The UK COP26 Presidency convened a Climate and Development Ministerial on 31 March 2021.
Ministers from Antigua and Barbuda, Bangladesh, Bhutan, Brazil, Canada, Chile, Colombia, Costa Rica, Democratic Republic of the Congo, Egypt, Ethiopia, the European Union, Fiji, France, Gabon, Germany, Ghana, Grenada, Guinea, India, Italy, Jamaica, Japan, Malawi, Maldives, Marshall Islands, Morocco, Norway, Pakistan, Philippines, Rwanda, South Africa, Sudan, Trinidad and Tobago, Tuvalu, United States, United Arab Emirates, the Deputy Secretary General of the United Nations, and heads of the Asian Development Bank, Green Climate Fund, Asian Infrastructure Investment Bank, European Bank for Reconstruction and Development, African Development Bank, Adaptation Fund, Caribbean Development Bank, Global Environment Facility, Inter-American Development Bank, International Monetary Fund, World Bank, Organisation for Economic Co-operation and Development, The Society for the Promotion of Area Resource Centres (SPARC) India, The Indigenous Peoples’ Caucus and youth representatives from The Mongolian Sustainable Finance Association, and Footsteps Bangladesh attended the Ministerial. In such challenging times, the COP26 Presidency was heartened by participants’ show of unity to address the collective challenges caused by climate change, and fervour to seize this once in a generation chance to deliver a global green and resilient recovery from COVID-19.
In his opening remarks the COP26 President emphasised the need for partners to come together around practical solutions. He reiterated that the steps taken today were in support of the COP26 Presidency’s stated goals of cutting emissions to keep 1.5 degrees in reach, facilitating greater action on adaptation, mobilising finance for climate action and coming together to make the COP26 negotiations a success. The UK’s Foreign, Commonwealth and Development Secretary emphasised the need to consider where international systems can do more to deliver urgent climate action. Speaking directly to the donors and financial institutions in the room, he emphasised that the mobilisation of finance is essential for implementation of the Paris agreement, and that we need to tackle this head on alongside the intertwined issue of recovery from the pandemic. Ahead of this ministerial a series of independent expert workshops helped to identify a set of key issues for Ministerial Discussion. Individual contributions made during the discussions have been combined with written submissions from non-participants, and remarks at an all Member State briefing at the UN, and captured below.
All participants welcomed the opportunity to address issues related to climate and development in the round; recognising the importance of it to tackling climate change and making progress towards a green and resilient recovery from COVID-19 ahead of COP26. Ministers and representatives from institutions and civil society discussed the following and agreed to take steps ahead of COP26 as outlined in the climate and development pathway annexed to this Chair’s Summary. The UK COP26 Presidency will reflect on progress in September 2021.
ACCESS TO FINANCE
Ministers outlined the urgent need for access to all types of finance, to decarbonise their economies, and adapt to climate change as the world recovers from COVID-19. Participants recognised that whilst the amount of climate finance was increasing, there were barriers to accessing the finance needed to support the delivery of climate action and sustainable development.
Participants highlighted challenges including: the transparency of finance flows, high application and reporting requirements for bilateral and multilateral finance, and the importance of harmonising requirements across finance providers. The importance of increased use of direct access modalities was also raised by several participants. The participants recognised that political will was required to streamline and simplify approaches and that greater individual and collective action would be needed before COP26. Aligning climate finance behind national plans, including Nationally Determined Contributions and National Adaptation Plans, was proposed by many as a more effective way to finance climate action. Enhanced support for development of national plans as integrated investment tools and the importance of strengthened in-country-coordination between climate finance providers were highlighted as key components.
Following calls for a Task Force on access to finance, the UK will work with Fiji and other interested countries to initiate a new Task Force on access to finance. Interested vulnerable and developing countries, finance providers and existing initiatives will be convened with a view to presenting a concept note and work plan by the Petersberg Climate Dialogue on 6-7th May. The aim will be to agree to pilot a new approach in some pioneer countries by COP26.
Participants highlighted challenges in accessing available finance from the climate funds, including the Green Climate Fund (GCF). The Updated Strategic Plan for the GCF contains commitments on improving access. The June and October meetings of the GCF Board are important moments for Board members to ensure progress on the work plan for implementing these commitments. Participants also discussed the need to increase the proportion of finance that reaches the local level and that new mechanisms were needed to improve access and empower the most vulnerable countries and communities. Several participants highlighted the challenges for all climate vulnerable countries, whatever their level of income, in accessing public and private finance.
RESPONSES TO CLIMATE IMPACTS
Participants stressed that increased Nationally Determined Contributions and near-term action to mitigate against climate change were essential for limiting warming below 1.5 degrees and limiting future adaptation needs. Several countries outlined their intention to bring forward their nationally determined contributions and some highlighted the importance of a just transition away from coal with support playing an important role. Other participants noted the importance of relocation with dignity where necessary, respecting nations’ sovereignty.
