In a world plagued by rising temperatures, extreme weather and escalating natural disasters, the urgency for decisive action against climate change and the threat of future pandemics has never been clearer.
Both threats affect us all.
However, countries between the Tropic of Cancer and Capricorn (including the Caribbean and Pacific, as well as parts of Latin America, Africa and Asia, home to another 40 percent of the world’s population) are now more have experienced more than four times the loss and damage .
To overcome these difficult challenges, we must build strong partnerships based on trust and respect. The global climate crisis cannot be met without global mobilization. The recently renewed Bridgetown Initiative, launched in Barbados last summer, calls on all of us to do our best to prevent and respond to climate change and pandemics.
You should invest now to avoid higher costs later. The windows are closing and we must act before irreparable harm strikes the most intolerable.
We have four tasks. We need to make the global financial system more resilient to shocks. Private capital flows must be unblocked so that climate change mitigation and medical research can be accelerated. We need to boost long-term, low-cost financing to governments so they can make their peoples, communities and nations more resilient to climate-related disasters and pandemics. And we need to find new sources of non-debt funding to fund post-disaster recovery.
The Bridgetown Initiative is proposing urgent reforms to the global financial structure to achieve these goals, calling for a tripling of concessional loans and subsidies to the world’s poorest countries. increase.
But we also need to maximize the availability and utilization of our most exploitable resource, development bank capital. Multilateral Development Banks (MDBs) have a unique role in the global mission to prevent and respond to climate change and pandemics. Agencies such as the European Investment Bank have already ramped up climate-related financing, aiming for the 2025 target set at the 2019 UN Climate Action Summit.
In the future, further integration with a wider range of public development banks, including the National Development Bank, which collectively lends over US$2 trillion annually, could further enhance the effectiveness of existing lending. there is.
Economists Vera Songwe, Nicholas Stern, Amar Bhattacharya and others estimate that developing countries will invest at least US$350 billion a year at low cost to build resilience against climate and pandemic risks. He said he needed funds. That would require nearly three times the MDB loans currently available to the poorest.
This will require maximizing the use of existing capital in all its forms held by development banks. However, not everyone can pursue this option, so we welcome efforts to redirect allocations of the International Monetary Fund’s reserve assets (Special Drawing Rights or SDRs) to multilateral development banks so that they can expand their lending. This is one area where the EIB is actively engaging with countries like Rwanda and Barbados.
We also need to leverage development bank balance sheets through risk sharing and risk transfer. This is an area where the EIB has a lot of expertise. However, development banks will need much more paid-up capital to get closer to their goal of tripling climate resilience financing. That’s why the latest Bridgetown Initiative includes a call to raise another US$100 billion for MDB.
To make the most of this capital, we need to modernize how we allocate MDB support. Development banks are right to focus on the poorest countries, but 70 percent of the world’s poor now live in middle-income countries that are ineligible for funding such as concessional funds and subsidies. Worse, climate change and pandemics are putting millions of people at risk of falling into poverty.
We need new long-term, low-cost financing vehicles that target investments to build resilience for vulnerable people in middle-income countries without changing existing concessionary regimes. Accordingly, the EIB recently approved extensions of loan maturities to sovereign counterparts for up to 30 years, with a 10-year grace period.
Development Banks say that in today’s world of global shocks, global efforts are essential to tackle poverty and support climate mitigation, biodiversity, early warning systems for natural disasters, and pandemic preparedness and response. It should be recognized that there is Success requires going beyond focused projects, while staying true to the goals of poverty reduction and growth.
level of resilience
The EIB fully supports these objectives and is working with other MDBs to bring them to fruition. Following his call to action at COP27 last year, the MDB Climate Group advocates an approach to address resilience at the national level. This means focusing on policies, investments and capacity-building measures that promote the green transition according to countries’ own priorities.
Such an approach enables a shift from phased, project-by-project climate finance to a more holistic approach that focuses on national and global outcomes.
Everyone, especially Europeans and others who support the transition to net-zero emissions, must help scale up financing to overcome the daunting challenges posed by climate change and the pandemic.
The Public Development Banking System, with its public interest model and innovative features, can be a mechanism for achieving common global goals.
Unless our commitments under the Sustainable Development Agenda and the Paris Climate Agreement are disseminated, we will not be able to alleviate the suffering of billions of people.
Only by reforming our financial system, investing more in climate change and listening to vulnerable countries can we achieve a sustainable future. Through our collective commitment to solidarity, fairness and mutual respect, we must work together to make the innovative vision of the Bridgetown Initiative a reality.
Mia Motley is the Prime Minister of Barbados. Werner Heuer is the president of the European Investment Bank. © Project Syndicate 2023www.project-syndicate.org