A group of UN experts have published a list of projects worth $120 billion for potential investors to help poorer countries cut emissions and adapt to global warming.
Among the numerous projects announced at COP27 on Wednesday was a $3bn water transfer project between Lesotho and Botswana and a $10m plan to improve the public water system in Mauritius.
“We can now show that a meaningful pipeline of investible opportunities does exist across the economies that need finance most,” Mahmoud Mohieldin, a UN-appointed expert from the UN Climate Change High-Level Champions, said in a statement.
However, while the investment is significant, an UN-backed report released before COP27 suggested that developing countries would need to secure $1trn in external financing every year by 2030, matched with their own funds, in order to meet the world’s goal of preventing runaway climate change. The Middle East and North Africa (MENA) region alone requires investment levels of around $600bn to scale up its NDC commitments by 2030.
By contrast, a recent report from lenders found the world’s leading development banks lent just $51bn to poorer countries in 2021; 62% of their total climate financing budget. Financing from private investors totalled just $13bn.
Private firms have historically expressed concerns about the risks involved in investing in emerging markets. In order to alleviate concerns, the High-Level Champion experts assisted in gathering a list of projects that could be funded more quickly.
On Wednesday, France and Germany also signed loan agreements to give South Africa 300 million euros (£260m) in concessional financing to help it move away from coal-powered electricity.
Italy, Britain, and Sweden were among the donors who pledged more than $350 million to finance nature-based solutions to the climate crisis in countries including Egypt, Fiji, Kenya, and Malawi.
Egypt, the host nation, announced that it had signed partnerships for its Nexus of Water-Food-Energy (NWFE) programme to support the implementation of climate projects with investments worth $15 billion.
Nicola Sturgeon, the first minister of Scotland, announced the country would be increasing their funding for loss and damage for developing nations by promising an additional £2m, raising the total value to £7m.
The Scottish Government has said it will offer the cash as grants rather than loans, so as not to compound financial hardships already seen in the countries impacted by climate change.
Until very recently, loss and damage financing was non-existent. Calls for funding have been repeatedly rejected by the US and other large economies, fearing liability for trillions of dollars in climate compensation.
Last year, at COP26, Miss Surgeon made Scotland the first country in the world to introduce a dedicated loss and damage fund, pledging £2m to support developing countries.
“With loss and damage now on the formal agenda for the first time, this Cop can mark a turning point in ensuring the views, experiences, and perspectives of the global south assume a far more central role.” said the first minister talking of this year’s increase.
“The funding Scotland has announced today is a small sum in terms of the overall scale of the loss and damage that developing countries face, but I hope that it sends an important message.”
Earlier this week, UK Export Finance (UKEF) announced it would become the first export credit agency (ECA) to offer Climate Resilient Debt Clauses (CRDC) in its direct sovereign lending.
What is the purpose of climate finance?
Climate finance has three purposes: cutting emissions, adapting to the climate crisis, and paying for loss and damage. At COP21 in Copenhagen in 2015, rich countries promised $100bn a year by 2020 for the first two purposes.
But, the agreement’s funding target has been repeatedly missed since 2013, leading to frustration from developing nations who are suffering the most from climate related impacts.
Loss and damage financing has, until very recently, been at zero, but recent pledges from the Scottish government may open the flood gates and drive other economies to follow suit.
