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Mary Mazzoni headshot

On Earth Day, Leaders Call for Climate Finance as Part of COVID-19 Recovery

Against the backdrop of a human health and economic crisis they call a "warning" for what's to come, financial thinkers and leaders say now is the time to commit to climate finance.
By Mary Mazzoni
climate change climate finance

In 2009, developed countries agreed to reach $100 billion per year in climate finance by 2020 to help poorer nations reduce emissions and adapt to climate impacts. Tracking progress is notoriously difficult, primarily because world leaders never decided what type of funding counts toward the goal. But some advocacy groups insist existing climate finance committed for developing countries is far below what's needed to ensure their resilience to the threats ahead. 

For example, in a 2019 report, the charitable organization Oxfam estimated that people living in the world’s poorest countries each receive around $3 per year — less than a penny per day — to protect themselves from the impacts of climate change.

Against the backdrop of a human health and economic crisis they call a "warning" for what's to come, financial thinkers and leaders say now is the time to push for change.  

"What world leaders today have shown is that we have the money: World governments have already spent over US$6 trillion just to keep the business-as-usual economy open [during this crisis]," said Ingmar Rentzhog, who sat on the board of more than a half a dozen companies before founding the climate action network We Don't Have Time. "We are at a crossroad in humanity now: Either we spend this money to go back to business as usual, the unsustainable world that doesn't work, or we invest in all of the solutions we have out there. I think it's a really simple choice."

"We have a strategic responsibility to recover better" 

In March of last year, a devastating cyclone hit the coastal city of Beira in central Mozambique. Months' worth of rain fell in a matter of hours, killing 600 people and leaving more than 1.8 million displaced. Mere weeks later, the city was hit again — this time by the most intense tropical cyclone ever known to have made landfall in this region of the country. 

The damage was unprecedented. Catastrophic flooding left more than 2.6 million people in Mozambique, Zimbabwe and Malawi in need of aid. It caused US$3.2 billion worth of loss and damage in Mozambique alone, equivalent to 22 percent of the country’s GDP and half of its national budget, according to Oxfam. From a monetary perspective, this is roughly equivalent to 23 Hurricane Katrinas hitting the U.S. at once. 

The United Nations called the cyclones “a wake-up call” for vulnerable countries “to build resistance" against climate change, but they are not isolated incidents. Further north, on the Horn of Africa, prolonged drought left more than 15 million people in need of humanitarian aid in Somalia, Ethiopia and Kenya last year. In its report, Oxfam detailed these stories as “a terrifying portent of things to come without urgent action from world leaders.” 

Now, as the novel coronavirus creeps across the Southern Hemisphere — and the World Health Organization warns the number of cases in Africa could surpass 10 million in six months — some  of these same nations are again among the most vulnerable. Mozambique, Somalia and Ethiopia all have less than one hospital bed per 1,000 people, compared to around three in the U.S. and eight in Germany, putting the former group's healthcare systems at high risk of becoming overwhelmed, all while continuing to cope with threats from climate change. 

"In the words of U.N. Secretary General Antonio Guterres, 'We have a strategic responsibility now to recover better,'" Nick Robins, professor in practice for sustainable finance at the London School of Economics, said on Monday at a webcast hosted by We Don't Have Time. 

Sounding the alarm for a commitment to climate finance

In his former role as head of the Climate Change Centre of Excellence at HSBC, Robins and his colleagues estimated that green stimulus programs amounted to just over 16 percent of the total public finance boost following the Great Recession of 2008. "Governments now must take a more comprehensive approach so that 100 percent of their COVID recovery plans are aligned with the Paris climate agreement, with a special focus on the needs of the most vulnerable, to deliver a just transition," he insisted. 

But that's a far cry from where we are now. World governments back the fossil fuel industry to the tune of around $5 trillion a year in the form of subsidies and a failure to put a price on carbon, according to the International Monetary Fund. 

"Let's be clear on the scale of the financial mismatch," Robins suggested. "On the one hand, we are making a perverse bet of well over 5 percent of global gross domestic product in supporting fossil fuels and carbon pollution. On the other hand, the investment required to save the climate has been estimated at about 1 percent of gross domestic product. This has never been about an issue of lack of money or finance, but about the rules that govern the allocation of that capital."

Here is where COVID-19 response and recovery plans provide opportunity. "COVID-19 is the world's largest cost-benefit analysis of precaution," said Paul Dickinson, executive chair of CDP. "Sadly, we were warned by health experts to prepare for pandemics, and in most cases governments did not heed the warning, and we see the results today."

"This is just a rehearsal for climate change," he continued. "We have learned that we are vulnerable. We have learned that we can — and sometimes we have to — change the whole economy to protect ourselves. We have to take action now on climate change, because this pandemic is just a warning of what happens when we ignore problems that we know can destroy us."

Governments consider green stimulus as part of COVID-19 recovery: Will climate finance be next? 

Large financial institutions including the World Bank have similarly advocated for climate finance and other forms of green stimulus as part of COVID-19 recovery.

Last week, a French member of the European Parliament followed suit, launching the European Alliance for Green Recovery and calling for climate change to be central in post-COVID-19 plans. The CEOs from 37 major European businesses, as well as heads of state from across the bloc, have since signed on. Both China and South Korea have also noted capital allocation for sustainable infrastructure as part of their recovery plans. 

As of now, these proposals primarily focus on building green infrastructure and lowering greenhouse gas emissions within each country's own borders. Whether capital will make its way to vulnerable countries is another matter entirely. 

For their part, groups ranging from the World Resources Institute, to the Institute for Sustainable Communities, to the United Nations itself have laid out roadmaps for delivering climate finance to developing countries as the world recovers from COVID-19. 

This work is far from over. But as Earth Day enters its 50th year, Robins reminds us that the sustainable finance space has already come a long way — including more than $80 trillion in investor assets and more than $47 trillion in banking assets now committed to integrate environmental, social and governance (ESG) factors into decision-making. "We don't have a lack of commitment or a lack of awareness. What we need now is acceleration and deepening of action to deliver the transformation and financial apprentices we need to see," Robins said. 

"Special attention should be given to the needs of developing countries, where the coronavirus impacts are said to be the most severe and the capital for the transition is in shortest supply," he concluded. "In this way, we could meet and exceed the longstanding pledge for $100 billion in annual north-south flows in climate finance, and we could make COP26 in 2021 the place where sustainable recovery plans are shared, upgraded and coordinated."

Image credits: Lucas Marcomini/Unsplash 

Mary Mazzoni headshot

Mary has reported on sustainability and social impact for over a decade and now serves as executive editor of TriplePundit. She is also the general manager of TriplePundit's Brand Studio, which has worked with dozens of organizations on sustainability storytelling, and VP of content for TriplePundit's parent company 3BL. 

Read more stories by Mary Mazzoni