The Africa Climate Summit (ACS) and the Finance in Common Summit (FiC) held in September reflected a growing momentum in the discussion of the climate-debt nexus. Even though commitments from traditional donor countries and institutions still fall short of the pressing issues at hand, emerging forums inject fresh perspectives and a new sense of urgency.
by Sarah Ribbert (Project Coordinator) and Arabella Wintermayr (Editor)
In the early days of September, two significant global summits took place, each with a strong focus on debt and climate finance. The Africa Climate Summit (ACS) convened in Nairobi, Kenya, for the first time, aimed to address the pressing climate issues faced by the continent, while the Finance in Common Summit (FiC) gathered in Cartagena, Colombia, to discuss the role of public development banks in sustainable development.
Both events underscored the urgency of addressing the debt-climate nexus. The question is whether the discussions will translate into concrete action – and whether the Global North and international financial institutions will meet the demands.
Africa Climate Summit: A Landmark Event in Itself
The ACS marked a historic milestone as the first major climate summit centered on Africa alone, hosted by leaders of the Global South. The continent, despite contributing relatively little to global greenhouse gas emissions, bears the brunt of devastating impacts caused by climate change. The Summit, hosted by the Republic of Kenya and organized by the African Union commission, brought together many African heads of states, international leaders and experts to deliberate on Africa’s role in confronting the climate crisis.
The most notable outcome of the summit was the adoption of the Nairobi Declaration, which reframes the discussion of Africa‘s role thusly, “Africa possesses both the potential and the ambition to be a vital component of the global solution to climate change.” However, the declaration cautioned that realizing climate-positive growth across the continent, with a substantial impact on global decarbonization efforts, necessitates significant investments. The declaration called upon the international community to alleviate Africa’s overwhelming debt load and revamp the global financial system to facilitate investments in green growth.
In particular, the declaration includes calls for a global carbon tax on fossil fuels, low-interest loans for green energy projects in Africa and reforms to the international financial system.
Notably, the declaration calls for “measures to improve debt management, including: a. the inclusion of ‘debt pause clauses’, and b. the Global Expert Review on Debt, Nature and Climate proposed by Colombia, Kenya and France on the occasion of the Paris Summit for a New Global Financing Pact” as well as “new debt relief interventions and instruments to pre-empt debt default – with the ability to extend sovereign debt tenor, and include a 10-year grace period.”
A new working paper from the Debt Relief for a Green and Inclusive Recovery (DRGR) Project emphasizes the critical need for new forms of financing, concessional funds, grants and comprehensive debt relief, especially for sub-Saharan African (SSA) countries. Outlining the levels of sovereign external debt and service payments between 2023-2030 for SSA countries, the paper shows the region will face debt servicing costs that are roughly the same as their climate financing needs. As DRGR Project Co-Chair Kevin P. Gallagher highlighted when speaking with France24, “African countries need a fresh start to be able to mobilize finance for a green and inclusive recovery.”
In light of these challenges, an official ACS side event co-sponsored by the DRGR Project highlighted potential climate and development-centered finance frameworks that could provide alternatives to the Group of 20 (G20) Common Framework and deliver on comprehensive, inclusive and timely debt restructuring. Gallagher presented the recent study at the event, providing an opportunity for participants to share considerations and feedback.
Altogether, the ACS marked a significant shift in the continent’s aim to take a unified and progressive stance on climate and international finance. Critically, on the heels of the Summit, the African Union was accepted as a permanent member of the G20.
Finance in Common Summit: Advancing Sustainable Finance?
The FiC Summit brought together the world’s largest gathering of development banks in Cartagena, Colombia, with a shared commitment to furthering the United Nations 2030 Sustainable Development Goals (SDGs) and the Paris Climate Agreement. The forum, established in 2020, is designed to achieve a deeper understanding of the goals formulated therein and find a coordinated path to act in accordance.
Worth mentioning is the focus on debt during various discussions. In the Final Communiqué, several debt-related solutions garnered attention. These encompass the Global Green Bond Initiative (GGBI), spearheaded by the European Commission, to structure green bond markets in emerging and developing economies. The Inter-American Development Bank’s Green Bond Transparency Platform also received acknowledgment, with an encouragement for countries beyond the Latin America and Caribbean region to consider similar initiatives.
Like its counterpart in Nairobi, the summit also referred to the Global Expert Review on Debt, Nature and Climate, whose establishment we discussed in a previous blog post. Moreover, FiCS members reached a consensus on establishing an Innovation Lab, which will concentrate on integrating contingent debt clauses linked to disasters, parametric contingent financing, credit lines and inventive risk transfer solutions aimed at aiding vulnerable communities.
However, the Final Communiqué does not sufficiently reflect that a fundamental change in the current financial architecture is needed to prevent debt crises in the future and resolve the one the Global South is increasingly experiencing. The summit represents a lost opportunity, not just to cease investments in fossil fuels but also to implement immediate and tangible measures necessary to confront the interconnected climate and debt crises.
The first days of September have proven that there is significant movement in the debate on the climate-debt nexus. While commitments from traditional donor countries and institutions have yet to meet the magnitude of the challenge at hand, the ACS proved that new self-confident forums not only bring an important perspective but also a new sense of urgency. Upcoming events like the 2023 IMF/World Bank Group Annual Meetings are the next opportunities for action.
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