Federal Minister for Climate Change Calls for New Financial Regimes for Climate Funding
In a keynote speech at the Chatham House Conference on Green Accountability and Climate Finance, Federal Minister for Climate Change and Environmental Coordination, Senator Sherry Rehman, urged for new financial regimes for climate funding. She emphasized the need for transformational thinking to bridge the dangerous gap between different levels of emitters, especially for the less-prepared developing world.
The Urgent Need for Climate Funding
Senator Rehman highlighted that the U.N. estimates that developing countries already need $70 billion per year to cover adaptation costs now and will need $140–$300 billion in 2030, rising to $280-500 billion by 2050. Pakistan alone needs to invest US$348 billion by 2030 to keep its head above water. However, the capitalisation of public financing funds is at a fraction of global pledges made, and the total annual investment requirement of developing countries would hit $2.4 trillion by 2030, but no such amount or fund or resource is available to climate-distressed countries trying to access climate funds to actually rebuild resilience in real-time.
Challenges of Accessing Green Financing
The formal green financing mechanisms, such as the GCF and GEF, while important, are difficult to access because they require projectization which then goes into onerous competitive bidding processes, taking more than a year to materialize. Additionally, the problem of double counting is a serious issue, causing a lack of trust in lending from both bilateral and MDBs to developing countries, as it can simultaneously count towards meeting climate change obligations and development commitments.
The Role of Private Sector and Businesses
Senator Rehman believes that the private sector and businesses must be brought to the table for scaling up the surge of climate financing that is needed. Big business remains outside of the formal negotiations naturally at multilateral convenings but needs to be brought in as part of the solution. The public sector financing is clearly drying up, and what is needed right now is for big business to be part of the solution which I am sure they’ll want to be, instead of running dazzling side shows at the COP convenings.
Enhancing Transparency and Accountability of Green Financial Mechanisms
Senator Rehman also highlighted the challenges of accountability in climate finance, noting that while there have been some successes in controlling corruption in overseas development assistance for the public sector, Transparency International reports that significant amounts of climate finance bypass typical control channels. The complexity of the institutional network governing climate finance at international, national, and local levels contributes to this issue. The minister emphasized the importance of multi-stakeholder accountability mechanisms to enhance transparency in designing, implementing, and monitoring adaptation and mitigation frameworks.
The Need for Restructuring Global Financial Institutions
Leaders in the Global South are calling for the restructuring of global financial institutions to enable climate financing since they were designed for a post-WWII world order and not for the post-climate change era of today. The functioning of these institutions needs to change to handle the most extensive mobilization of international finance in history to help developing nations adapt to and cope with a warming planet. If enhanced transparency and audits can incentivize change and trigger investments on the ground, we could all benefit from this exercise in real time.
Conclusion
Senator Rehman concluded that the global climate crisis has left no country untouched, but it is the developing world that is facing the most severe consequences. The resources needed to limit the reversal of development gains that extreme weather brings, to mitigate risks associated with climate shocks and global crises and prevent the weakening of the resilience of populations to climate change, are estimated at US$4.2 trillion. The urgent need for climate funding requires new financial regimes and the involvement of the private sector and businesses to scale up the surge of climate financing that is needed.
