Why climate finance matters?

It is critical to address the climate finance issues affecting the countries of the Caribbean and the Americas now..

The Bahamas Prime Minister, Philip Davis’ Remarks at the Climate Finance in The Americas Meeting’s Opening Session

OCTOBER 2, 2023

"...let’s not forget that climate finance is ultimately about people, not just numbers on a balance sheet.  It’s about protecting our planet, our communities, and current and future generations from the devastating impacts of climate change.  And, it’s about building a more equitable and inclusive future for everyone, not just the privileged few."

Dear Friends and colleagues, let’s get right to the point.

Everyone in this room is aware of the urgent need to mobilize trillions of dollars in investment to tackle the climate crisis.  We’ve made some progress in recent years, but we still have a long way to go.

So how do we get there?  What do we need to do, starting right now, to mobilize those trillions of dollars?  And how can we work together to make that happen?

From shifting investor preferences to reforming multilateral development banks to tackling currency risks, there are many factors that will determine our success in this endeavor.

But before we dive into the details, let’s take a step back and consider why climate finance matters.

Put simply, we cannot achieve our climate goals without it.  This is true for the developed world, but it is especially true for developing nations.  Whether we are talking about transitioning to renewable energy, improving energy efficiency, or protecting vulnerable communities from the impacts of climate change, all of these efforts require significant investment.

We hear again and again that meeting the climate change challenge is costly.  Something is costly when it does not contribute to the goals we set ourselves, as individuals or as societies.

Climate finance, though, is ultimately about what we, as societies, value; the world we want to live in and the lives and hardships we can save by channeling our money to build resilience against the ravages of climate change.

We need to reform the international financial architecture, including private finance flows and multilateral development banks.

We need to make the current international financial architecture fit for purpose to enable low emissions and climate-resilient investment globally, in every region and in every country.

At COP27, Parties called for a transformation of the financial system and its structures and processes, engaging governments, central banks, commercial banks, institutional investors and other financial actors.  They also called for significant reforms of multilateral financial institutions in terms of financing models, risk appetites, and non-debt instruments.

We’re also seeing new initiatives from the financial sector that highlight the need for scaled-up climate finance.  We’re seeing central banks form coalitions and networks; we’re seeing financial institutions make net-zero pledges; and we’re seeing a growing number of country investment platforms and just energy transition partnerships.

Additionally, a growing number of complementary efforts on reform are in motion, including through the G20, V20, the IMF and other regional forums.

The number of initiatives alone shows how the reform imperative has garnered increasing momentum, but at the same time, how it has fragmented into disparate efforts.  This reality reinforces more than ever the importance of coordination to ensure the whole is greater than the sum of its parts.

Reforms must respond to the need to drive progress across three main areas.

First, we need to drive progress on managing risks to investing in climate action in developing countries.  Where risk is real, we need to deploy at scale the risk reduction instruments – such as guarantees, insurance, and local currency hedging and financing – necessary to unlock capital.  Where risk is perceived, we need to address the biases that hinder investment at scale, and the expectation of high financial returns when engaging on climate change.

Second, we need to drive progress on financing a just and equitable transition.  We need to develop transparent transition plans that shift investment portfolios over time, and that enable ramp-ups in climate investments to the same extent as we see a phasing out of harmful investments.

Third, we need to drive progress on managing the debt crisis.  We need to develop a shared understanding of climate-fiscal-debt links and ensure no country builds up excessive debt because of climate action.

My friends, let’s be candid. The clock is ticking.  We needed change and action years ago.  But now we’re really running out of time.

The Bahamas is an archipelago of 700 islands and numerous cays, spanning thousands of square miles.

Our location means we are highly susceptible each year and in some cases multiple times per year to hurricanes, floods, and rising seas.

When a hurricane devastates the economies of multiple islands at a time, as was the case with Hurricane Matthew, Hurricane Joaquin and more recently Hurricane Dorian, we are left with the daunting task of rebuilding each island’s economy, including rebuilding communities, and damaged infrastructure such as communication networks, water supply, school systems, airports and ports.