Participants emphasised that the effects of climate change are already being felt, and that it is often the most vulnerable who are hit hardest. Participants raised a range of practical challenges to taking action on adaptation and loss & damage and stressed the urgent need to accelerate action to address growing extreme weather. The country specific nature of climate extremes was also noted, especially in countries particularly vulnerable to climate change, reflecting that the global response needed to respond to these differences. Participants highlighted the importance of mainstreaming climate risk and adaptation into government-wide national planning and budgeting and enabling national capacity to effectively deliver sustainable development and growth. Participants also highlighted the value of National Adaptation Plans and Adaptation Communications to this end. Climate modelling and data was also recognised as an important tool to help facilitate early action. The importance of integrating nature based solutions into national planning was underlined, with a number of participants referencing examples of best practice. The incoming COP26 Presidency encourages submission of these ahead of COP26, wherever possible.
The importance of drawing on the knowledge held by indigenous peoples, women, rural communities, young people and local authorities was also emphasised, along with the importance of pursuing rights-based approaches. The Principles for Locally Led Adaptation were noted as an effective framework to bring local actors into decision making on climate adaptation. Participants noted the importance of investment in countries’ long-term capacity to manage and implement action, following the example of the LDCs as set out in their 2050 vision. During consultations, initiatives such as the African Adaptation Initiative and LDC Initiative for Effective Adaptation and Resilience were recognised as important vehicles for supporting national, regional and local ownership of projects.
Many participants acknowledged the opportunities for job creation, role of technology and innovation, and wider sustainable development in action to prepare for and respond to climate impacts. Participants called for more opportunities for building capacity across key sectors – including agriculture, infrastructure and water security – for sharing good practice, and scalable solutions that can be replicated across different country-contexts. Platforms such as the Adaptation Action Coalition would be a good forum for taking this work forward.
Participants identified improvements in disaster risk reduction, response, and support to improve the resilience of infrastructure and critical services as crucial. They highlighted the importance of improved access to affordable disaster risk finance to protect against residual risks. Regional risk pools were highlighted as an approach that enabled strong local ownership. Participants also highlighted the need for strengthened international risk forecasting to increase preparedness to major crisis risk. As G7 President, the United Kingdom outlined its intention to host discussions on these issues at the Foreign and Development Ministers Meeting on 3 May with a view to securing additional financial support by the G7 Leaders’ Summit on 11-13 June.
Participants underlined the importance of finding practical solutions to tackle loss and damage. The COP26 Presidency announced its intention to host consultations, in cooperation with Chile, with parties and other stakeholders with a view to advancing operationalisation of the Santiago Network on Loss and Damage ahead of COP26. The incoming Presidency will similarly hold workshops with parties on the Global Goal on Adaptation, to build mutual understanding on how progress on the Global Goal can be understood and represented.
QUANTITY, QUALITY AND COMPOSITION OF CLIMATE FINANCE
Participants outlined the financial challenges posed by the COVID-19 pandemic and highlighted the opportunity for a global green and resilient recovery. Many participants highlighted the scale of the climate finance needed to implement national climate action. Whilst there was a recognition that all forms of finance would play a role – public and private, domestic and international – participants stressed the urgency and importance of developed countries delivering on their commitment to jointly mobilise $100bn of climate finance a year by 2020, recognising that this is a floor and not a ceiling, and increasing this through to 2025, from a range of public and private sources.
Participants agreed that there was a pressing need to scale up finance for adaptation and resilience, with many calling for a better balance between mitigation and adaptation finance, and some suggesting that developed countries should aim for a 50:50 ratio in their public finance. Many also noted the importance of an increase in grant financing, especially for adaptation. Participants also raised the importance of investing in nature-based solutions. A new multi-stakeholder initiative, the Voluntary Carbon Market Integrity Initiative, was launched today to strengthen high-quality voluntary carbon markets, highlighting the opportunity to increase private finance flows into a range of sectors important to national mitigation and adaptation plans, including forests and land-use.
It was highlighted that transparency and predictability of finance was imperative to a resilient recovery and sustained investment in climate action. The COP26 Presidency will take forward discussions on the future finance agenda and transparency and predictability in advance of the COP. Participants also discussed the importance of transparency for attracting private finance and the importance of long-term financing. Climate finance was highlighted as an important factor for advancing equality and social inclusion, increasing gender responsiveness, the inclusivity of persons with disabilities and delivering on the needs of those most impacted by climate change.
Developed country Ministers stressed their commitment to increasing both the quality and quantity of finance towards the $100bn a year goal and particularly to improve the balance of adaptation to mitigation finance. A pathway for addressing these challenges was outlined, noting the Earth Day Summit, Petersberg Climate Dialogue and the G7 Leaders’ Summit as critical opportunities for further climate finance pledges. The Petersberg Dialogue was highlighted as an important moment for further action; including discussion of how fulfilment of the $100bn could support a green and resilient recovery from COVID-19.
Participants highlighted the role of international financial institutions and development banks and their boards. Some participants called for a more creative approach to development bank financing, recognising the climate and COVID-19 emergencies and taking more risk on balance sheets. Participants highlighted that work should be prioritised to assess Multilateral Development Banks capacity to provide further financing, through both additional concessional financing including a replenishment of IDA and progress on balance sheet optimisation. Others went further and called for progress on reviewing the financial architecture and deeper reforms, highlighting opportunities for restructuring the global financial architecture in support of greater financial flows.
