6UK international leadership on climate change
Multilateral climate funds
The Green Climate Fund
138.The Green Climate Fund (GCF) is “the main dedicated multilateral vehicle for supporting the Paris Agreement and contributing to the $100bn climate finance goal”.246 The GCF was established in 2010 under the UN Framework Convention on Climate Change (UNFCCC), and is headquartered in the Republic of Korea. It is governed by a 24-member Board, with representatives from 12 developed and 12 developing countries, and operates on consensus-based decisions. It finances both mitigation and adaptation to climate change. The fund received $10.3bn in initial pledges, of which the UK contributed £720m.247 It is currently pursuing its first replenishment.
139.We received written submissions that welcomed the balanced governance structure of the GCF and its transparency,248 but some evidence drew attention to uncertainty around funding and the ability of the GCF to operate. Water Aid wrote, “The spirit of the Green Climate Fund is a positive step, but in the face of questions over continuing donor support and contributions, its purpose and future capability remains precarious”.249 In addition, disbursements have initially been slow250 and there have been reports of disagreements between the Board members representing developed and developing countries,251 although the recent meeting of the Board in February 2019 is reported to have run more smoothly.252
140.We heard that accessing climate finance through the GCF can be challenging for developing countries with low capacity for responding to climate change, as the “high environmental, social, governance and fiduciary standards” mean that the GCF only provides “late-stage” financing - finance that goes to institutions with a proven-track record.253 The Glasgow Caledonian University Climate Justice Centre agreed that “the current UNFCCC climate finance structure makes it difficult for developing countries to access finance, and discourages local-level involvement”. As a result, the projects that are being funded are predominantly “large-scale projects with little benefit to recipient countries”.254 The Climate Justice Centre argues that funds like the GCF should have better direct access mechanisms.255 IIED recommends that the UK should play a role in improving national and community level access to GCF funds from developing countries.
UK should use its position on Green Climate Fund (GCF) board to re-define the design principles of climate funds by reshaping the investment framework to ensure poorer countries, bottom-up national intermediaries and community-based projects have more access to GCF funds.256
141.The Government’s written evidence to the inquiry outlined how the UK has been seeking to improve the effectiveness of the GCF:
The UK is working hard, with others, to shape the GCF into a fully effective organisation. We are using our position on the Board to play a leading role in driving forward organisation-wide reforms and improvements. These include adopting better decision-making processes, improving the efficiency of its Board, ensuring a robust focus on results, targeting resources appropriately, and improving how the Fund engages with private sector partners.257
Indeed, the Government is now well-placed to influence these improvements, as the UK currently holds the position of co-chair of the GCF Board. Minister Perry told us that she was pleased with the Government’s efforts to improve the GCF:
One of the things I am really proud of is how we have really engaged with the challenges of, say, the governance of the Green Climate Fund, where, again, we are very much trying to steer that fund to make the right investment decisions.258
142.We heard that improvements at the GCF are being seen. Dr Angela Falconer, Associate Director of the Climate Policy Initiative, told us that efforts have been made “to set up an investment framework for the GCF that supports the most impactful projects, supporting country ownership as well as impact in terms of emission reductions and resilience”. There is still more that can be done, but “significant progress has been made already”.259
Climate Investment Funds
143.Established in 2008, the Climate Investment Funds (CIFs) are a set of World Bank managed trust funds implemented through five multilateral development banks and funded by a group of 14 donors. The UK is the largest donor to the CIFs, with contributions of over $2 billion.260 DFID’s Multilateral Development Review in 2016 rated the CIFs ‘good’ both for match with UK development objectives and organisational strength.261 According to DFID’s written evidence, the CIFs have built a portfolio of over 300 investments in 72 developing countries since 2008, delivering tangible outcomes such as contributing to over 3 gigawatts of new renewable energy capacity.262
144.We have received mixed evidence about the value of the CIFs. Christian Aid described the CIFs as having “varied success in delivering climate mitigation and adaptation funding”, and criticised in particular the spending on adaptation, which is significantly lower than the funding allocated to mitigation.263 In their written submission, ActionAid gave the CIFs as an example of a multilateral climate finance mechanism that does not meet “climate justice principles such as democratic governance, community participation and no economic conditionality”.264 In early 2019 the CIFs marked their 10 year anniversary in Morocco, which involved the launch of a report by the Overseas Development Institute (ODI) assessing the transformational impact of the CIFs. Overall, the report is positive in its assessment and recommends that “CIF programme implementation over the next period should build on the experience and expertise gained during the first 10 years of CIF”.265 Neil Bird, a senior research fellow from ODI who co-authored the report, told us that although there was initially some uncertainty over what the CIFs would achieve when they were established, recipient countries of the funds are now enthusiastic in their support:
One of the most vocal supporters of what has happened since [the CIFs were set up] was a representative from a small island development state in the Pacific, who saw that the investments made under the Climate Investment Funds had benefited the vulnerable people in his country.266
