DevelopmentAid’s Post

Climate negotiators are currently meeting in Bonn (#SB60) to discuss climate finance. Debt distress is restricting the ability of countries to scale up climate action. 21 former finance chiefs call for revamping the G20 Common Framework for Debt Treatment and beyond so that countries can focus on development and climate change. #COP29 #climatefinance https://lnkd.in/dW5PRiiU

Developing Nations, Debt, and Climate Finance Developing nations face a daunting challenge: financing climate action while grappling with significant debt burdens. The Paris Agreement and the UN's 2030 Agenda require substantial investments, estimated at trillions of dollars annually. However, the global economic landscape, marked by the pandemic, rising interest rates, and geopolitical tensions, has made it increasingly difficult for these countries to secure the necessary funds. The Debt-Climate Nexus The relationship between debt and climate change is complex and mutually reinforcing. Climate change exacerbates economic vulnerabilities, leading to increased debt burdens. Conversely, high debt levels constrain countries' ability to invest in climate resilience and low-carbon development. The Role of International Cooperation The international community must play a pivotal role in addressing this crisis. Key actions include: Debt Relief: Implementing comprehensive debt relief initiatives, similar to the HIPC Initiative, can free up fiscal space for climate investments. Climate Finance: Scaling up climate finance, particularly through grants and concessional loans, is essential. Reforming the Common Framework: Improving the efficiency and effectiveness of the Common Framework for Debt Treatment can facilitate timely and adequate debt relief. Credit Enhancement: Providing guarantees and other financial instruments can reduce the cost of borrowing for developing countries. Leveraging SDRs: Allocating additional Special Drawing Rights can provide liquidity and support economic recovery. Debt Service Suspension: Temporarily suspending debt service payments can alleviate short-term financial pressures. Conclusion COP29 presents a critical opportunity to address the challenges of climate finance and debt. By taking bold and decisive action, the international community can help developing nations build resilience, reduce emissions, and secure a sustainable future. Full article here https://lnkd.in/dcJyE4AW

A recent report by the Debt Relief for Green and Inclusive Recovery Project (DRGR) highlights that emerging countries face a daunting challenge. They're projected to spend a staggering $400 billion on servicing external debt this year alone. However, 47 of these nations risk default within five years if they divert funds towards climate adaptation and sustainable development, crucial for meeting 2030 Agenda and Paris Agreement goals. The report urges a global financial overhaul, debt forgiveness, and increased affordable financing to avert a looming crisis. It also calls for IMF to reconsider its debt sustainability assessments to factor in climate spending needs. Read more at: https://lnkd.in/d8Vim8Ez #thomaslloyd #renewableenergy #infrastructure #esg #netzero #asia #climatechange #sustainability #emergingmarkets #energytransition #electricity #biomass  

📣 My 🆕️ Daily FT column is out now, focusing on sovereign #debt, the global #financial system, and the #climacrisis. 1️⃣ Interlinkages and connections between debt, climate change, vulnerability, and investment in climate action. 2️⃣ Debt response options and instruments 3️⃣ Proposals for reforming or improving the world's financial architecture ➡️ Check out the full column below--it was written ahead of our workshop in London on debt and climate change (https://lnkd.in/g6sTp8Mn), which saw a very successful discussion that will inform our ongoing research as well as further columns on this topic. #finance #climatechange #NDCs #resilience #lossanddamage #climatefinance #debtresponse #debtswap #insurance #climatebonds SLYCAN Trust SLYCAN Trust Youth UN Climate Change COP28 UAE The Adaptation Research Alliance Global Shield against Climate Risks InsuResilience Solutions Fund (ISF) Insurance Development Forum The Geneva Association Access to Insurance Initiative (A2ii) ReliefWeb The Loss and Damage Collaboration Global Parametrics Mattias Söderberg Vositha Wijenayake Climate Risk & Early Warning Systems (CREWS) Initiative Understanding Risk ResilienceLinks FARM-D Mongabay World Adaptation Science Programme #financialreform Lorenzo Mercuri Georgina Belk Thibyan Ibrahim Happy Khambule

