Cop28 gave climate finance the push it needed, but it's time to up the pace

Beached boats lie on the shore near damaged houses in Grenada after the passage of Hurricane Beryl this month. Reuters

Speaking from a devastated Grenada in the aftermath of Hurricane Beryl this month, the head of the UN Framework Convention on Climate Change laid bare the biggest obstacle facing climate frontline communities.

“Governments in these vulnerable, developing islands have such limited fiscal space. They’re heavily debt burdened. They don’t have the financial means to continue to borrow to rebuild what they have just rebuilt, only for it to be destroyed again,” Simon Stiell said in an emotional interview, as the small Caribbean island’s community struggles to pick up the pieces.

If ever there as a snapshot of the brutal socio-economic impact of climate change, it is this: peoples’ lives and livelihoods were swept away overnight.

And, as Mr Stiell pointed out, the impact of Hurricane Beryl also highlights the global climate fight’s biggest challenge: making finance accessible and affordable to vulnerable and emerging markets and developing economies – otherwise known as EMDEs.

The climate fight won’t make any headway if the global financial system isn’t reformed. Far too many low-income economies are imperilled by mounting debt, entrapped and forced to repay higher-interest loans on money borrowed to fight the consequences of increasing extreme weather events.

Finance holds the key to unlocking new, inclusive climate mitigation and adaptation solutions. It is rightly, therefore, at the top of the international community’s agenda this year.

Brazil, the G20 president, has pushed reform of the climate finance system hard. This was on display at the third G20 Finance Ministers and Central Bank Governors Meeting in Rio de Janeiro last week. The subsequent communique emphasised the group’s focus on “promoting effective policy frameworks and mobilising adequate, affordable and accessible finance to address climate change and biodiversity challenges”.

Importantly, the meeting also showed important signs of integration with the global climate action agenda laid out by the Cop28 UAE presidency, at the Cop28-G20 Conference on Sustainable Finance, held on the sidelines in Rio. At the conference, the UAE’s Minister of State for Financial Affairs, Mohamed Hadi Al Hussaini, called for an international framework that supports the distribution of finance in ways that mitigate investment risks in developing countries.

Given the fact that this year, the G20 Leaders’ Summit overlaps with the first days of Cop29 – when heads of state and government usually convene at the UN climate talks – a direct merging of agendas from the two influential bodies can be seen. In this sense, integration between these two bodies is both inevitable and important.

Much of the momentum behind the issue of climate finance was generated seven months ago, when Cop28 ushered in a new dawn for a practical, pragmatic approach to closing the climate finance gap and investing in an equitable energy transition that leaves no one behind.

As well as securing $85 billion in new commitments and replenishing the Green Climate Fund, Cop28 secured an agreement on a new Global Climate Finance Framework with 10 principles for closing the finance gap that the transition demands, which currently stands at about $7 trillion a year by 2050, according to data from the International Renewable Energy Agency.

Investing this $7 trillion annually to greenify the global economy and close the financing gap is not only critical to achieving our shared climate goals, it also presents an unprecedented opportunity to accelerate local, regional and global low-carbon, climate resilient, inclusive growth.

The good news is that climate finance is moving in the right direction. More than $1.7 trillion was invested in clean energy alone in 2023, which coincided with a 13.9 per cent growth in renewable energy power capacity, according to Irena.

The not-so-good news is that climate finance is not moving fast enough. Further delays are only exacerbating the urgency of future needs, with the annual sum of climate finance needed set to rise only if the shortfall persists.

This climate finance gap is felt especially acutely in EMDEs in the Global South. According to a report by the Independent High-level Expert Group on Climate Finance, $2.4 trillion worth of investment a year is needed in EMDEs by 2030 across the priorities of a just energy transition, adaptation and resilience, loss and damage, and the conservation and restoration of nature.

This figure represents a four-fold increase from current levels devoted to these areas. And, as the first Global Stocktake highlighted, climate investments and accessible finance in EMDEs are severely lacking.

Further, EMDEs are being left behind on clean energy. While clean energy investments hit an all-time global peak last year, more than 90 per cent of the increase in these investments since 2021 has taken place in the developed economies, and China. Low- and lower-middle income countries accounted for only 7 per cent of clean energy spending in 2022.

The challenges to overturning the climate finance status quo are clear. EMDEs face higher interest rates, impractical policy frameworks and market designs, and a higher cost of capital. The solutions should be just as clear.

Guided by international co-operation, we need to see an urgent scaling-up of climate finance that prioitises the needs of EMDEs with ready solutions to easing debt burdens. It is on these frontlines – the small islands, the developing states, the vulnerable and emerging economies – where the fight against climate change and the race to the energy transition will be won and lost.

Initiatives such as Irena’s Energy Transition Acceleration Financing Platform and Lives and Livelihoods seek to mobilise and redirect crucial finance to the parts of the world that need it the most. This is important to build and rebuild infrastructure; to support vital industries that frontline communities rely on, like food, agriculture, health care and education; and to build new energy capabilities so that no-one lives in the dark.

For finance to trickle down, however, the taps at the top need to be turned on. And a new financial architecture needs to be built so that capital flows quicker and easier.

The systemic nature of the climate crisis means that it can be tackled effectively only through expedient and efficient economy-wide reforms designed to deliver the quantity and quality of finance necessary for all communities to transition to climate resilience and safety.