Simon Stiell: We Need a Roadmap for Unlocking Climate Finance
Lecture given by UN Climate Change Executive Secretary Simon Stiell (Twenty-Third William G. Demas Memorial Lecture) on the occasion of the 53rd Annual Meeting of the Board of Governors of the Caribbean Development Bank.
Good afternoon your excellencies, governors, ladies and gentlemen.
It is an honor for me to be here today. And it is a great pleasure to be back in our Caribbean neighbourhood.
This meeting comes at an opportune moment from the perspective of the climate calendar, sandwiched between the June Intersessional negotiations and the Paris Summit on finance.
Today I hope to fill the shoes of others that have gone before me, by marrying my understanding of our Caribbean neighbourhood with the perspective I am afforded from my current position in UN Climate Change.
As I was preparing my remarks for this memorial lecture, I imagined asking Dr Demas for his advice: what would he be thinking about the challenges of the day? I can promise you his thoughts would be vastly wiser than mine, but today I want to share with you a vision, a vision of our region and its impact on the world’s drive to tackle the climate crisis, the forefront of the ‘How’. Our Caribbean region is perfectly placed to provide a bridge between divided international communities, incubate solutions and chart a path forward which others can crowd in behind.
As you all know, Dr Demas was renowned for being a strong and passionate advocate for the Caribbean integration movement. He saw that as a region, when the Caribbean united, it was stronger. As a brilliant economist, he understood the central role of finance in determining the options available, providing the freedom to choose one’s own path towards a just and prosperous society.
As I imagined him sharing his advice, I realized that his work is now more important than ever, and the themes he cultivated are as relevant for our time, of post-pandemic climate change and geopolitical turbulence, as they were when he guided the Caribbean fifty years ago.
The Caribbean region was one of the front runners pushing for inclusion of the 1.5ºC target in the Paris Agreement of 2015. Those negotiating on our behalf knew all too well that 1.5 wasn’t just a commitment, it was a lifeline, and it would require them to be agents of extraordinary change to deliver it.
Despite a litany of hurdles, we succeeded. As the science now tells us the dramatic difference in negative consequences of a world 2°C warmer, rather than 1.5°C, the fact that we managed to secure this ambition to limit global warming to 1.5°C, means we may have changed the whole world for the better as a result.
1.5ºC is not only inscribed as the stretch commitment in the Paris Agreement, it’s enshrined into action across the entire world economy.
As I stand here in front of you today, nearly eight years have passed since the world came together around the Paris Agreement. Two things have become clear:
One -Implementation of that agreement is progressing, but Two - more slowly than required.
149 countries now have a net zero target.
145 states & regions now have a net zero target.
252 cities now have a net zero target.
And 929 publicly listed companies now have a net zero target.
The direction of travel is clear as day and becoming more robust all the time.
National government net zero targets underpinned by legislation or policy documents have increased in the past two-and-half years from less than 10% to 75%.
There is no smart CEO in the world today who is not thinking about climate as it relates to their business strategy, their products, their customers and other stakeholders.
The Paris Agreement has transformed the world to be far different than it would have been without it.
Of course, the global COVID pandemic and the war in Ukraine have not helped in this regard; and
The effects of climate change have shown themselves earlier than most people expected, with more devastating consequences.
Despite all the pledges, collectively we are far behind in our actions to cut emissions on time.
In the Caribbean in particular, we face the challenges of pledged support and promises going unfilled, high debt burdens, low fiscal space, extreme vulnerability to external shocks, and low economies of scale.
We also know that nearly six trillion dollars is needed across all sectors in developing countries by 2050 to meet our climate commitments.
We couldn’t have greater clarity from the scientists, that the scale of the problem is enormous and that there is a cavernous gap between what actions are needed and our political, regulatory and societal response.
Into that gap, fall the lives and livelihoods of hundreds of millions of people, entire ecosystems, cultural traditions, hopes and dreams. It is a gap of suffering, deeply and profoundly, at the cost of inaction and delay.
Yet, our scientists are telling us that reaching the 1.5ºC ambition is still possible, but the window of opportunity is quickly closing.
This is where I see my work marrying up with the vision of Dr Demas – the climate and development agendas have gone hand in hand in this region for decades, perhaps by other titles, but the understanding is engrained.
Friends,
What we need now is a dash of the practical Caribbean ‘How’.
In just a few months, the world’s governments and civil society groups will reconvene in Dubai for COP28 to:
Take stock of how we’ve done since Paris: the first official global stocktake.