⚡Just in: A NEW report commissioned by the governments of Colombia, Kenya, France, and Germany lays bare the devastating effect of debt burdens for many vulnerable low-income countries. The Expert Review on Debt, Nature, and Climate reveals the extent to which unsustainable debt burdens, loss of in nature, and escalating climate change are compounding one another in a hugely destructive '‘triple crises''. Ali Mohamed, Special Envoy for Climate Change-Executive office of the President of Kenya & Chair of African Group of Climate Negotiators says: “This interim report highlights the inescapable reality that we cannot address the climate crisis without tackling the growing burden of debt. Vulnerable nations are caught in a cycle of borrowing to recover from climate disasters, further straining their economies. It’s time for the global community to come together, not just to restructure debt, but to recognize that investments in nature and climate resilience are fundamental to long-term economic stability. Our goal is to turn this vicious cycle into a virtuous one, where sustainable investments lead to prosperity and resilience, rather than debt distress.” ➡️ For more information, see the full report: https://lnkd.in/dnCiCP_w Center for Global Development, BNP Paribas, University of Massachusetts Amherst, World Resources Institute, Utrecht University, Boston University Global Development Policy Center, Inter-American Development Bank, CEB - Council of Europe Development Bank, Institute of Finance and Sustainability (IFS), Bruegel - Improving economic policy, Council on Foreign Relations, Resilient Earth Capital, Universidad de Los Andes, Universidad Internacional del Ecuador, The Liquidity and Sustainability Facility (LSF), LBBW 

We were invited to the G20 IMF/WB Sovereign Debt Roundtable to discuss how to address the twin crises of #debt and #climate. With Maia Colodenco we argued for the need of a Sustainable Financing Strategy for the Green Transition.  The twin challenge of debt and climate crises that developing economies are currently facing requires large-scale, up-front investments that allow countries to implement a well-designed climate action to boost economic growth. Focusing solely on ex-ante and ex-post debt instruments is not enough to overcome it.  Read our paper below 👇 : https://lnkd.in/dfKRB9e5 https://lnkd.in/dBw_wz9e

There's a growing concern about the environmental impact of debt, particularly on developing nations. Debt can pressure these countries to prioritize short-term economic gains through unsustainable resource extraction, harming our planet. However, debt financing can also be a tool for positive change when directed towards renewable energy and sustainable solutions. The key is responsible investment and collaboration. How can we bridge the gap between financial stability and environmental well-being? Share your thoughts in the comments! #SustainableDevelopment #DebtManagement #GlobalCooperation https://lnkd.in/duDAMZy5

Debt cannot become the acceptable new normal in climate financing,' Pakistan's Prime Minister Shehbaz Sharif calls for #ClimateFinance and #Debt Relief at the ongoing COP29 Azerbaijan. 'The developing world will need at least US$6.3 trillion in financing by 2030 to implement half of their NDCs by 2030 which is why we must resume focus on non-debt financing solutions enabling countries to fund climate initiatives,' the premier said at the Summit. Citing Pakistan's example, PM Shehbaz reiterated in 2022 when one-third of Pakistan was underwater, the country had to #repurpose all its development and climate funds for just financing basic relief efforts. The economic loss of USD30 billion added to the country’s heavy debt burden, devaluing the currency, etc. Financial pledges made at the previous United Nations climate summits are yet to materialie. At the Summit, PM Shehbaz Sharif has been vocal about the disproportionate burden of climate and debt borne by countries like Pakistan, which contribute minimally to global emissions yet face the devastating impacts from climate disasters, #airpollution #smog that challenge it social and economic development. 'As the minus-one emitters, we should not brave the impact of emissions realized by others without even the tools to finance resilience,” he emphasized. UN Environment Programme's Emissions Gap Report 2024 reveals 77% of GHG emissions came from the G20 countries in 2024, while least-developed countries contributed just 3%. Countries must collectively cut 57% off greenhouse gas emissions by 2035 to get on a least-cost pathway for 1.5°C. This gargantuan task requires investing heavily in solar and wind energy, in forests, and in reforming the buildings, transport, industry sectors which is not possible without a new global financial architecture and strong private sector action. At COP29, PM Shehbaz Sharif has reiterated Pakistan's call for debt relief to allow it to allocate much-needed resources towards investing in essential services to help people and the country build climate resilience. Pakistan’s unsustainable debt levels mean less fiscal space and opportunities to address adaptation and mitigation and recovering from loss and damage after a climate disaster In recent years, more than 70% of public climate finance has been delivered through loans, posing a significant challenge as many developing countries face burgeoning debt crises. A critical question hangs in the air: how can we ensure that the money mobilized to address the climate crisis is not only sufficient in quantity but also effective in quality? In the face of stark needs, the negotiation on the new collective quantified goal, (NCQG) at #COP29 must be ambitious. Negotiators must consider the issue of quality, alignment with national priorities, and the predictability of funds. 'Without climate justice, there can be no real resilience.' #COP29 #ClimateFinance #DebtRelief #GlobalSouth #Pakistan#ClimateCrisis #GlobalLeadership

