Azerbaijan has unveiled the Climate Finance Action Fund (CFAF) to invest in climate action in the developing world. The fund will become operational after the initial fundraising round, seeking to raise $1 billion with 10 contributing countries as shareholders. CFAF will be capitalised by contributions from fossil fuel producing countries and companies across oil, gas, and coal, with Azerbaijan as a founding contributor. Members will commit to transferring annual contributions as a fixed-sum or based on production volume. This initiative is part of a package of 14 announced during COP29 to enhance ambition and enable action in combating climate change.
CFAF will serve as a catalytic public-private partnership fund, mobilizing the private sector and de-risking investments. It will include special facilities offering concessional and grant-based support to address the consequences of natural disasters in developing countries. The fund will provide off-take agreement guarantees for small and medium-sized renewable energy producers and first-loss capital for green industrial projects, with a focus on the food and agriculture sector to protect livelihoods and achieve net zero. Profits generated from projects will be reinvested back into the fund for further initiatives.
Fifty percent of the capital will be allocated towards climate projects in developing countries relying on support for mitigation, adaptation, and research and development, promoting clean energy technologies, improving energy efficiency, enhancing climate resilience, and developing cutting-edge technologies. The remaining fifty percent will help members meet their Nationally Determined Contributions (NDCs) aiming to achieve the 1.5C temperature target. Azerbaijan is leading by example with plans to submit a 1.5-aligned NDC, urging all parties to follow suit and contribute towards the fund.
A portion of the revenues generated from investments will be deposited into a Rapid Response Funding Facility providing highly concessional and grant-based support to address natural disasters in vulnerable developing communities. The fund will be headquartered in Baku, Azerbaijan, with a board of directors representing contributors and an independent audit committee publishing quarterly financial reports and project evaluations. Shareholders will collectively make decisions, with an established working group of international financial experts developing the management model and funding mechanism for the fund.
Mukhtar Babayev, COP29 President-Designate, expressed gratitude for the support received from the President of Azerbaijan in launching the CFAF, emphasizing the importance of taking concrete action to combat climate change. The fund aims to fulfill the COP29 plan to enhance ambition and enable action, calling on donors to join in the effort. UNFCCC Executive Secretary, Simon Stiell, highlighted the significance of intergovernmental cooperation through COP meetings to avert the global climate crisis and promote decarbonization and climate resilience. COP29 Chief Negotiator Yalchin Rafiyev stressed the unique qualities of the CFAF, being the first fund with contributions from both countries and companies in the fossil fuel sector to address climate action and natural disasters.
The launch of the CFAF was part of a larger package of 14 initiatives introduced during COP29 to drive action across all climate pillars and encompass global, regional, and national groups in a holistic approach to sustainable development. The initiatives aim to involve all demographics in an inclusive process that delivers inclusive outcomes. Babayev announced that the COP29 Presidency would communicate further information on the action agenda and initiatives to Parties and Constituencies within the UNFCCC in due course, urging for collective efforts in combating climate change.