Participants acknowledged the need to mobilise greater flows of private finance towards adaptation, the need for new financial instruments and to secure support to grow the markets of local companies providing resilience products and services. They reiterated the important role of Development Finance Institutions, IFIs and international climate funds. The COP26 Presidency noted the DFI+ Collaborative on Accelerating Investment in Adaptation and Resilience, launched in November at the Finance in Common Summit. This brings together Development Financial Institutions and other development agencies to improve coordination between actions needed to help overcome barriers to private investment in adaptation and climate resilience. Additional members from the G7 and EDFI are being invited to join ahead of the next Finance in Common Summit and COP26.The United Kingdom confirmed it would raise the need for significant commitments from DFIs at the G7 Foreign and Development Ministers Meeting.
Participants raised several elements related to the formal UNFCCC process, including on the long-term finance agenda and initiation of deliberations on the new collective finance goal post-2025. The COP26 Presidency reiterated that the $100bn goal is of the utmost importance to all countries, and expressed its commitment to driving progress on all UNFCCC issues. Many participants also raised the importance of aligning financial flows with the long-term goals of the Paris Agreement, with some suggesting the importance of greater discussion on the implementation of Article 2.1c.
FISCAL SPACE AND DEBT SUSTAINABILITY
Participants recognised that governments’ fiscal pressures have been exacerbated by the pandemic, impacting countries’ abilities to pursue their development priorities, including the increasingly urgent and evident issues of climate change and biodiversity loss. Some participants noted that climate impacts such as disasters or extreme weather, further constrain fiscal space. According to the IMF/World Bank debt sustainability analyses, about half of low-income developing countries are at high risk of debt distress or are in debt distress already. Creating fiscal space, both through international initiatives and domestic efforts, was judged as critical to creating the conditions for countries to achieve a green, inclusive and resilient recovery.
Since the beginning of the COVID-19 crisis, the international community has come together to help alleviate the fiscal challenges of the pandemic faced by low-income countries, including those most vulnerable to climate change. The IMF, Multilateral Development Banks (MDBs) and G20 have agreed a series of measures to address these challenges and create fiscal space including through the Debt Service Suspension Initiative (DSSI), the G20 Common Framework for Debt Treatments beyond the DSSI, and the replenishment of the IMF’s Catastrophe Containment and Relief Trust. In addition, the IMF has approved financial assistance to 85 countries so far, totalling USD 107 billion and MDBs have collectively aimed to commit approximately USD 230 billion to emerging and low-income countries as a response to the pandemic.
Participants expressed their strong support for the sustained roll out of these measures and agreed that the financial reform discussions prompted by the COVID-19 pandemic should take a structural approach that fully considered climate risks and opportunities. Participants also recognised the importance of increased transparency and quality of climate finance, including effective options for access to concessional finance and innovative financial tools, which will help to avoid increasing fiscal pressures in the pursuit of climate goals. The significant potential of boosting domestic resources mobilisation was also highlighted, for example through combating illicit financial flows and technical assistance to protect the domestic tax base and the environment through implementing policy tools such as international tax standards and carbon pricing.
The IMF highlighted that a new SDR allocation of $650 billion would provide a liquidity boost for all members. The voluntary reallocation of SDRs by countries with strong external positions to support the most vulnerable member countries would also be welcome. Participants noted that this would free up further resources for the most vulnerable countries, providing more space to pursue green, inclusive and resilient pathways as part of their recovery.
The IMF outlined that it is stepping up its engagement on climate, including in its Article IV consultations reports and Financial Sector Stability Assessments. These efforts will strengthen the assessment of climate risk and transition strategies within its macroeconomic and financial stability surveillance, and also highlight the benefits of countries’ supporting climate investment to encourage low-carbon and climate resilient growth, and fiscally sustainable economies. The World Bank, in collaboration with the IMF/UN/OECD and other stakeholders, is hosting a Climate, Debt and Nature working group. The working group will provide further details on how it would take forward discussions on these issues during the World Bank and IMF Annual Meetings in October.
Italy, in their role as Presidency of the G20, attach priority to stepping up support for vulnerable countries especially Low Income Countries. To this aim it highlighted that further discussions on debt are taking place through the G20 Finance Track. Italy noted that they were working to reach a consensus in support of a further and final extension of the Debt Service Suspension Initiative to end-2021, while also highlighting continuing collaborative work on the Common Framework, with the involvement of the private sector. Participants welcomed that these issues are being taken forward. Italy flagged the meeting of Finance Ministers and Central Bank Governors to be held in Venice in July as a key event for discussing climate issues.
Italy also highlighted the work of the G20 Development Working Group, which will support the implementation of Integrated National Financing Frameworks, the use of debt-related resources towards the SDGs, and scaling-up financial instruments linked to sustainability in developing countries. France highlighted that the Summit on African Economies, in May, will cover the fiscal and economic challenges facing countries.
NEXT STEPS
The UK Presidency will work with countries, institutions, civil society, and others on the issues and actions highlighted in this summary in the run up to COP26.