145.The CIFs contain a ‘sunset’ clause, whereby they are to be closed once a new climate finance mechanism under the UNFCCC, now the Green Climate Fund, becomes operational. There is a question around the point at which this sunset clause should be triggered. Christian Aid told us that the ‘sunset clause’ should be enacted, and that the UK should support the transfer of funding to “the more accountable GCF”.267 Neil Bird was of the view that the GCF is not yet at a point when it can deliver at the scale and speed required. He offered an analogy:
If the tide was rapidly coming in on a beach and I had two boats, one which I knew floated and would take care not only of me but of more vulnerable members of society, and another boat, which everyone recognises is the best design but they are still putting the keel together, I know which boat I would go into for this tide.268
He added that the sunset clause was important, but that he felt the right moment to trigger it hadn’t yet arrived: “I would just question whether taking that action now will hold up very significant work that is needed”.269 He stressed the importance of ensuring that both the GCF and the CIFs, continue to receive funding this year so that they can both continue their operations:
Both of those funds run out of money this year, 2019, without further funding support, so we are at a critical juncture. We have seen the evidence from the scientific community, the IPCC 1.5 degree report. Action is needed now.270
146.The UK Government is well placed to press for improvements to the Green Climate Fund. The Government should work with the GCF Board to improve efficiency in decision-making and enable better access to finance by lower capacity countries and organisations, so that finance channelled through the GCF can be truly transformational.
147.Transferring finance from the Climate Investment Funds to the Green Climate Fund is an important goal, considering the GCF’s balanced governance structure and its legitimacy under the UNFCCC. However, this transfer should not be made prematurely if the CIFs are delivering valuable outcomes that the GCF is not yet in a position to match. The Government should continue to treat the CIFs as an interim measure, supporting the CIFs to deliver transformative outcomes whilst actively working towards a point when all the CIFs funding can instead be channelled through the GCF.
Multilateral Development Banks
148.According to the Government’s written evidence, Multilateral Development Banks (MDBs) “have a cornerstone role, both in helping to shift financing and investments into ‘green’ investment and contributing to the $100bn Paris target”.271 The submission says that through market borrowing, each £1 that the UK puts in to MDBs delivers between £2 and £3 of spending in poorer countries and more than £7 of leveraged private sector investment.272
149.According to a joint report from seven MDBs, in 2017, multilateral development banks in total contributed $35.2 billion to climate finance (79% for mitigation, 21% for adaptation), which is up 28% from 2016. Collectively, they reported that they have committed almost US$194billion in climate finance since 2011 in developing and emerging economies.273
150.Whilst these levels of spending on climate finance seem positive, we also received evidence pointing to the multilateral banks’ ongoing investments in fossil fuels. E3G’s written evidence highlighted that:
while most of these banks are scaling up climate finance, several of these institutions are also investing substantial funds toward fossil fuel projects. Over 2015–16, some of these MDBs (AsDB, EIB, EBRD and World Bank) spent almost as much on fossil fuels as they did on energy-related climate finance.274
151.Christian Aid said that these ongoing investments in fossil fuels by the MDBs are undermining the achievements of the UK’s ICF.275 Several written submissions, including from Christian Aid, Tearfund, and WWF, argue that they UK should be using its influence with MDBs to hold them more accountable for these investments and to champion greater support for renewable energy.276 E3G suggested that the UK could maximise its influence by working with other donors and “forming a new coalition [ … ] of shareholder governments on the topic of MDB climate leadership”.277 They said that there is also room for the UK to do more to engage across all MDBs, including encouraging best practice sharing across the banks.278
152.In December 2017, at the One Planet Summit, the six largest MDBs released a joint statement in which they committed to align their financial flows with the goals of the Paris Agreement.279 The World Bank also announced that it would no longer finance upstream oil and gas after 2019, except in exceptional circumstances.280 At COP24 in December 2018, a group of nine MDBs announced a joint framework for aligning their activities with the goals of the Paris Agreement, in order to advance the commitment they made the previous year.281 According to the World Bank, a joint MDB working group is developing methods and tools for implementing the framework and the MDBs will report back at next year’s COP25 on their progress.282 Dr Helena Wright, representing E3G in oral evidence to the Committee said that whilst the framework is a positive step, it is currently a “series of high-level principles” and would benefit from greater detail and further defined approaches, “to enable it to be more robust and impactful and to drive transformation in line with best practices”.283
153.Multilateral Development Banks (MDBs) are making positive contributions in climate finance and have made welcome commitments on aligning their financial flows with the goals of the Paris Agreement, but these have not yet gone far enough. Whilst some banks have made certain, progressive commitments—such as the World Bank Group committing to end all finance for upstream oil and gas—others have not, and all banks have more work to do in greening their financial flows. The UK should use its influence with MDBs to champion more strongly a shift away from high-carbon investments and a scaling up of investments that are compatible with a 1.5°C world. The Government should work together and coordinate with other MDB shareholders to amplify pressure.
