On Monday, we saw COP28 attendees focus on climate-related funding and investments during ‘Finance Day’, where the daily programme revolves around the mobilisation of funding to support climate action. During this year’s event, major areas covered included climate-resilient debt clauses, finance pledges, and financial innovation to tackle the climate crisis. The measures form part of the wider “COP28 UAE Declaration on the Global Climate Finance Framework”, which aims to make climate finance available, accessible, and affordable. You can read more about the climate finance framework here: The COP28 UAE Climate Finance Framework
Source: COP28
COP28 President Dr. Sultan Al Jaber summarised the progress made at Finance Day:
“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.”[i]
Probably the most discussed announcement of the day was the proposed expansion of Climate Related Debt Clauses, or CRDCs, where 73 countries joined a call to action to donors to expand the use of these clauses by 2025. These clauses allow debt repayments to be paused if and when countries are hit by climate catastrophes.
The plans came alongside the news that the IDB (International Development Bank) had already offered $1.2 billion in loans covered via the use of CRDCs. Further, the World Bank revealed that it will start offering CRDCs in existing loans, which will pause debt as well as interest for two years in the event of a natural disaster[ii].
On a national level, the UK announced the first ever climate resilient debt clause for Senegal, making this the first in Africa, as well as other CRDC proposals for Guyana. Andrew Mitchell, UK Minister for Development, said:
“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”.
The largest bank in the UAE, the First Abu Dhabi Bank (FAB), announced that it will lend, invest, and facilitate more than AED500 billion ($135 billion) in sustainable and transition financing by 2030. This new target is an 80% increase from its 2021 commitment of AED275.4 billion ($75 billion)[iii]. The commitment becomes the largest sustainable finance pledge made by any bank in the MENA region thus far. Furthermore, FAB’s commitment accounts for over half of the collective AED1 trillion ($270 billion) pledge made by UAE banks towards sustainable finance at COP28[iv].
HH Sheikh Tahnoon bin Zayed Al Nahyan, Chairman of FAB, said: “FAB is deeply integrated into the UAE’s ambition on climate change and net zero, placing sustainability at the heart of social and economic progress. Across the Group, we believe in the urgency to scale investments and financing, as the foundation of climate action. In setting even more ambitious sustainable finance targets by 2030, we are expanding our commitment. Our objectives will accelerate the decarbonisation journey, while supporting the UAE vision and regional, and global net zero agenda.”[v]
Innovation was also on display during Finance Day, with the African Development Bank (AfDB) and the Inter-American Development Bank (IDB) showcasing their deployment of a hybrid capital-based mechanism to channel unused SDRs (Special Drawing Rights) through MDBs (Multilateral Development Banks). Using this model, wealthy countries lend their SDRs to MDBs, who can use them to issue bonds, multiplying the available capital.
Supporting these measures was Japan, which announced a commitment to support the initiative for the purposes of climate and development. Likewise, France announced its commitment to support this facility through a guarantee, and Spain and the UK indicated their willingness to further explore this solution.
MDBs have also made a new joint declaration to collaborate on this issue and promised to convene a new taskforce from January 2024. It follows long-standing calls from developing nations for reforms to the international climate finance system, to not only scale the level of finance provided, but ensure more fair and efficient allocation. The UN-convened Race to Resilience campaign has called the move "a crucial step in addressing the debt, nature, and climate crises."[vi]
[iii] COP28: UAE's FAB to provide over $135 bn in green finance (economymiddleeast.com)
[iv] Ibid
Lauren has extensive experience as an analyst and market researcher in the digital technology and travel sectors. She has a background in researching and forecasting emerging technologies, with a particular passion for the Videogames and eSports industries. She joined the Critical Information Group as Head of Reports and Market Research at GRC World Forums, and leads the content and data research team at the Zero Carbon Academy. “What drew me to the academy is the opportunity to add content and commentary around sustainability across a wealth of industries and sectors.”
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