have the “right” skills to navigate the transition? How can my organization help deliver the required re- and up-skilling, including to the existing and potential workforce?
More from McKinsey
- From poverty to empowerment: Raising the bar for sustainable and inclusive growth
- Protecting people from a changing climate: The case for resilience
McKinsey @ COP28: Looking ahead
December 9: Unlocking high-integrity carbon markets to fund the global climate transition (register here)
December 10: Climate resilience & nature / Financing a net-zero, nature-positive food system transition (register here)