154.Collective action is needed, and so the MDB joint framework for alignment with the Paris Agreement is a welcome step. However, the framework is currently too high-level to be driving real change. The MDBs should set out how they will implement this framework in order to achieve alignment at pace. Again, the UK should employ the support of other shareholders and use collective influence to drive this forward.
UN Secretary-General’s 2019 Climate Action Summit
155.Both at international climate negotiations, and through its spending of international climate finance, the UK Government has demonstrated leadership on climate change in several respects. Evidence to the inquiry emphasised that the UK Government played an active role in negotiating and securing the 2015 Paris Agreement.284 We were told that UK’s commitment to supporting least developed countries, particularly through its commitment to spending 50% of finance on adaptation, and its provision of grant-based funding, is also significant.285 The NGO Forest Coalition praised the UK Government for its global advocacy on forests.286 E3G noted the leadership role that the UK played with Canada in launching the Powering Past Coal Alliance.287 It is clear from the evidence that in a number of respects the UK has been setting an example and playing a global leadership role in combating the causes and impacts of climate change.
156.However, over the course of our inquiry we also heard that there are several important issues that the international community is yet to fully grapple with, and on some of these issues, UK leadership has, so far, been lacking. In this final section of the report we will consider two of the areas where the UK Government has an opportunity to step up and make progress on vital conversations on challenging issues that require solutions. The Government has an opportunity to demonstrate this leadership: the UN Secretary-General is hosting a UN Climate Action Summit in September 2019, “to boost ambition and accelerate actions to implement the Paris Agreement on Climate Change”.288 The Secretary-General has asked the UK to lead on Climate Resilience at the Summit.
157.We asked Professor Dirk Messner, Director of the United Nations University Institute for Environment and Human Security, how he would like to see the UK take on the issue of ‘resilience’ at the Climate Action Summit. His answer suggested that the concept of resilience is broad and multifaceted, linking to governance structures, social structures, ecosystems, and traditional drivers of vulnerability:
The concept of resilience is trying to understand how institutions and governance might be linked to the concept of resilience, how the investments in people, health and education are linked to resilient societies, how investments in healthy ecosystems are part of the equation and how social cohesion needs to be strengthened. It is a concept of trying to understand the associated dimensions of resilient societies.289
He told us that in seeking to address this concept of resilience at the Climate Summit, the UK Government should firstly seek to bring forward examples of what works, and secondly, recognise that there are ongoing debates, and much more we need to understand about resilient societies. We hope that in adopting this approach, the UK will be able to address two pressing issues: loss and damage, and climate migration.