It takes us years to recover – and consider this – in under ten years, we have been hit by four separate Category 4 or Category 5 storms.

This traps us in a vicious cycle: 

- We are vulnerable to a warming climate caused by the emissions of other nations;

- Hurricanes made more intense by that warming climate leave behind extreme devastation and a loss of economic activity;

- We are forced to borrow to repair and rebuild, at high-interest rates which reflects our climate vulnerability and our lack of fiscal space to invest in resilience;

And on and on it goes.

In the meantime, our country is considered a high-income country, limiting our access to concessional financing and development aid.

This is an old formula that makes no sense in a new era.  And this is no inconsequential technicality – the high-income designation means we cannot sufficiently invest in our people, our development, and our resilience.

This has to change.

It is critical to address the climate finance issues affecting the countries of the Caribbean and the Americas now.  Our calls for action are strongly articulated in the Declaration of The Bahamas on Climate Finance in The Americas.  This Declaration was negotiated and formally agreed to by OAS member states, and reflects our joint call for global and hemispheric change to the climate finance architecture.

The Declaration of The Bahamas on Climate Finance in The Americas highlights the four key pillars of climate finance:

1 - Enhancing Access through strengthened efforts and collaboration to expand adequate, and direct access to climate finance at scale for all developing countries in the Americas.  This pillar, among other things, also emphasizes the call to move ‘beyond GDP per capita’ to capture climate vulnerabilities in funding decisions in a manner that supports climate-vulnerable countries.

2 - Improving the Terms and Instruments of Finance

Under this pillar, member states stressed the fundamental role of concessional and non-debt finance for the provision and mobilization of resources for assisting developing countries in the Americas in combating climate change.  We also call for enhanced efforts and collaboration to expand affordability of climate finance in the Americas.

3 - Scaling up Towards Adequacy

Here, we jointly call on the Multilateral Development Banks to boost efforts and collaboration to scale up the provision and mobilization of adequate climate finance in the Americas.

4 - Improving Coordination

Under this final pillar, our countries call for enhanced efforts and collaboration by improving accountability and coordination in respect to climate finance.  We call on the Multilateral Development Banks to collaborate with regional and national development banks, as well as United Nations agencies, the OAS, CARICOM, hemispheric and regional intergovernmental organizations and philanthropies, to improve governance and coherence, efficiency and effectiveness of climate finance architecture.  We also call on member states to take steps to advance the calls in this Declaration in relevant fora.

Friends and colleagues, this brings me to my final point: using the global stocktake and the new collective quantified goal on climate finance as pivotal moments to set reforms in motion.

The global stocktake is a process for countries and stakeholders to see where they’re collectively making progress towards meeting the goals of the Paris Agreement – and where they’re not.

It’s like taking inventory.  It means looking at everything related to where the world stands on climate action and support, identifying the gaps, and working together to chart a better course forward to accelerate climate action.

The stocktake is a course-correcting moment, an opportunity to provide a roadmap with ‘solutions pathways’ that drive immediate action.

Some of the key finance pathways could include fostering accountability of non-state actor commitments, and innovative financing models to tackle currency risks.

This is the year we need to establish clarity on how governments, multilateral development banks and international financial institutions, private sector finance institutions and industries will deliver the trillions required.

I emphasize again the urgent need for action on climate finance, and the importance of collaboration and innovation in addressing this complex challenge.

But let’s not forget that climate finance is ultimately about people, not just numbers on a balance sheet.

It’s about protecting our planet, our communities, and current and future generations from the devastating impacts of climate change.

And, it’s about building a more equitable and inclusive future for everyone, not just the privileged few.

I can’t think of more important work.  So let’s keep pushing forward together with determination and purpose.

Thank you very much.

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Renewable Energy is the Key to Securing Humanity’s Survival

Without renewables, there can be no future...

5 ways to power the energy transition

From UN News

Renewable technologies like wind and solar power are, in most cases, cheaper than the fossil fuels that are driving climate change, but the world needs to prioritize the transformation of energy systems to renewable energy.