To chart a course from there to 2030 that will put us onto the track we need, and
To embed the transformation of the finance agenda to make that course correction possible.
At this global stocktake, we cannot afford disparate approaches.
At the end of this week, many of us here will travel together to Paris, for an event which is slated to focus on restoring fiscal space, foster private sector development, encourage investment into green infrastructure and mobilise innovative financing.
Now that’s a lot for one meeting.
Whatever comes from the event itself, from the Climate perspective we need two things:
One – more finance, available this year.
And Two – a roadmap for unlocking significantly more finance between now and the end of the decade.
This brings me to the vision of what our Caribbean region is uniquely placed to bring – bridging, solutions, and a pathway forward.
Bridging
At school we were all taught: “An eye for an eye, makes the whole world go blind”. But unfortunately, this is where we find ourselves in our drive for collective progress on climate action – a chicken and egg situation if you will.
There are countries within the negotiating arena who see it as their role to hold up progress in the negotiations and refuse to take action at home, until sufficient finance is delivered to support it. There are others who refuse to provide all the finance promised, until they see ‘meaningful action’ is being taken.
Here’s the thing – action has to be taken and it has to be taken now. To take action you need finance as an enabler. So both of these things have to happen and they both have to happen right now.
As I said in my closing speech of the June Intersessional negotiations in Bonn at the end of last week – climate change is not a North vs South issue.
We need a proactive bridge between the two. A voice which can champion a progressive third way.
A third way which delivers for those that need it most – that means action and provision of support to enable further action in an upwards iterative spiral. A voice that holds space for sensible progress.
Progressive alliances tend to be issue specific, finding it easier to build common ground around one issue - may that be mitigation action, or the importance of certain ecosystems. We need to build common ground across issues, a package of action which will ultimately deliver for us all.
In the Caribbean, we are uniquely placed to understand what this needs to look like, having experienced climate impacts for generations. Consistently responding to change by building our communities around principles of growth, global integration and sustainability, with one eye constantly on self-sufficiency.
With our limited resources, we know the struggles of what it takes to keep the lights on, cupboards filled, children educated, and opportunities for resilience taken. We are practical people, we can provide the bridge between approaches which provides the space for more ambition on all issues globally.
Speaking of which, it was the small island states, under the leadership of Antigua & Barbuda as AOSIS Chair, which helped land the definitive outcome of a fund and funding arrangements for loss & damage. A disagreement which had plagued the negotiations for years.
We will continue to need our regions leadership to bridge between factions and deliver the fund this year, with the support of the Transitional Committee – building the necessary political will for success.
Finding Solutions
The next USP of our region in tackling the global challenge is our size. Where creating economies of scale may have been on Dr Demas’s mind when he proposed deeper integration and regionalism, they are possibly an opportunity in the climate context.
As a region, we punch above our weight when it comes to world changing ideas. Just take Prime Minister Mottley’s recent drive to make the global financial architecture fit for purpose.
The Bridgetown Initiative is attempting nothing less than finding a way to provide emergency liquidity, expand mulitlateral lending to governments by 1 trillion dollars, and activating private sector savings for climate mitigation and fund reconstruction after a climate disaster through new multilateral mechanisms.
That’s a tall order, but delivery starts with putting one foot in front of the other, biting off sections bit by bit.
The Caribbean is, to a large extent, still dependent on fossil fuels for its energy supply. But no-one wants to be beholden to the international price of oil and gas. Solar and wind are cheaper than ever now. They make more money and pay back far faster than fossil fuels.
Energy production globally is shifting from a concentrated, expensive, polluting commodity-based system, to an efficient, manufactured, technology-driven system that offers continuously falling costs and is available everywhere.
The world will add a record 440 GW of new renewable capacity this year, double what the International Energy Agency predicted in 2020. For the first time this year, renewables are eating into the energy market share. Solar is attracting more capital than oil.
We cannot end fossil fuel use over night, but we need to put a plan in place for its accelerated replacement by renewables. Globally, a rapid, but phased and responsible transition away from fossil fuels would bring a raft of benefits to populations and societies.
National governments and non-governmental organizations are already piloting and implementing new financial instruments and other financial products to support more effective mitigation, adaption and responses to loss and damage.
Take the examples of the blue bonds Barbados and Belize have already invested in. These effective instruments, in which expensive debt is swapped with debt at a much lower coupon result in reduced public debt.
They ensure precious coastlines, that protect the region from climate impacts, that benefit the region’s economies and its peoples’ wellbeing, are set aside to be conserved.
Ecuador - not far from here - has just swapped $1.6 billion in bonds for a new $656 million loan - in the biggest debt for nature swap in history. But it won’t be the biggest for long.
And there is no better positioned region than the Caribbean, along with the other SIDS, to further pioneer innovative financing approaches for managing the climate crisis and buffering against further loss and damage.
Meanwhile, regional risk pools and insurance providers are already considering opportunities to offer new products and increase accessibility to their services.
The Caribbean Climate Risk and Insurance Facility provides insurance for Caribbean and Central American governments and electricity companies for cyclones, excess rainfall, fisheries, and electric utilities for short-term recovery.
And look at Jamaica’s innovative catastrophe bond, which secured $185 million of disaster insurance protection with the assistance of the World Bank and the IBRD Capital-At-Risk notes program.
This type of financing can help ensure the region isn’t completely economically devastated when the next big hurricane hits, but rather is better prepared and more resilient.
We are providing the test cases for other Small Island Developing States and regions to build from. We must use our scale as an advantage, to explore ideas and, dare I say it, fail fast.
We will not meet the scale of the challenge we currently face without testing options and testing them at pace. Now, I am aware, that is not the normal message to give to a room of prudent bankers, but I am not here to provide reassurance, I am here to provide the warning of what will happen if we do not lean in. My message to multilaterals and international financial institutions is how important it is to shift our focus from de-risking project to sectoral level finance, to better enable the necessary investment flows into the region.
We know better than most the inherent bias that can exist in international systems. Those systems that don’t understand investing in developing countries, those that consider it to be more difficult than it is.
Bias doesn’t just change through education alone, it also changes through demonstration. This is my plea to you to document and share what you are doing. Don’t be quite about either your success or your failures. This requires a new approach by the international financial community - the difference between the real and perceived risk costs – with a competitive cost of capital that enables the levels of investment flow required to support the regions transition and development.
We simply don’t have time not to.
Charting a Path
This brings me to my final point – charting a path.
You only need to listen into conversations between people on the block, or in a rum shop here in the Caribbean, to quickly realise how we can cut through the noise and get straight to the point.
The international multilateral system needs clear voices which can unravel confusion and chart a way forward.
I want to give you a very simple but powerful example of this. There is a person in this room, who attended the Climate negotiations in Glasgow, COP26 – through their engagement in those meetings, relationships they developed with the Presidency, working in cooperation with others in the region and other SIDS, they made the difference on whether the call for Special Drawing Rights was included in the decision, further tipping the international community into action.
That person was your own Bank president.
… so I can personally vouch for the effectiveness of his travels!
At the recent Spring meetings, I found myself looking around a room full of eminent persons, and I noticed something interesting. I noticed a clear convergence of language in the room, both identifying the problem and what needs to be done to fix it.
That is a distinct shift from where we were even a year ago. But the next thing I noticed was the problem, each person pointing fingers at each other to start, rather than pointing the finger at themselves.
That approach might eventually get us to where we need to be, but I can guarantee you, it will be woefully too late.
More than grand statements, we need people to roll up their sleeves. People willing to sit together in a room, for as long as it takes to figure out the ‘how’ – how we are going to get from point a to point b. This is my call to you to give a particular focus to your work with shareholders to support their engagement and active delivery in this space.
Globalisation has brought many positives, but we should not accept a total homogenisation of ideas or approaches.
Our culture in the Caribbean has always seen value in more than money. And today we have the opportunity to lean into that, further developing our thoughts, feelings and perspectives on what makes or gives something value.
Where we value our security and resilience, vulnerability can be assessed in a number of ways. Building a collective vision of accepted ways to judge value, gives us the opportunity to better measure progress from each of our context-specific baselines.
The region can chart a path by testing and incorporating these approaches, without having to wait on others who might be wedded to the more traditional methods.
It will take courage and creativity to unite and to break through the obstacles in our way.
But our region has the character of spirit required.
With the beauty of nature ever present on its islands.
With the joy and resilience of humanity so self-evident in its people.
The Caribbean is the region that can make the difference now in this moment of consequence. It’s done it before and can do it again. Today you are the ones at the heart of that story. The way forward is yours to design. Build bridges, find solutions, and chart the path forward.
I thank you.
