Experts reveal steps to reform international climate finance

A two-day meeting of world leading economists and finance leaders convened by the COP28 Presidency has delivered consensus on the key next steps needed to establish a new framework for international climate finance and to drive progress at COP28 and beyond to COP29 and COP30.

World-leading economists from the Independent High-Level Expert Group (IHLEG) met with figures from leading global institutions, including the World Bank, IMF, ECF and IFC, the COP28 and COP27 Presidencies and UN Climate Change High-Level Champions for two days of talks in Abu Dhabi from 15th-16th August.

Those assembled agreed that they will come to COP28 with recommendations on a new framework for international climate finance, as well as a definitive roadmap on how to implement the recommendations.

Particular areas of focus for the new framework will include addressing debt distress in vulnerable countries, and the role of the private sector in delivering increased finance. Here, the group recognised that although private finance flows are growing, they need to grow much faster to meet the $2.4 trillion total investment estimated to be needed annually by 2030 to address climate change in emerging markets and developing economies.

The roadmap will be designed to guide all institutions - UN agencies, the IMF, WB, regional MDBs, national governments and the private sector - around short and long-term plans to achieve the Paris Agreement. Agreement on the roadmap at COP28 will allow leaders across the public, private and third sectors to drive forward a clear plan of action on international climate finance.

All those in the meetings were unanimous in their agreement that finance is fundamental to enabling the delivery of solutions to enable the transition to a net-zero, climate-resilient future. They also agreed that the primary focus of their work would be to rapidly increase international climate finance between now and the end of the decade to support emerging markets and developing economies mitigation and adaptation initiatives.

Dr Sultan Bin Ahmed Al Jaber, Minister of Industry and Advanced Technology and COP-28 President-Designate, opened the meetings with a clear call to action for those attending to deliver “a detailed action-oriented framework and tangible recommendations that lead to real results”.

Following the meeting, he commented, “For too long, climate finance has divided the international community and held back progress in tackling climate change and supporting countries most impacted by it. But climate finance is the issue that lies at the core of the COP28 agenda because finance is how we transform goals into reality.

“The time for action is right now. I would like to thank everyone who attended the IHLEG meetings, and for their focus and determination in developing a new framework for climate finance. This new framework needs to be comprehensive. It needs to cover both adaptation and mitigation. And it needs to unlock a supercharged stream of private capital. All forms of finance must be made more available, more accessible, and more affordable. MDBs must be adequately capitalised and provide much more concessional finance to lower risk and bring more private capital to the table. And we need to explore innovative new mechanisms for managing currency risk. I am confident that the assembled experts who have devoted their time to this effort, will find solutions to unlock climate finance.”

Lord Nicholas Stern, co-chair of the IHLEG, said, “These meetings have proved to be very fruitful, in large measure due to the leadership of Dr Sultan and the support from his team. We are all in no doubt of the urgency of the challenges, of the scale of the problems that we must tackle, and of the global action necessary to rise to these challenges. This is a moment where all stakeholders must step up, including the MDBs, their shareholders, and the private sector. We will continue to work with the COP28 Presidency to drive forward in the weeks ahead.”

Dr Vera Songwe, co-chair of the IHLEG, also noted, “Over the last few months every corner of the world has been hit by a climate event. We must act fast, collectively and at scale to turn these climate disruptions into a growth opportunity for people and planet. The IHLEG group, the COP28 president and all the esteemed colleagues gathered here agree that raising the $2.4 trillion will not be sufficient if we do not accelerate implementation. I look forward to a COP28 that will deliver impact.”

Kristalina Georgieva, Managing Director of the International Monetary and also in attendance, stated, “The IMF is committed to ensuring climate policy support and finance are reaching those most in need, and I am thankful to the leadership of COP28 for convening this important meeting today. We look forward to partnering with all stakeholders in the lead up to COP28 and working to drive stronger partnerships between the public and private sector for climate success.”

The IHLEG develops and presents policy options and recommendations to enable the public and private investment necessary for delivery of the ambitions of the Paris Climate Agreement. Its ultimate goal is to advance a holistic financial framework for resource mobilisation to deliver an equitable and efficient climate finance system, as set out in the Paris Agreement and Glasgow Pact and start its implementation.