Keeping promises: helping developing nations prepare for climate change
Dr Barbara Buchner, global managing director of Climate Policy Initiative, tells Chris Seekings about the urgent need to raise climate finance for developing nations, and how far we are from the US$100bn goal
At the COP15 climate summit in Copenhagen in 2009, rich countries agreed to provide US$100bn in climate finance to poorer nations each year by 2020 to help them deal with the loss and damage caused by climate change. That promise was broken, and no concrete action was agreed at last year’s COP26 to deliver on the goal, despite extreme weather having become increasingly frequent and destructive across the developing world during the past decade.
As global managing director of Climate Policy Initiative (CPI), Dr Barbara Buchner advises governments and financial institutions on solutions that resolve barriers to investment, including through the Global Innovation Lab for Climate Finance, which has helped mobilise US$3.2bn of climate finance for developing countries in the past eight years. Her work also involves tracking total climate finance worldwide, making her an authoritative voice on the steps needed to scale up investment and reach the US$100bn goal.
“Working in academia, I discovered that if you want change, you need to understand policymaking and policymakers’ language”
The International Council for Science has named Buchner one of the 20 most influential women working to tackle climate change, and Apolitical has called her one of the 100 most influential people in climate policy.
How did you become involved in climate finance?
I’m an economist by training, focused on environmental sciences, so from early on was interested in the environment and climate, and how you can shift the system to help preserve the world. Working in academia, I discovered that if you want change, you need to understand policymaking and policymakers’ language – so I went to work for the OECD at the International Energy Agency, before helping to start CPI in 2010 to help governments and financial institutions use their resources more effectively. They come to us for advice, and we push the boundaries and come up with our own ideas on raising climate finance. We have built strong relationships with governments in the West, and are also working with governments in emerging economies such as Brazil, India and Indonesia.
The CPI “tests cutting-edge climate finance instruments that resolve financing barriers hindering alternative energy, adaptation, and land use projects” – tell me more about that.
These cutting-edge instruments are developed under a flagship project called the Global Innovation Lab for Climate Finance. We crowdsource ideas or concepts that need additional technical support and connections to investors to get them implemented. We have several criteria. One of them is being innovative, which means addressing barriers in the market in a new or more effective way. We have developed more than 55 business models and financial solutions during the past eight years.
Can you give me an example of one of those solutions?
One of our biggest success stories is a project called Climate Investor One – a financing facility that fast-tracks renewable energy projects in developing countries by bringing three facilities into one. It has a project-preparation facility, a construction-finance facility and a refinance facility, combining donor and public and development finance funds in pre-operational stages to kickstart and de-risk projects, and then attracting construction stage and operational stage private investment. It’s a three-phase sequential financing approach that addresses a lot of challenges associated with climate finance in developing economies so they can attract private investment.
“While $630bn has been raised, the needs are in the trillions, so we are falling far short”
It has managed to get pension funds and institutional partners involved, which is important if we are to get to the scale we need, and the idea is being replicated for another fund focused on water, oceans and sanitation.
The CPI also tracks total climate finance raised worldwide. How do you do that, and how much has been raised to date?
“I was positively surprised by COP26 – much more happened than I expected”
We have been tracking climate finance since 2011 by pooling different data sources to give the most comprehensive information on climate finance flows. We continue to improve our methodologies and move into harder areas where there’s not enough information, such as finance for sustainable agriculture and energy access. In global flows, around US$630bn today has been raised – around 51% from the public sector. However, the latest figures show that around half the money that we’ve been able to track went to East Asia and Pacific, with China alone representing more than 80% of that amount, building on strong government supports there. That confirms a trend that we’ve seen for the last 10 years, which is that there’s a strong domestic preference from investors.
How far are we from delivering the US$100bn of climate finance for developing nations each year?
The US$100bn is a starting point, but does not get us even close to where we need to go. While US$630bn has been raised globally, the needs are in the trillions, so we are falling far short. The US$100bn is important for building trust and delivering on commitments that have been made in the context of negotiations. Using OECD numbers and our own information, it seems that we are close to meeting that US$100bn commitment, but we must go beyond it if we are to meet our temperature goals.
There are also methodological issues around the US$100bn goal, including missing definitions, and there must be more focus on climate finance quality, not just quantity. There are certain areas where private investors are not yet able to go because of the specific risks. Having a better understanding of the risks of investment in the riskiest sectors and geographies, and who is best able to cover those risks, would go a long way to improve climate finance quality. It’s important for the G20 or G7 to discuss these issues.
What countries and sectors are most in need?
We have seen improvements in climate finance going to Africa, but we need to make sure that gets scaled and allows African countries to make progress, particularly on adaptation. Everyone has seen the impacts of climate change already, so there is going to be an increasing need for adaptation and measures. It might be because of data issues, but we are only able to track about 7% of the overall chain of money raised for adaptation. So that is a big need, and needs additional focus and support.
In terms of allocation, we continue to see most of the money going towards mitigation or renewable energy and transport, because we still need to phase out fossil fuels, and there has been a lot of progress on new technologies. It is also important to think more generally about infrastructure and how we build our economies in a more resilient way.
What were your feelings about COP26, and what do you hope to see at COP27 later this year?
I was positively surprised by COP26 – much more happened than I expected. It was particularly positive to see deals on accelerated coal retirement and the phasing out of fossil fuels. There was also a lot of focus on nature, which is positive and needs to happen more, and there was a strong presence from the private sector, which is now more in the picture than it was in the past.
Looking ahead to COP27, while US$100bn of climate finance for developing nations is not enough, it is an issue of trust, and I hope that we can see it as a starting point to go beyond. I hope there is also more attention on scaling up adaptation finance, and concrete projects and partnerships would be welcome. It is then up to CPI to show whether those pledges hold up, and to measure the impact and integrity of those commitments.