December 22, 2023
SSDH at COP28 – Key Takeaways
SSDH at COP28 – Key Takeaways
COP28 – the United Nations Climate Conference – was held from November 30th to December 12th, 2023, in Dubai, United Arab Emirates (UAE). The Conference convened policy makers, business leaders, climate activists, and members of civil society for ground-breaking, transformative discussions around global climate action.
About 100,000 participants attended COP28 and conversations revolving around climate finance were at the top of the agenda: a positive trend given the interconnectedness of climate vulnerability and debt, specifically for developing countries, as pointed out by IIED research.
According to the United Nations Conference on Trade and Development (UNCTAD), public debt has been growing faster in developing nations compared to developed countries. According to research by ActionAid International, a staggering 93% of the most climate-vulnerable nations are “drowning in debt”. The debt crisis has been exacerbated by other interrelated crises including the COVID-19 pandemic and climate change.
This year’s Finance Day unlocked significant progress on the reform of the international financial architecture, specifically to support vulnerable countries in their fight against the climate and nature crises.
Major international financial institutions and countries made new commitments to offer climate-resilient debt clauses (CRDCs) which would allow countries hit by climate catastrophes to have their debt service to be paused.
These innovative financial instruments announced at COP28 can help provide countries with fiscal space to invest in climate resilience and recovery. These instruments are critical in the context of rising debts as well as needs to address loss and damage.
- The SSDH launched a Task Force on Credit Enhancement for Nature-/Climate-linked Sovereign Financing comprising technical working groups from eleven of the world’s major Multilateral Development Banks (MDBs), Development Finance Institutions (DFIs) and other facilities (ADB, AFD, AfDB, AIIB, IDB, GCF, GEF, US DFC, EIB, World Bank, MIGA) to explore the scale-up of credit guarantees, political risk insurance and more.
- The launch of the Task Force at COP28 was backed by a Joint Declaration of the participating MDBs/DFIs, which was reinforced by Statements of Support from the re/insurance market participants and the V20 Chair.
- The SSDH will serve as the Secretariat and technical partner of this Task Force, which will commence work in January 2024.
- The SSDH convened with representatives of the Kenyan Treasury, IUCN, UN ECA, and CIFF to develop the Kenya Sustainability Sovereign Debt Initiative (KSSDI)
- The KSSDI - which will be launched in the 1st Quarter of 2024 - aims to mobilize financing for nature in the short-term in a way that strengthens the country’s sovereign risk profile and reduces future costs of borrowing.
- This initiative will leverage SSDH's Accelerator program and IUCN’s science/data tools to support nature- and climate-relevant national plans, as well as program identification, target setting, metrics selection, and progress tracking.
Throughout COP28 Finance Day, significant progress to make climate finance more available, accessible, and affordable to all countries – specifically the most vulnerable ones to climate change – was achieved.
Other major related announcements at COP28 included:
- Over £480 million in aid announced by the UK for the first ever climate resilient debt clause to Senegal as a way to support developing countries access climate finance and mobilise private investment.
- The World Bank announced it will start offering CRDCs in existing loans, which will pause debt as well as interest for two years in the event of a natural disaster. AfDB, EBRD and the French Development Agency also announced plans to integrate these clauses in sovereign loan agreements.
- International support grew for a hybrid capital-based mechanism developed by the African Development Bank (AfDB) and the Inter-American Development Bank (IDB) to channel unused SDRs of wealthy countries through MDBs, who can then use these to issue bonds.