By: Republic Bank
As efforts to mitigate and adapt to climate change gather momentum across the globe, so too does the need for nations to do more. This has become more apparent in light of the tremendous shortfall in reducing greenhouse gas emissions, and achieving the 1.5 degree Celsius goal agreed upon in the 2015 Paris Agreement.
At COP27, held in Egypt in November 2022, this shortfall took precedence as concerns abounded as to how little progress had actually been made. Less than a year after the consensus of the Glasgow Climate Pact in 2021, at the G20 meeting in Indonesia in August, several leaders came forward unable to agree on the threshold, with some questioning its scientific validity.
The fact remains that, as the UN has stated, the world is on track to “soar” past the limit and will find itself on a collision course with unprecedented heat waves, destructive storms and droughts, as well as the extinctions of animal and plant species.
In the Caribbean, for the more than 40 million people who call the region their home, global climate change poses the biggest existential threat; one that ultimately threatens the region’s sustainable development and its long-term security and economic outlooks. In the past two years, this very real predicament was further exacerbated by the COVID-19 pandemic’s staggering socio-economic impacts on Caribbean societies.
For regional leadership on climate change to be effective, it must evolve in step with a fast-changing world. It must be focused on bringing as many partners to the table to develop multi-tiered policies and financial solutions in support of climate adaptation initiatives.
For regional leadership on climate change to be effective, it must evolve in step with a fast-changing world. It must be focused on bringing as many partners to the table to develop multi-tiered policies and financial solutions in support of climate adaptation initiatives.
The challenge is formidable, to say the least. In terms of global climate finance, it has been estimated that – to address the impacts of climate change and meet carbon emissions reduction targets – US$4 trillion annually is needed by 2030.
According to the UN, however, climate finance flows in 2021 were recorded at around US$632 billion, a fraction of what is required.
As global climate finance uncertainties grow, developing nations have become increasingly eager to persuade the private sector to become more active, with an emphasis on finding innovative ways to mobilise and finance climate action.
As global climate finance uncertainties grow, developing nations have become increasingly eager to persuade the private sector to become more active, with an emphasis on finding innovative ways to mobilise and finance climate action.
This mounting urgency to act more meaningfully has already resulted in several regional financial institutions doing more to implement impactful and measurable initiatives.
This new climate financing ecosystem is seeing financial institutions invest more in blue and green technologies, complying with – and championing – climate change policies, and expanding the ways they serve the community.
Banks can also help achieve SDGs through the provision of preferential lending rates, structuring debt-for-nature swaps, and showcasing investment opportunities to organisations focused on climate mitigation and adaptation, to name a few.
Other avenues include incentivising businesses and communities through unique financing arrangements that promote the sale of electric and hybrid cars, loans that are aligned to the promotion of clean fuels, renewable energy, and technologies that contribute to an improvement in energy efficiency, and construction loans for the deployment of climate-resilient technologies.
While there is a call for governments and global institutions, like the IMF, to become more involved in raising climate finance, it is clear that regional financial institutions have a critical role to play in expanding existing levels of investment and achieving major climate finance goals.
Given the impacts of climate change on the Caribbean, financial institutions must make climate financing a priority if any real success is to be achieved. In closing the climate finance gap, in particular, the sector must be encouraged to move beyond investing capital in programmes.
Given the impacts of climate change on the Caribbean, financial institutions must make climate financing a priority if any real success is to be achieved
They must move to a place where sustainability is a natural part of their DNA. This will provide the foundation for broader dialogue and the implementation of more creative and adaptive solutions to climate and sustainability-based financing issues.
Over time, as the sector continues to engage stakeholders across boundaries, it will become more closely aligned with, and be seen as a key contributor to, the global effort to put the world on the path to a more sustainable future.
