After a year of heated deliberations, the loss and damage fund is finally in full force: In a big scoop for developing countries who disproportionately bear the consequences of climate change, some 200 countries have finally signed off on operationalizing the long-awaited loss and damage fund established a year ago at COP27, according to statement released on Thursday. The fund is set up to finance adaptation and mitigation efforts in climate vulnerable countries facing hurricanes, floods, droughts, and rising sea levels.

The UAE came in strong, and others (slowly) follow: The fund’s launch — which was announced at the COP28 opening plenary — came in parallel to the UAE pledging to contribute USD 100 mn into the fund, the statement said, despite some countries pushing for developed countries to shoulder the responsibility given its historical role in emission production. Germany, the UK, Japan, and the US also made initial contributions, standing at USD 100 mn, GBP 40 (c. USD 51 mn), USD 10 mn, and USD 17.5 mn, the statement disclosed. Since the fund’s launch on Thursday, Norway said it is putting in USD 25 mn, Spain EUR 20 mn (USD 21.78 mn), Portugal EUR 5 mn (c. USD 5.44 mn), and Canada USD 16 mn.

We’re still nowhere near enough the demanded funds: The pledges made so far are only a negligible fraction of the USD 100 bn that a group of developed countries have identified as the minimum annual needs by 2030. One study estimated that the economic cost of loss and damage to be USD 400 bn a year by 2030, while another predicts a cost of USD 290 and 580 bn a year by 2030.

Mia Mottley calls for taxing polluting industries as a source for the fund: “When you take USD 200 bn from oil and gas, USD 70 bn from international shipping, another USD 40-50bn from international air travelers and a financial transaction tax, we have a dedicated source of funds, not just for loss and damage, but to build resilience,” Barbados Prime Minister and climate champion Mia Mottley said in reference to a global movement calling for the taxation of fossil fuel profits as an alternative source of green financing.

Next steps: The World Bank, the fund’s interim host, could start doling out funds in three months, Bloomberg said on Friday. Meanwhile, World Bank head Ajay Banga told the Financial Times that the bank will not hand out any financing before “a raft of technical analysis” is completed.

A USD 30 bn Emirati climate venture:The UAE is launching a USD 30 bn “catalytic climate vehicle” — dubbed Alterra — to improve access to climate funding for the Global South, according to a statement released on Friday. The venture — backed by Lunate Capital — will have the USD 25 bn Alterra Acceleration program to direct institutional capital towards climate investments, as well as the USD 5 bn Alterra Transformation program to provide risk mitigation capital and incentivize investment flows into the Global South. The venture aims to mobilize USD 250 bn in green investments by 2030.

The initial commitment: Alterra — along with BlackRock, Brookfield, and TPG — have committed USD 6.5 bn to climate-dedicated funds, some of which are earmarked for 6 GW worth of renewables in India, 1.2 GW of which will start operation in 2025, the statement said.

The World Bank increases climate finance target to USD 40 bn by 2025: The World Bank has set a target to increase its climate financing capacity to USD 40 bn by 2025 — around USD 9 bn more than what was last recorded by the bank, according to a statement released on Friday. The new target would increase the bank’s climate-focused financing by 10% reaching 45% of the bank’s total lending volume for FY2024/2025. The World Bank set a target back in 2021 to extend 35% of its overall lending capacity toward climate funding within 5 years.

IN OTHER WORLD BANK NEWS:

The lender wants to scale climate finance through securitization: The World Bank is working with 15 finance firms to lower the risk of investing in climate projects in emerging economies and attract private capital. The lender’s Private Sector Investment Lab is working on a model of “originate-to-distribute” to reel in big investors for climate projects. (Bloomberg)

Carbon credits could net USD 2.5 bn for 15 countries by 2028: By preserving their forests,15 countries including Ghana, Indonesia, and Vietnam, have potential to generate as much as 24 mn of the World Bank’s carbon credits by next year before increasing the volume to 126 mn by 2028. If successful, this could add USD 2.5 bn to their combined GDPs. (Statement)

More climate financing courtesy of the IFC:The IFC and several major charity organizations launched the Allied Climate Partners (ACP) which aims to raise USD 11 bn for green projects in developing countries, according to a statement released on Friday. The Three Cairns Group and the Bezos Earth Fund plan to seed the fund with USD 235 mn and the IFC will contribute another USD 590 mn. The group will use an initial USD 825 mn to attract private funding. ACP, IFC, the Monetary Authority of Singapore, and Temasek will also establish a green investments partnership to address climate finance gaps and increase the bankability of green and sustainable projects in Asia.

TheUS will pour USD 3 bn into Green Climate Fund: The US has pledged to allocate USD 3 bn to the Green Climate Fund, aimed at supporting developing countries in achieving their carbon reduction and adaptation targets, Bloomberg reports, citing statements made by Vice President Kamala Harris said on Saturday. The latest USD 3 bn contribution from the US comes after USD 9.3 bn has been pledged by the UK, France, Germany, and Japan, among other countries, to fund climate projects in countries affected by climate change between 2024 and 2027. With the new commitment, the Green Climate Fund has been replenished with USD 12.3 bn in total, COP28 president Sultan Al Jaber said.

Still not enough: Even with the current replenished Green Climate Fund, the pledged sum represents a small portion of the USD 340 bn of climate finance required by 2030. The adaptation finance needs announced by the UN are to help developing countries adapt to the warming climate and support them in implementing adaptation and mitigation policies.

OTHER STORIES TO KEEP AN EYE ON-

EU offers Morocco EUR 50 mn for its green transition: Morocco signed a joint statement with the European Union on Saturday agreeing to receive EUR 50 mn in financing to help expand the kingdom’s green energy and carbon removal programs. The agreement will activate the terms of the green partnership signed by Morocco and the EU last year. (Maghreb Arabe Press)

Investcorp launches climate investment platform: Mubadala-backed Investcorp launched on Friday a USD 750 mn climate-focused investment platform focused on developing emission-reducing innovative products and tech. The asset manager plans to make 10-15 investments in the next 4-5 years, with each funding round ranging between USD 50-75 mn. (The National)

Egypt to debut voluntary carbon market at COP28: In preparation for launching its first voluntary carbon market during COP, Egypt has identified 16 sectors — including renewable energy, waste management, and carbon capture — in which it aims to attract investments in carbon trading. (Sky News)

DIFC boosts sustainable funding: The Dubai International Financial Centre (DIFC) rolled out its Sustainable Finance Catalyst, aimed to ramp up sustainable funding raised from Dubai to USD 100 bn by 2030. The catalyst is set to include the launch of the first AI-powered sustainability knowledge hub aimed at providing businesses with expedient and cost-efficient sustainable financing and investment data. (Statement)

CIBAFI to tackle climate crisis with Islamic sustainability: The General Council for Islamic Banks and Financial Institutions (CIBAFI), the Islamic Financial Services Board and the Accounting and Auditing Organization for Islamic Financial Institutions have introduced a roadmap to amplify the role of Islamic financial services in advancing sustainability and confronting worldwide climate-related challenges. (Statement)

Tags: