AFI network recognizes urgency to scale up climate finance, driving strong message from COP23
Continuing the momentum on climate finance, this year’s COP23 in Bonn concluded late last week with a comprehensive list of climate action pledges and initiatives. Some of the key positive outcomes include the following:
- The global value of Green Bonds reached US$100 billion for the first time
- Bloomberg pledged US$50 million to move away from coal dependence
- The UK and Canadian delegation made a significant contribution to the conference with the launch of their alliance, “Powering Past Coal” that aims to disincentive and rapidly reduce global coal consumption
The second week of COP23 kicked off with "Finance for Climate Day” where discussions focused on funding the interventions that will reduce damages from climate change impacts — a cause that financial regulators and policymakers support because they recognize the dual threats of financial exclusion and climate change as key barriers to financial stability. The debates on urgent action within the opening days of COP23 were crystallized in the final days of the conference when plans were laid down to finance various interventions.
Ramping up ambitious climate action
An important development for climate finance this week was the signing of the Bonn-Fiji Commitment – a commitment to action adopted by over 300 local and regional leaders to deliver the Paris Agreement at all levels, supported with 20 initiatives including those focused on Africa, islands, post-industrial cities and climate reporting standards.
Decentralised decision making and including local voices is a distinct move towards making climate finance more inclusive. Given that Nationally Determined Contributions and the resources to achieve them are often implemented from the top down, decentralised decision-making and community action will enable climate change efforts from the bottom up, scaling up climate change action. AFI enables those who have previously been marginalised from these decision-making processes, and the resources available, for adaptation and mitigation interventions to create a more inclusive and sustainable climate finance ecosystem.
AFI member and COP23 Presidency, Fiji, has also committed to the Maya Declaration for climate change. One of their targets is to work with partners on developing and promoting sustainable business models to support communities’ response to climate change. Learn more at the AFI Data Portal.
Strengthening climate resilience
Climate risk insurance is gaining traction more widely in climate change dialogue with the aim to increase access to direct or indirect insurance coverage against the impacts of climate change.
The theme took centre stage at COP23 when the new InsurResilience Global Partnership presented their planned efforts to strengthen the resilience of developing countries and protect the lives and livelihoods of poor and vulnerable people against the impacts of disasters. Insurance products, usually inaccessible to the poor because of their lack of collateral and credit histories, are essential in recovery from disasters and coping with the financial burden of unexpected events. These combined efforts, in addition to the ongoing commitments and negotiations around the Paris Agreement workplan, signify a positive overall outcome from the conference.
Sustainable Innovation Forum and Climate Smart Finance
A few pioneering initiatives breathed new life into the climate finance discussions this week, highlighting the innovation emerging from the sector. The UN Environment Program (UNEP) and Climate Action hosted the 8th Sustainable Innovation Forum alongside COP23. Although primarily associated with developed countries, the Forum highlighted the potential for technology and IT to change human behaviour and the need to legislation in this regard needs to become less linear to adapt to a changing technology environment.
ClimateCoin is an example of fintech being used to invest in causes which tackle climate change. The new fintech startups are sponsors of the event and provided a tangible example of fintech and climate change innovation. ClimateCoin aims to contribute to greater stakeholder involvement, transparency and upscale further innovative climate change actions. The Ethereum based cryptocurrency is launching its Initial Coin Offering (ICO) on December 1st.
The panel on Climate-Contingent Finance in Agriculture, held at the end of the second week of COP23, provided some of the more thought-provoking contributions to the climate finance discussion. The agricultural sector has developed and tested many adaptation solutions to climate change given the sectors sensitivity and exposure to climate change impacts. It is, therefore, a space where innovative solutions can be fostered, and potentially applied in other situations.
Angela Falconer, Associate Director in the Climate Finance program of Climate Policy Initiative, opened the panel by presenting data on current climate finance flows from their Landscapes 2017 report. Falconer highlighted the need to improve tracking of domestic public climate finance, supporting policies offered by governments as they implement their Nationally Determined Contributions and increased revenue, in addition to stronger policy frameworks around climate change exposure that signal less risk to private investors, will improve the effectiveness of domestic government climate finance spending.
A unique tool developed by F3 Life addresses climate risks by increasing the climate resilience of smallholder farmers. Essentially, smallholder farmers sign loan agreements which are contingent on their implementing sustainable farm management practices (backed up by sound scientific research). These sustainable practices are monitored over the loan repayment period and linked to their credit scorecard. This, in turn, informs the algorithm which determines credit default risk and improves the smallholder bankability. This innovation is designed to counteract the degradation associated with intensive farming for profit and develop, what Mark Ellis-Jones of F3 Life calls, “environmental interest” which acts as a buffer to the risks of land degradation.
The urgency to scale up climate finance
With so many climate action pledges and initiatives, a further strong message from all sides at COP23 was the growing need to coordinate efforts across policy, planning and investment to ensure that every cent invested and every minute of work contributed results in a much greater impact and boosts ambition under the national climate plans.
The AFI network continue to support innovative solutions to complex problems and seek to develop like-minded policy approaches to climate change and financial inclusion. In recognition of the urgency to scale up climate finance and build momentum for sustainable development, AFI members including COP23 Presidency, Fiji, signed the Sharm El Sheikh Accord on Financial Inclusion, Climate Change and Green Finance in September 2017. Learn about AFI’s involvement in climate change.