Dubai: The COP28 Finance Day, which may be called the most important among the thirteen days of the 28th meeting of the Conference of Parties, witnessed a landmark breakthrough in international financial architecture, with major commitments from influential countries and financial institutions to introduce innovative mechanisms supporting low-income and vulnerable nations in their battle against climate change.
Key announcements include the expansion of Climate-Resilient Debt Clauses (CRDCs) by prominent entities such as the UK, France, World Bank, Inter-American Development Bank, European Investment Bank, European Bank for Reconstruction and Development, and African Development Bank (AFDB). This move garnered support from 73 countries urging donors to extend the use of CRDCs by 2025, providing fiscal space for climate action.
COP28 President Dr. Sultan Al Jaber emphasized the importance of including the developing world in climate solutions, stating, “The announcement of new SDR pledges for Africa and the broad adoption of climate-resilient debt clauses is essential. It will help those most vulnerable to the shocks and disasters caused by climate change.”
Prime Minister of Barbados, Mia Mottley, expressed gratitude, saying, “I want to thank you all for the extraordinary courage to do the right thing. We can always bring back our debt, but we cannot bring back our society.”
In a series of commitments, nations and financial institutions are advancing global climate resilience through innovative financial strategies. The United Kingdom has taken a historic step by introducing the first-ever climate-resilient debt clause to Senegal, signaling a significant stride in African climate financing. The Inter-American Development Bank has declared a substantial $1.2 billion dedicated to loans covered through Climate-Resilient Debt Clauses or CRDCs, promising heightened climate resilience across diverse regions. The World Bank has pledged to integrate CRDCs into existing loans, ensuring a two-year pause on debt and interest in the aftermath of natural disasters, with all transaction costs covered by the institution.
Additionally, the African Development Bank, European Bank for Reconstruction and Development and the French Development Agency are unveiling plans to integrate CRDCs into sovereign loan agreements.
Japan has committed to supporting the AFDB’s facility, leveraging Special Drawing Rights for climate and development, while France has pledged support through a guarantee, with Spain and the UK expressing interest in further exploration. These collective efforts mark a crucial turning point in global climate financing and resilience.
These initiatives represent a significant stride in reforming the global climate finance architecture, aligning with the COP28 UAE Declaration’s vision for accessible, affordable, and available climate finance. Endorsed by multiple countries, including India, France, Barbados, Kenya, Ghana, Germany, UK, USA, Senegal, and Colombia, the declaration outlines principles for an inclusive climate finance architecture.
The event showcased perspectives from credit rating agencies, including Fitch Ratings, expressing intentions to consider revisions to credit rating criteria to ensure CRDCs do not burden borrower countries. Concessional finance becomes crucial as developing countries seek to transform economies and build resilience against climate change.
Countries discussed progress on SDR lending, calling for additional pledges, with some nations already committing SDRs to support climate action. The UAE, during the COP28 World Climate Action Summit, pledged $200 million USD to assist low-income and vulnerable countries through the International Monetary Fund Resilience and Sustainability Trust (RST).
COP28 UAE, held at Expo City Dubai from 30 November to 12 December 2023, convened over 70,000 participants, including heads of state, government officials, industry leaders, and representatives from various sectors. The conference is conducting the first-ever Global Stocktake, evaluating progress against climate goals in line with the Paris Climate Agreement. The UAE is leading efforts to establish a clear roadmap for a global energy transition and inclusive climate action.