COP28 Finance Day Unlocks Innovative Financial Mechanisms To Support Vulnerable Countries Fight Climate Change
COP28 Finance Day witnessed an important step forward in reshaping the international financial landscape to aid low-income and vulnerable nations in combating climate change. Major global financial institutions and nations have made significant commitments to incorporate climate-resilient debt clauses (CRDCs) into their lending practices.
These clauses, designed to allow the pause of debt service in the face of climate-related catastrophes, received fresh endorsements from the UK, France, World Bank, Inter-American Development Bank (IDB), European Investment Bank (EIB), European Bank for Reconstruction and Development (EBRD), and African Development Bank (AfDB). Notably, 73 countries united in a call to action, urging donors to extend the utilisation of these clauses by 2025.
These commitments play a crucial role in equipping countries to navigate climate shocks by ensuring fiscal space for climate action investments. This aligns with the core tenets of the COP28 UAE Declaration on the Global Climate Finance Framework, aiming to make climate finance more accessible, available, and affordable.
In a collaborative effort, Japan and France announced their commitment to supporting the African Development Bank’s initiative, leveraging Special Drawing Rights (SDRs) for climate and development.
Reflecting on these developments, “I’ve said all along that if we fail to include the developing world in our solutions to climate change we will all fail. The announcement of new SDR pledges for Africa, and the broad adoption of climate-resilient debt clauses is essential. It will help those most vulnerable to the shocks and disasters caused by climate change,” said COP28 President Sultan Al Jaber.
Prime Minister Mia Mottley of Barbados expressed gratitude for the courageous decisions, noting that while debt can be recovered, the societal impact of climate disasters cannot be reversed.
“I want to thank you for the extraordinary courage to do the right thing. We can always bring back our debt, but we cannot bring back our society,” said Mottley.
The Finance Day at COP28 marks a significant stride in fostering international cooperation to address climate challenges and support those most vulnerable to their repercussions.
"By delivering new Climate Resilient Debt Clauses in Senegal and Guyana, the UK is allowing affected communities to temporarily pause debt repayments in the wake of a climate disaster, giving them breathing space to recover," said Andrew Mitchell, UK Minister for Development, at the event.