The Climate Ambition Summit, scheduled for 20 September at UN Headquarters in New York, will consider how to accelerate this transformation.

Here are five ways that acceleration could happen:

1. Shift energy subsidies from fossil fuels to renewable energy

Fossil fuel subsidies are one of the biggest financial barriers hampering the world’s shift to renewable energy.

The UN Secretary-General has consistently called for an end to all international public and private funding of fossil fuels, one of the major contributors to global warming, calling any new investments in them “delusional”.

“All actors must come together to accelerate a just and equitable transition from fossil fuels to renewables, as we stop oil and gas expansion and funding and licensing for new coal, oil, and gas,” he said.

The International Monetary Fund (IMF) revealed that $5.9 trillion was spent on subsidizing the fossil fuel industry in 2020 alone.  This figure includes subsidies, tax breaks, and health and environmental damages that were not priced into the initial cost of fossil fuels. 

That’s roughly $11 billion a day.

Shifting subsidies from fossil fuels to renewable energy leads to a reduction in their use and also contributes to sustainable economic growth, job creation, better public health, and more equality, particularly for the poorest and most vulnerable communities around the world.

2. Triple investments in renewables

An estimated $4 trillion a year needs to be invested in renewable energy until 2030 in order to reach net-zero emissions by 2050.  Net zero is the term which describes achieving the balance between carbon emitted into the atmosphere and the carbon removed from it.

Investment in renewables will cost significantly less compared to subsidizing fossil fuels.  The reduction of pollution and climate impact alone could save the world up to $4.2 trillion per year by 2030.

The funding is there, but commitment and accountability are needed, particularly from global financial systems.  This includes multilateral development banks and other financial institutions, which must align their lending portfolios towards accelerating the renewable energy transition.

“Renewables are the only path to real energy security, stable power prices and sustainable employment opportunities,” the UN chief said.

He has further urged “all governments to prepare energy transition plans” and encouraged “CEOs of all oil and gas companies to be part of the solution”.

3. Make renewable energy technology a global public good

For renewable energy technology to be a global public good, meaning available to all and not just to the wealthy, efforts must aim to dismantle roadblocks to knowledge-sharing and the transfer of technology, including intellectual property rights barriers.

Essential technologies such as battery storage systems allow energy from renewables to be stored and released when people, communities, and businesses need power.

When paired with renewable generators, battery storage technologies can provide both reliable and cheaper electricity to isolated grids and off-grid communities in remote locations, for example, in India, Tanzania, and Vanuatu.

4. Improve global access to components and raw materials

A robust supply of renewable energy components and raw materials is a game changer.  More widespread access to all the key components and materials is needed, from the minerals required for building wind turbines and electricity networks to elements for producing electric vehicles.

The UN’s International Seabed Authority is currently working with its Member States on how to exploit such abundant mineral resources in international waters as those crucial for manufacturing batteries while ensuring the effective protection of the marine environment from harmful effects that may arise from deep-seabed-related activities.

It will take significant international coordination to expand and diversify manufacturing capacity globally.  Greater investments are needed, including in people’s skills training, research and innovation, and incentives to build supply chains through sustainable practices that protect ecosystems.

5. Level the playing field for renewable energy technologies

While global cooperation and coordination is critical, domestic policy frameworks must urgently be reformed to streamline and fast-track renewable energy projects and catalyse private sector investments.

Technology, capacity, and funds for renewable energy transition exist, but policies and processes must be introduced to reduce market risks to both enable and incentivise investment, while simultaneously preventing bottlenecks and red tape.

Nationally determined contributions, or countries’ individual action plans to cut emissions and adapt to climate impacts, must set renewable energy targets that align with the goal of limiting the increase in global temperatures to 1.5°C (2.7°F) above pre-industrial levels.

To achieve this, it is estimated that the share of renewables in global electricity generation must grow from 29 per cent today to 60 per cent by 2030.

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The Poverty Pandemic

Correcting course to accelerate poverty reduction

By MARI ELKA PANGESTU

On End Poverty Day we must respond to current challenges in ways that do not further impoverish the poor today and focus on creating opportunities that they can enjoy tomorrow.