Debt-for-nature swops could give $136 billion boost to climate fight, says report. LONDON - Debt-for-nature swops, in which poorer countries have debt written off in return for protecting eco systems such as barrier reefs or rainforests, could provide US$100 billion (S$136 billion) for the fight against climate change, a new report has calculated. The British-based non-profit International Institute for Environment and Development (IIED) based the estimate on the possibility of debt swops in many of the 49 less-developed countries seen as most at risk of debt crises. Belize, Ecuador, Barbados, Gabon and Cabo Verde have all done such swops in recent years and Ms Laura Kelly, the director of IIED’s sustainable markets research group, said many of those in debt distress and also often most threatened by global warming were looking at them. The IMF and World Bank, whose figures the analysis is based on, estimate the countries focused on collectively owe US$431 billion, mostly to wealthier governments, the IMF itself and pension and hedge funds. At the same time, these countries received less than US$14 billion in climate finance, according to 2021 figures from the Organisation for Economic Cooperation and Development, which is significantly less than they need to limit climate change or at least adapt to it. The aim of IIED’s report is to encourage a drive for more debt swops at the upcoming IMF and World Bank Spring meetings, which start later this week. Ms Kelly said countries that could benefit included Pakistan, Sri Lanka and The Gambia in West Africa, which is at “huge risk” of sea level rise, she stressed, and needs to invest heavily in flood prevention and wetland preservation. Ghana too, which like Sri Lanka is now restructuring its debt, is another obvious candidate. One of its key exports, cocoa beans used for chocolate, could thrive if more is done to protect its vital rainforests. “For governments (that do debt swops) it creates some fiscal space, but also it helps to achieve outcomes in terms of climate and nature that have global impact,” Ms Kelly said, adding that many countries were interested in potentially doing them. REUTERS https://lnkd.in/dPnk9-qg

African environment ministers convened at the African Ministerial Conference on the Environment (AMCEN) to address urgent climate finance needs. Current funding of approximately $30 billion falls drastically short of the $277 billion required annually to achieve 2030 climate goals. The African Group of Negotiators on Climate Change, advocated for a new global climate finance target of $1.3 trillion per year by 2030, moving away from reliance on loans that exacerbate debt burdens. Many African nations face severe debt crises, with debt servicing consuming significant portions of government revenues, limiting their ability to invest in essential services and climate initiatives. To secure a sustainable future, African leaders need to prioritize investment in energy infrastructure, enhancing energy efficiency, and developing robust climate adaptation strategies. These efforts are crucial for positioning Africa as a leader in the global energy transition and the shift to a low-carbon economy. 🌐 https://lnkd.in/dbec-UgJ. #ClimateAction #AfricaResilience #SustainableDevelopment #ClimateFinance #RenewableEnergy #COP29 #ClimateGoals #Côted’Ivoire