COP27 may have been disappointing in that it simply maintained the COP26 language around supporting the commitment to 1.5 °C without stronger language on additional efforts on emission reduction. But, nevertheless, for some it did bring important positive developments. Luma Saqqaf, CEO of Ajyal Sustainability Consulting, argues in this guest post why parts of COP27 should continue to be celebrated.
We need to remember that whatever commitments countries may declare, it is unclear and uncertain what sources will fund the trillions of dollars required to achieve these commitments.
There is a lack of funding not only for the reduction of emissions but with respect to both adapting to the impacts of climate and dealing with the real damage inflicted on communities and countries as a result of climate change. Pakistan flood damage earlier this year caused an estimated loss of US $30 billion in economic losses and total damages. Given the magnitude of the required funding, it is imperative to address how it is raised and, more importantly, to include the private sector in it as well, as no government money will be enough for these challenges.
It is on these fronts, namely, finance and engaging the private sector, that COP27 achieved significant strides.
To begin with, after three decades of pressure from developing countries, a historic breakthrough agreement to create a loss and damage funding mechanism was agreed for vulnerable countries hardest hit by climate disaster. The funding for this is intended to be provided by the developed nations, with details to be discussed during the first half of 2023.
The impact of this fund announcement was further enhanced by the World Bank’s launch of the Global Shield Financing Facility to help developing countries access more financing for recovery from natural disasters and climate shocks. This is led by a €170 million contribution from Germany and more than €40 million by other countries.
In an attempt to unlock private funding to finance developing countries, Egypt launched the Sharm El-Sheikh Just Finance Guidebook. The Guidebook is intended to serve several purposes, from bridging the information gap to help de-risk developing countries’ credit risk – notably in Africa – to examples and solution prompts around blended finance and how private finance can come together with government, development banks and philanthropy to tackle the significant finance needs of the developing world.
Egypt itself, through the Nexus on Water, Food and Energy (NWFE) programme, showcased how just financing may be brought to life. Egypt managed to raise around $15 billion from international partners to finance ambitious projects in energy, food and water sectors. The financers included governments, developing banks as well as international banks.
Egypt was not the only recipient of funding. The EU announced that it would dedicate more than $1 billion in climate funding to assist African countries in strengthening their resilience in the face of accelerating global warming. This package includes a $60 million pledge for the loss and damage fund mentioned above.
In addition, a Just Energy Transition Partnership (JETP), similar to the one provided to South Africa at COP26, was announced for Indonesia at COP27. $10 billion has been pledged by a group of rich nations over three years, with seven international banks pledging to match that amount, bringing the total to $20 billion. The JETP is intended to support Indonesia’s efforts to close down coal plants in the country.
Other countries in MENA secured significant climate-related funding, albeit mostly from within the region. Part of this success was driven by the Egyptian COP27 presidency that made the regional dimension a cornerstone of a COP for the first time ever. Five forums along the lines of the five regional commissions of the UN Economic and Social Council were formed to discuss cooperation around reduction of emissions and the required funding for countering climate change.
The fruits of this cooperation between Arab Coordination Group (ACG) members were announced on Finance Day in the form of $24bn in funding commitments by 2030. This will aid the energy transition and increase water availability and food security in the region.
In addition, the Saudi sovereign wealth fund PIF pledged $24bn for green investments in Jordan, Egypt, Oman, Iraq and Sudan.
The fact that COP27 was able to make true shifts in moving funds towards developing countries and affirming just finance as a core tenet of COPs is no small feat. While all the eyes have started shifting to what COP28 may deliver, some aspects of COP27 should continue to be celebrated.
About the Author
Luma Saqqaf is CEO of Ajyal Sustainability Consulting, advising corporations, financial institutions, regulators and financial markets in MENA on sustainable finance issues and regulations.