On End Poverty Day this year, it’s hard to find cause for celebration.  The COVID19 pandemic triggered a historic setback, pushing 70 million people into extreme poverty in 2020 – the largest one-year increase in three decades.  

The war in Ukraine deepened the global economic slowdown, which is now in its steepest decline following a post-recession recovery since 1970.  At this rate, nearly 7 percent of the world’s population – almost 600 million people – will still be struggling in extreme poverty in 2030.   

Whilst the picture is sobering, it is a wake-up call for us to think and act to correct course. It’s important to remember that many of the development challenges we face today did not start with the pandemic.  Riding on the momentum to build back better, it’s a good time to review deficiencies of past policies and underinvestment.  

We must correct course now across a comprehensive range of policies and step-up global cooperation for a lasting recovery to move towards green, resilient, and inclusive development.  

In any crisis, it is the poor that are hit hardest.  According to the latest World Bank analysis, the poorest people bore the steepest costs of the COVID19 pandemic: income losses averaged 4% for the poorest 40%, double the losses of the wealthiest 20% of the income distribution.  

It is the poor who do not have the resources to cope.  During the pandemic, strong fiscal policy measures did help to protect poor and vulnerable people, but poor countries were less successful than rich countries.  With less to spend, low- and lower-middle income economies offset barely a quarter of the impact on poverty.

What may be even more worrying are the long-term consequences of multiple overlapping crises, which could worsen poverty in the near future if we do not accelerate action.  Losses in learning and human capital, as well as climate change are among the most critical.

Losses in Learning and human capital: As a result of prolonged school closures and shocks to household incomes during the pandemic, learning poverty has increased by a third in low- and middle-income countries.  This means that an estimated 70% of 10-year-olds are unable to understand a simple written text. 

Today’s students could lose 10 percent of their future average annual earnings as a result.  Youth have also suffered a loss in human capital, in terms of both skills and jobs. 

Short-term declines in youth employment can lead to more frequent unemployment spells, lower future wages, and increased social unrest.  Beyond reducing incomes, the decline in human capital will lead to lower productivity and less inclusion for decades to come, hindering growth, increasing poverty and inequality.

These trends can be reversed if countries act quickly and decisively, guided by evidence on what works.  We must keep schools open, assess students and match instruction to their levels, streamline the curriculum and focus on foundations  - especially literacy, numeracy, and core socioemotional skills.  And we need to create a national political commitment for learning recovery, guided by credible measurement of learning.  We must not forget to invest in girls’ education – which may well be the highest-return investment available in the developing world.

Climate change: The climate crisis is already here, and it could push an additional 132 million people into poverty by 2030.  The adverse consequences of climate change—water scarcity, crop failure, food insecurity, economic shocks, migration, and displacement— can multiply threats by exacerbating conflict, reducing economic opportunities and social cohesion, as well as straining public institutions.

We need to make sure that climate is integrated into development and ensure a well-managed ‘just’ transition towards clean energy sources in a way that protects people, communities, and the environment.  

Developing countries face a triple penalty – they pay more to provide electricity services; they are locked out of economical clean energy projects; and they are locked-in to fossil fuel projects with high and volatile variable costs.  We will need impactful programs and projects, adequate public policies, and significantly increased funding from multiple sources. Countries need to also invest in adaptation and resilience.

A resilient recovery will depend on a wide range of policies, including fiscal reforms that reorient spending away from subsidies toward support targeted to poor and vulnerable groups, and improvements in efficiency and efficacy.  Prioritizing long-term growth requires appropriate investments in crisis readiness, too. 

COVID19 showed us how progress achieved over decades can vanish overnight when such readiness is lacking.  Public investments that support long-run development, such as investments in human capital of young people or investments in infrastructure as well as research and development can have a positive impact on growth, inequality and poverty decades later.

We must respond to current challenges in ways that do not further impoverish the poor today and focus on creating opportunities that they can enjoy tomorrow.

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