Speaking notes for Minister Barbara Creecy for the Climate and Development Ministerial hosted by the incoming COP 26 Presidency

31 March 2021

 

Firstly, allow me to take this opportunity to convey our gratitude to the UK Government and incoming COP 26 Presidency for hosting this Climate and Development Ministerial.

Distinguished Ministers, Excellencies,

As we gather here today at this Climate and Development ministerial meeting we find ourselves amidst some of the greatest social, economic and environmental challenges in history. International cooperation, political will, leadership, ambition and action is needed to address these significant threats.

Enhanced access to massively scaled-up finance, technology and capacity-building support are vital to put us on a path to transition to an environmentally sustainable, climate resilient, low carbon economy and just society.

The barriers identified in the concept note namely: complexity of the process; delays in disbursement; need for co-financing/leveraging resources, amongst others, are all relevant, yet they are and have been barriers that have existed since the dawn of the Convention.

Clearly, today as we debate, I want to suggest that the problems relating to climate fiancé are more systemic and more wide ranging. Accordingly, we will need a mind shift if we are to address this challenge in a sustainable manner. Political will and leadership will be needed on the part of Developed and Developing countries alike.

So what are the problems:

The first is the  long delay on the part of some developed countries to fulfil climate finance obligations and commitments under the Convention and Paris Agreement. It is striking that we have witnessed declines in both Global Environment Facility, and the Green Climate Fund, and after over 10 years since Copenhagen developed countries have still not achieved the US$ 100 billion mobilisation goal by 2020.

The second challenge is the  disturbing decline in public finance for mitigation and adaptation with grant financing hovering at around 6%, and the rest in the form of loans and other non-grant instruments.

Access to public grant and concessional finance by developing countries is being differentiated on the basis of World Bank and other MDB income classifications, the consequence of which is that 75% of the global population and 62% of the global poor are being disadvantaged. This is exposing a large proportion of the global population to the devastating impacts of climate change.

Because of dwindling access to concessional multilateral finance and a shift of Official Development Assistance (ODA) away from central budget support towards wider goals, such as climate change mitigation, migration management, good governance and post-conflict support, often times determined by donor interests is leading developing countries to borrow at high risk in international financial markets.

At end of 2018 the total debt stocks of developing countries stood at almost double their combined GDP, the highest level on record. Despite the dire debt situation, developing countries are being presented with greater debt instruments to support their climate mitigation, adaptation and broader development efforts, thereby exacerbating debt sustainability and reducing fiscal space.

The third challenge is mandatory financial disclosures as a vehicle to improve identification of climate risk and scale-up responsible investment . It has unintended consequences for many developing countries and their private sector who may be deemed as having high climate risks given the nature of their asset base and balance sheets.

This exposure to high climate risks serves to discourage pension funds and other fund managers from investing in their transition agendas. The trend of international financers to abruptly disinvest from fossil fuels poses a particular threat to Africa because of the unintended impact on jobs, the economy, energy and food security.

Over 450 public development banks that provide funding for large infrastructure projects in the energy sector, among others, pledged on 12 November 2020 to align with the Paris Agreement. This alignment with the Paris Agreement and in particular Art 2.1.c,  is noble in its intention. However it is resulting in unintended consequence that impact on access to climate finance.

And so what is the solution?

We need to start addressing the issue of climate finance as an ecosystem, as the issues are interlinked and complementary. And we need to address issues in a balanced manner.

Developing countries need the development space to transition and this transition must be just and can leave no one behind. There must be global  acknowledgement and respect for the fact that the transition to a low carbon economy and a climate resilient  society does not happen overnight.

It requires planning that takes account of country’s specific circumstances, and key economic sectors. There must be support for proof of concept projects that can be upscaled. There must be an emphasis on job preservation, job transition and future job skilling.

We urgently need deliberations under the UNFCCC on Article 2.1.c that would enable all parties and stakeholders, particularly in the financial sector to have a better understanding as well as some clear guidelines towards its implementation while avoiding unintended consequences.

Our multilateral financial mechanisms and MDBs must be prepared to take greater risk.

The extent of effective and ambitious implementation by Developing Countries of climate action depends on the effective and ambitious implementation of Developed Countries’ commitments on finance, technology and capacity building taking fully into account that economic and social development and poverty eradication are the first and overriding priorities of the developing country Parties.

Edmund Burke the British statesman and philosopher once said that Ambition can creep as well as soar – Access to and ambition in the means of implementation (i.e., finance, technology and capacity building) will define whether our climate and development ambition will creep or soar.

I thank you.