Finance ministers from the V20 Group of climate vulnerable nations have called for improvements to the global financial system.
V20 leaders have called on the G7, the G20 and the IMF to act decisively on loss and damage while ensuring the inclusion of vulnerable economies in their decision-making processes.
The call comes amid intensifying climate change impacts that are consistent with projections from the latest IPCC reports showing growing losses and damages due to inadequate adaptation responses and a prevailing 98% financial protection gap.
The V20 countries are among the most climate vulnerable nations on Earth and face a rapidly deteriorating macroeconomic burden spanning their 1.4 billion people. They are seeking greater awareness and improved funding practices from wealthy nations and multilateral organisations like the multilateral development banks.
H.E. AHM Mustafa Kamal, the V20 chair explained: “The world will remember the last two years as the period that exposed major fault lines in the global governance system. The fissures run through supply chains, design of national economies, infrastructure, healthcare, social security systems, financial protection cover to micro, small, and medium-sized enterprises which our people rely on for their livelihood, and the alignment of international investment with our national priorities, amongst others.”
He continued: “These fault lines will remain even as the world recovers from the pandemic. Those most affected must help lead so they can convert the challenges into opportunities. Vulnerable countries have agency as showcased by the V20 instrument called Climate Prosperity Plans, which will allow us to move from vulnerability to resilience to prosperity, based on strategic technology partnerships and investments.”
The V20 is critical of what it calls ‘sluggish’ progress by developed countries towards delivering finance with a greater sense of urgency and appropriate scale. In particular, they stress that recovery from the pandemic and the impact of Russia’s invasion of Ukraine on global energy prices, are causing further problems alongside the long term consequences of climate change.
V20 ministers feel that a global financial system unresponsive to climate change realities means more developing countries will be forced into situations of fiscal distress or default, not because of long-term insolvency but due to a lack of cash on hand, hard currency, and exchange rate volatility.
Special Envoy, H.E. Abul Kalam Azad, said: “The V20 can begin efforts to engage in dialogue with the Multilateral Development Banks (MDBs) and IMF to spur efforts that prioritise these improvements for the MDBs and IMF to be fit-for-climate prosperity. Equally important is collaboration from MDBs through alignment of country financing programmes with our Climate Prosperity Plans: We call on you for project preparation support and to support bringing down the cost of capital through credit strengthening, long-term financing and local currency financing.”
These concerns are reflected among more prosperous nations and multilateral organisations as they seek to upscale their support.
EIB president Werner Hoyer explained: “Through our increased presence on the ground and even closer cooperation with partners, we will support solutions to protect people, businesses, and ecosystems in vulnerable regions. Partnerships are key to EIB global operations, even more so when it comes to adaptation. We look forward to establishing closer ties with the V20 as we head towards COP27.”
One of the major challenges in enhancing the availability of green finance is that of verification. There is strong demand for green investments from investors and asset operators, and the reassurance that finance provided will be as effective as it needs to be is an important step now being taken and it is hoped this will strengthen resilience investment around the world.