An award-winning international development expert and a climate justice expert have called for a rethink of the global financial system that would bring reparatory justice to small, climate-vulnerable nations while offering concessionary development financing to the countries most in need of assistance.
Hannah Ryder, the Chief Executive Officer of international development consultancy Development Reimagined, and Yamide Dagnet, Director of Climate Justice at the Open Society Foundations, for a side event on the margins of the Dubai Climate Talks on December 7.
The discussion was part of Climate+, a conversation series organised by independent news organisation Devex, and presented a frank analysis of progress towards climate justice, the current state of the global financial system, and why the two issues are inseparable.
“We have been in the multilateral and climate finance space where we have been beating around the bush on a range of issues, and that has delivered the outcomes that we are talking about today. It has exacerbated inequalities even if there’s good intention behind it,” Ryder, a trained economist, said.
“Simple example. You are a low-income country, expecting to become a middle-income country. When you apply for World Bank financing, as soon as you get past that threshold, you suddenly have to pay more interest. You don’t have any incentive to declare that you are middle-income. It is a very odd situation. You can understand why that was logical in the past, but if you are designing it for today’s problems, that is a system that doesn’t work.”
Ryder says there are many middle-income countries with an urgent, unmet need for concessional financing.
“My country, Kenya, is just about middle-income; we have to work really hard to get USD 300 million for one project, but we need at least (USD) 4 billion a year to reach the development goals that give every citizen access to proper education and health.”
Dagnet says the most vulnerable countries, those least responsible for but disproportionately impacted by climate change, have recognised that their demands for climate justice and financial reform are more impactful in unison.
“We are here at COP, and the reason why COP matters is because the multilateral forum is really where vulnerable nations have a seat at the table, and they do that by coming together. We are invested in empowering such a coalition. One of them is the V20, a group of finance ministers that started with 20 countries and is now at 68, representing 1.5 billion of the world population. They have been pushing the boundaries and moving the discussion on financing because of that empowerment.”
A former climate negotiator, Dagnet, says the OSF has been supporting decision-makers from vulnerable countries to attend financing events and assisting in areas like understanding communication, capacity-building, and analysis for developing solutions.
“Eight years after the Paris Agreement, we need to objectively say: ‘This is where we are, but this is not where we need to be, and this is what we need to do to get there,” she said.
The development aid and climate justice experts say the landmark announcement of the operationalization of the Loss and Damage Fund on Day One of COP28 is a long-fought victory, but agree that there is a long road ahead.
“It’s an obvious win so early on in the climate talks,” said Ryder. “I was one of those people who worked on that USD 100 billion commitment, which was a great win in 2009/2010, and it was an innovation, but that hasn’t delivered. Since we’ve had that experiment, let’s learn from it. What we need are financial mechanisms that are predictable and are not linked to immediate or random government decisions on issues like financial transaction taxes. That’s what the work should be over the next year.”
Dagnet says a lot of questions remain.
“There is going to be a lot of discussion next year to ensure sources of funding and how systematic it will be. What will be the role of insurance companies? The polluter space principle? How are we going to make sure that windfall profits by those who are responsible for where we are, like fossil fuel companies and other intensive sectors like aviation and maritime (contribute to climate change funding)? Who is to ensure it goes to where it is needed? Transparency and accountability will also matter,” she said.
So far, pledges to the Loss and Damage Fund total over USD 400 million.
The United Nations estimates that USD 387 billion will be needed annually until 2030 to help developing countries adapt to climate change.
“At this point, we are in a mature enough world, and we are trying to look after our children and future. Let’s take responsibility. Let’s call it reparations. Let’s call it loss and damage. Let’s work with countries that need to build the capacity to speak to their domestic audiences on how to explain what reparations are. If we keep on beating around the bush, we’re not going to make much progress,” says Ryder.
For Dagnet, the goal is a financial system that acknowledges and addresses the burden placed on vulnerable countries and provides concessionary assistance to the countries that need it most.
“Call it global solidarity. Call it due reparations and debt. What matters is that we cannot hide. We need to face the fact that we need to mobilize and address historical missteps,” she says.
The Prime Minister of Barbados, Mia Mottley, has been on a global crusade to restructure the global financial architecture through the Bridgetown Initiative. Named after Barbados’ capital, it calls for an overhaul of development finance that would address issues like inequality and help climate-vulnerable nations build resilience and respond to climate change.
Many argue that it is a reform over 80 years in the making and that it is inextricably linked to justice for the world’s most vulnerable countries.
Economists like Ryder say the current system is just not designed to give the kind of scale to redistribute finance and ensure that money goes to the places where it’s necessary.
“We need to think of the global financial system not as it is but also as what it could be if designed from scratch. That is the benchmark.
Alison Kentish is a freelance contributor to the Thomson Reuters Foundation, covering climate change issues from Dominica in the Caribbean.
