Climate finance calls grow louder in face of global emergency

A protester carrying a sign at the U.N. Climate Change Conference in Madrid, Spain. Photo by: Victor Barro / Friends of the Earth / CC BY-NC-ND

WASHINGTON — The final month of 2019 marks an inflection point for negotiators at the United Nations Climate Change Conference in Madrid this week, with the hottest decade in recorded history now coming to an end, and the first decade of the Paris climate agreement about to begin.

The fundamental issue at COP25 is ambition. Governments have to commit to more aggressive national climate action plans that reflect the urgency of the climate crisis before the Paris Agreement takes hold in 2020, while the international community is under mounting pressure to deliver enough financial and technical support — particularly to low-income countries — to give those plans a realistic chance of implementation.

“The collapse of biodiversity, global warming and irreversible changes to natural systems ... will produce adverse economic and societal impacts around the world that are far greater than those of the 2008 financial crisis.”

— John Denton, secretary-general, International Chamber of Commerce

Some of the key financial instruments for delivering climate finance have faced big tests of their own this year. In October, the Green Climate Fund secured a $9.7 billion replenishment, despite the Trump administration’s rejection of any U.S. government contribution.

Next week, the World Bank’s International Development Association — one of the most important sources of concessional finance for low-income countries — will hold its 19th replenishment conference. IDA is hoping for more than $80 billion, which includes grants from its donors — many of whom have directed the fund to channel a significant portion of its funding to projects that carry co-benefits of climate change mitigation.

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The handful of existing sources of public climate finance pales in comparison to the amount of investment required to adapt to climate change and cope with its negative impacts. In Madrid, climate advocates are pushing for a range of additional financing options that might help bridge the gap between the rising costs of climate change and the financing available to address them.

Perhaps the most controversial of these is the perennial hot-button issue of “loss and damage,” which recognizes that climate change will — and already is — causing harm to vulnerable countries, outpacing the ability of these countries to adapt.

A report released this week by Oxfam found that climate-induced disasters were the leading driver of internal displacement over the past decade, and that people in low- and lower-middle-income countries are over four times more likely to be displaced by weather-related disasters than people in high-income countries.

The more contentious idea proposed by civil society representatives and climate-vulnerable countries is that the low- and lower-middle-income countries should be aided in addressing those costs by the heavy emitters responsible for causing them.

While several high-income countries have balked at the idea that they might be held liable for climate change impacts in other parts of the world — opting instead to back initiatives that rely on disaster risk insurance — civil society and vulnerable-country representatives have sharpened their call for an explicit link between concrete financing commitments and discussions about loss and damage.

At COP25, delegates will review the Warsaw International Mechanism, which is the framework to address loss and damage within the negotiations.

Before the climate conference began, a coalition of 152 civil society groups signed an open letter calling for a new financing facility and debt relief for countries experiencing climate-related disasters, which are set to cost at least $300 billion each year, according to the letter.

“Without a reliable and comprehensive financing facility to ensure finance to help countries cope with climate-induced loss & damage, the most vulnerable parts of the world will sink deeper into debt and poverty every time they are hit by climate disasters they did not cause,” the letter reads.

“We call for a comprehensive funding facility and a moratorium on developing countries’ debt, to be delivered at this COP in Madrid. We await your reply at your earliest convenience,” the letter says.

In the absence of sufficient public climate finance, others are hoping tweaks to the global financial system might help deliver investment at the scale demanded to tackle both climate change and the Sustainable Development Goals.

John Denton, secretary-general of the International Chamber of Commerce, wrote to finance ministers this week, encouraging them to pursue policy and regulatory changes that might better embed sustainability into financial markets. Denton pointed to the global regulatory response to the 2008 financial crisis as an example of how regulatory changes can shift assets in more desirable directions.

“Without doing so, the collapse of biodiversity, global warming and irreversible changes to natural systems and structures that we all depend on will produce adverse economic and societal impacts around the world that are far greater than those of the 2008 financial crisis,” Denton wrote.

He proposed 10 policy changes that could have “a significant effect on the way in which financial markets serve our world,” including embedding sustainability into credit ratings, expanding the concept of financial stability to include sustainability-related risks, and earmarking the estimated $100 billion in “dormant assets” for sustainability-related projects.

Finance ministers will have a chance to consider those recommendations — as well as the broader role they can play in financing a global response to climate change — when the Coalition of Finance Ministers for Climate Action meets on Monday. The coalition, which officially launched at the World Bank spring meetings in April, has collectively endorsed a set of principles that aim to use fiscal policy and public finance to help countries deliver their climate action plans.

At Monday’s meeting, the coalition will unveil its Santiago Action Plan, which will lay out the coalition’s work plan for 2020.

About the author

  • Michael Igoe

    Michael Igoe is a Senior Reporter with Devex, based in Washington, D.C. He covers U.S. foreign aid, global health, climate change, and development finance. Prior to joining Devex, Michael researched water management and climate change adaptation in post-Soviet Central Asia, where he also wrote for EurasiaNet. Michael earned his bachelor's degree from Bowdoin College, where he majored in Russian, and his master’s degree from the University of Montana, where he studied international conservation and development.