We need to allocate new multilateral finance to developing countries, says COP26 President Alok Sharma. On 11 July, COP26 President Alok Sharma told an audience in Venice that “climate change is the greatest challenge that we face”, and “to keep that 1.5 degree limit within reach, we must halve global emissions by 2030, and these efforts depend on finance. Without it, the task ahead is near impossible.”
One of the UK government’s key aims for COP26 is to “get finance flowing to climate action, both public finance and private finance”, with a particular focus on emerging markets and developing countries, “where the need is greatest”.
Sharma claimed it was “essential that developed countries deliver the $100billion a year that they have promised to developing countries”, a sum that promises to be a major sticking point in the upcoming negotiations. Agreed at Copenhagen, the failure to deliver on this promise has seriously damaged trust from developing countries in industralised countries’ committment to global climate action.
One solution to this is a $650bn allocation of Special Drawing Rights (SDRs), a multi-currency lending facility, being prepared by the IMF. The G7 has argued that they want to “channel almost a sixth of the newly allocated SDRs to support healthy, green and resilient recoveries from Covid-19 in the poorest and most vulnerable countries”, said Sharma, calling for a more ambitious level of SDR recycling than during the aftermath of the Global Financial Crisis.
The Reading West MP urged Multilateral Development Banks (MDBs) to take action, suggesting that “every MDB should set a date by which they will align with the Paris Agreement, as the World Bank and the EBRD have done.” We will be working with the Islamic Development Bank on our Path to COP26 campaign.
“Every MDB should meet their climate finance targets, increasing them where possible, and develop plans to mobilise more private finance”, said Sharma. This will be key to overcoming the significant barriers that still exist to investment in emerging markets, which can seem too risky to attract large-scale institutional capital, despite the enormous investment opportunities.
The COP26 President urged MDBs and private financial firms to “increase their collaboration, and scale-up blended finance initiatives and technical assistance, and to improve the conditions for investment within countries, and build pipelines of high-quality, bankable projects”. One initiative in this vein has been the IsDB’s Transform Fund, which Hayat Sindi, Scientific Adviser to then President of IsDB, spoke about during our SDG financing panel at Ethical Finance 2021.