Here’s the exciting COP27 breakthrough no one is talking about

Mohamed Adow is director of Power Shift Africa

The most celebrated prize from the recent COP27 climate summit in Egypt was the creation of a “loss and damage” fund to compensate poor and vulnerable communities suffering the impacts of climate change.

But there was another breakthrough made in Sharm El-Sheikh that isn’t getting the headlines but has the potential to unlock trillions of dollars for climate action.

Getting wealthy countries to pay their climate debt has been like trying to get blood out of a stone.  Despite these rich polluters being the ones that caused the climate crisis and despite them acknowledging this and pledging to pay $100 billion per year in climate finance by 2020, they have failed to keep this promise.

$100bn may sound like a lot but it was a number chosen by the rich nations as an amount they were prepared to give, not a figure based on any assessment of the needs of the vulnerable. 

The actual amount needed for developing countries to adapt to the ravages of climate change and decarbonise their own economies stands at $3.8 trillion annually according to the Rockerfeller Foundation. They also estimate that only 16% of climate finance needs are currently being met.

One key to unlocking these trillions is through the multilateral development banks (MDBs) which have access to the kind of cash that could truly transform the climate finance landscape. The breakthrough at COP27 was that for the first time the countries of the world collectively called for these banks to reform their processes and put them to work in tackling the climate crisis.

The COP27 outcome document calls on the shareholders of multilateral development banks and international financial institutions to “scale up funding”, “ensure simplified access” and make them “fit for the purpose of adequately addressing the global climate emergency.”  This is a clear step forward from last year’s meeting, COP26, in Glasgow, which had none of this language.

These institutions, such as the World Bank, International Monetary Fund and African Development Bank, have long had a remit to tackle poverty and fund international development.  But they have proven to be shamefully slow at recognising their role in tackling climate change, with some of their actions actually making it worse. 

Many of them still fund fossil fuel projects around the world, actively harming the lives of those on the front lines of the climate crisis, and they have been slow to invest in climate solutions like renewables.  In fact, the boss of the World Bank, David Malpass, appointed by former U.S. President Donald Trump, has been accused of being a climate change denier, after he repeatedly failed to accept the scientific consensus on the subject.

As Barbara Creecy, South Africa’s environment minister said: “We are going to need to examine the global financial architecture because of the scale of the finance that’s needed for countries to transition. We need to look at the multilateral development banks. They are very risk averse.’”

Only by harnessing the trillions of dollars tied up in these development banks will we see progress to cut emissions and meet the humanitarian needs of those having to adapt to the droughts, storms, floods and rising sea levels which are threating lives and livelihoods.

One concrete example of the growing momentum in unlocking these funds is the Bridgetown Initiative, created by Barbados Prime Minister Mia Mottley.  With the strength of the dollar weakening other currencies, and tightening monetary policies in many developed nations, finance is proving hard to come by for poorer countries trying to adapt to climate change while also dealing with the fallout from the COVID-19 pandemic and the war in Ukraine.

The Bridgetown Initiative calls for “unused Special Drawing Rights” to create financial liquidity for debt burdened nations and for the MDB’s to provide at least $1 trillion in investment to countries that need it.

At the annual spring meetings in 2023, Mottley and French President Emmanuel Macron will present the proposals to the International Monetary Fund and World Bank, which demonstrates the growing global support for these moves and should build on the momentum shown at COP27.

COP27’s loss and damage fund was a breakthrough for vulnerable countries in search of climate justice.  But critics have bemoaned the lack of progress to cut emissions at the summit.

Unlocking the resources of these global financial institutions has the potential to address both issues, delivering new funding to equip nations to adapt to climate change while boosting their decarbonisation plans to curb emissions and keep temperatures in check. 

If that is realised then COP27 may go down as the most impactful climate summit in history.