Finance is the theme for today's discussions at COP27 and innovative finance was the subject for one of the roundtable sessions on 7 Nov 2022. Life tends to get messy when money is involved and climate issues are no different. There are successes and some difficult failures.
Creator God, who made this beautiful earth, thank you that you have given us the opportunity to share in your work. Help us as we strive towards a world where unjust debts are cancelled - for with you nothing is impossible.
(From Alma Link, Diocese of London)
Creator God, we in the global north are rich beyond measure compared to many of our neighbours in the global south and we experience a comfort and security that we often take for granted. Today we pause to give you thanks for all you have provided for us.
However, we also pause to acknowledge before you that we have not distributed the wealth of your world fairly. We have allowed practices to develop that have imprisoned many in the global south in a cycle of debt and poverty. We also acknowledge that our wealth has been created on the back of practices that have damaged your creation. The impacts of this are experienced daily by so many of our southern neighbours, many of whom have been driven further into poverty because of them.
Today the COP27 discussions focus around finance and how to make our global financial systems work better and more fairly for the poorest in the world and those at most risk from climate disaster. We ask that these discussions will unlock funds that can be accessed easily and without the constraints of additional debt. We also ask that developed countries will acknowledge their role in creating the climate issues we face today and will find the resources needed to lift poorer countries out of poverty and into healthy development, without harming the environment.
Exodus 22: 25-27 (NIV)
If you lend money to one of my people among you who is needy, do not treat it like a business deal; charge no interest. If you take your neighbour’s cloak as a pledge, return it by sunset, because that cloak is the only covering your neighbour has. What else can they sleep in? When they cry out to me, I will hear, for I am compassionate.
2 Corinthians 9: 8 (NIV)
And God is able to bless you abundantly, so that in all things at all times, having all that you need, you will abound in every good work.
Many countries, particularly in the global south, are facing unsustainable levels of public debt.
Their creditors are usually countries and/or institutions in the global north.
Almost half of external debt and interest payments by low and lower middle income countries are to commercial lenders.
Many debtor countries are also on the climate frontline, experiencing the worst of the impacts arising from climate change.
A poor country servicing a large debt does not have the necessary resources (money) to mitigate climate disasters nor does it have the resources required to adapt to a changing climate. Poor people suffer the most.
Unsustainable debt keeps countries locked into the exploitation of natural resources, including fossil fuels, because this is often one of the few secure sources of income available to them.
We in the global north have grown rich through our use of fossil fuels and we have contributed considerably to the current climate issues. However, we now expect our southern neighbours to replace fossil energy with clean energy options. We need to step up financially to support them in this, however to date we have failed to meet the targets we committed to (the promise of $100bn per year by 2020 pledged by developed nations in 2009 may not be met until 2023).
There are existing models for using green bonds, environmental impact bonds, debt-for-climate swaps and blended finance.
The International Monetary Fund establishe of the Resilience and Sustainability Trust in 2022 to provide long term financing and low interest loans to vulnerable countries.
There could be scope in the use of voluntary carbon markets.
The involvement of private philanthropy.
Kickoff: Opening Speech by the Prime Minister - Climate Finance in a Polycrisis Era: Setting the scene for the Finance day, highlighting main challenges and opportunities on climate finance from all financing sources and for all aspects of climate action
Public Finance/Policy - Sovereign Debt for Nature and Climate Investment: Rethinking debt for climate by considering what sustainable finance tools look like and reviewing reallocation methods between countries.
Public Finance/Policy - Reducing the Cost of Green Borrowing: Providing ways of accessing low-cost finance so that the cost of green borrowing is reduced.
Role of Platforms to Ensure Just Transition in Africa: Ways to accelerate the green energy transition in Africa so that communities that rely on emissions-intensive sectors for their livelihoods are not disadvantaged.
Financing Adaptation - Challenges and Opportunities: Ways to finance climate adaptation plans and to increase their attractiveness to investors.
Special Role of MDBs and Philanthropies in Unlocking Climate Finance: Moving beyond traditional financing structures to unlock climate finance - the role of philanthropies and multilateral development banks (MDBs)
Encouraging the Role of the Private Sector in Climate Related Initiatives and Climate Transition - GFANZ: Review of the hurdles facing green private finance and a discussion of solutions (note that GFANZ is the Glasgow Financial Alliance for Net Zero).
Africa: From Needs to Access (Integrating the outcomes of the ICF-African Ministers of Finance & Environment): (The ICF (International Cooperation Forum) included a number of development partners, and participants from the private sector, non-governmental organisations and think tanks).
Role of Financial Regulatory Bodies to Facilitate Climate Finance: e.g. incentivisation of sustainable developments, increasing transparency of reporting.
Meeting of the Coalition of Finance Ministers for Climate Action: A chance for finance ministers to convene and reflect their commitment to climate action.
Ministry of International Cooperation Guidebook for Just Financing: COP27 Presidency initiative launch.
Financing Loss & Damage - Challenges & Opportunities: A call to acknowledge and finance Loss and Damage associated with climate change.
Voice of Africa: Meeting of the heads of the African sovereign wealth funds to ensure their role in mobilising resources, consideration of investments and public private partnerships for climate action.
Innovative Finance for Climate and Development - COP27 roundtable notes.
Woolfenden T and Khushal S, October 2022. The debt and climate crises: Why climate justice must include debt justice. *A good read to put the complexities into context.
The World Bank and PPIAF, 2015. What are Green Bonds?
Quantified Ventures, 31 October 2018. Sharing Risk, Rewarding Outcomes: The Environmental Impact Bond. * A commercial site but it gives a straightforward explanation.
Singh D and Widge V, 10 May 2021. Debt for Climate Swaps. Climate Policy Initiative.
Brodsky S, 5 September 2019. What Is Blended Finance? Glenmede impactivate.
Website for the International Monetary Fund's Resilience and Sustainability Trust.
Hewitt, E. 23 March 2022. How the voluntary carbon market could help us get to net zero. World Economic Forum website.