Loss and damage
158.Although there is no internationally agreed definition of loss and damage, the term usually refers to the impacts of climate change that cannot be avoided through mitigation or adaptation. The Bond Development and Environment Group define loss and damage in their written submission as, “The impacts of climate change that go beyond what it is possible to adapt to”.290 According to Warsaw International Mechanism for Loss and Damage (WIM), which was established under the UN Framework Convention on Climate Change (UNFCCC) in 2013, loss and damage can result from both extreme events (such as hurricanes, heat waves,) and slow onset events (such as desertification, sea level rise, ocean acidification).291 The WIM also divides loss into economic losses (such as agricultural production, tourism, infrastructure) and non-economic losses (such as life, health, cultural heritage, biodiversity).292
159.Independent consultant, Julie-Anne Richards, pointed to some examples of recent cases of loss and damage:
in 2017 when Hurricane Maria hit the island of Dominica, it caused in that one night loss and damage to the extent of 223% of their GDP—in one night. Another example is, if we look at Malawi and their 2015–16 drought, they suffered loss and damage of roughly $500 million. That is the cost of people being forced from their home, the cost of people not having enough food to eat and all of the social and economic costs that are rolled in with the idea of climate impacts going beyond what it is possible to adapt to.293
In April 2019, we took evidence on the UK’s humanitarian response to Cyclone Idai, and heard about the devastating impact that the cyclone has had across three countries, and the terrible economic and non-economic losses that it has left in its wake.294
160.We asked Dr Saleemul Huq, Director of the International Centre for Climate Change and Development in Bangladesh, what the expected impacts of loss and damage will be in the coming years:
The cost of damages from climate-induced impacts is going to be in the trillions of dollars over the next few decades. Those dollar values are going to be mainly in the developed countries. Rich countries are going to suffer the largest amount in dollar values. Poorer countries, like my country, Bangladesh, will suffer loss of life and loss of livelihoods; people will have to migrate. The dollar value associated with that may not be in the trillions—it may be in the millions—but the non-economic loss of livelihoods, lives, species and habitats [ … ] is very, very significant for those poor countries. As you said, island countries are being forced to move entirely. That is an absolutely brand-new phenomenon we have never faced before.295
161.Article 8 of the Paris Agreement is dedicated specifically to loss and damage. Christian Aid told us that, with the inclusion of Article 8, the Paris Agreement enshrined loss and damage as a separate ‘third pillar’ alongside mitigation and adaptation.296 However, loss and damage is not yet being treated as a separate funding stream by donors. Christian Aid stressed to us that loss and damage must be considered “separate and distinct” from adaptation so as to avoid finance for this already underfunded area being stretched and reallocated.297
162.Dr Huq explained that the issue of loss and damage is so politically sensitive, because “it immediately brings to mind the words ‘liability’ and ‘compensation’, which are taboo words in negotiations for many developed countries”.298 Dr Alison Doig presented a slightly different interpretation of why the UK Government was, in her view, “blocking any discussion on loss and damage”:
It is meant to have its own negotiating strand and its own financial strand but admitting that means more money, it means more effort and it means taking that seriously.299
In any case, both witnesses agreed that the UK Government has avoided conversation around loss and damage at climate negotiations. Dr Huq said:
The UK has a good long history with [the least developed countries] but it seems to stop at the loss and damage issue. It is alright for adaptation but when it comes to loss and damage, they are not willing to move beyond that particular red line.300
163.In terms of what the UK could do to begin to progress a conversation around loss and damage, Julie-Anne Richards told us that recognising some of the UK’s existing climate finance as finance for loss and damage would have a significant impact:
DFID already supports social protection schemes in, for example, countries where droughts are becoming more and more common. That could be seen as loss and damage finance. DFID could acknowledge that it is loss and damage finance and account for it separately to its adaptation finance. That would progress the argument significantly with zero additional funds, with just a small accounting change.301
Dr Huq agreed that establishing loss and damage as “a new category of support” could be a key to progress. Once that recognition is there, he said, “then there can be discussions with developing countries on how best to put together funding to address the issue of loss and damage. There are many different ideas floating around that we can discuss”.302
164.Bond’s Development and Environment Group went further, arguing that commitments towards loss and damage should be in addition to the UK’s 0.7% ODA commitments. They advocated for the ‘polluter-pays-principle’ and suggest that a ‘Climate Damages Tax’ on fossil fuel extraction could act as one mechanism for raising funds that go towards loss and damage.303
165.The Government Ministers chose not to respond to our questions on loss and damage in oral evidence, but, with our agreement, sent us a follow-up note outlining their approach. In the note, the Government told us that:
Much of our existing development and climate finance (including over £1.8 billion for adaptation since 2013) is already relevant to averting, minimizing and addressing loss and damage, as it is devoted to mitigation, adaptation, disaster risk reduction and disaster response.
It said that at the forthcoming UN Secretary-General’s Climate Change Summit, the UK would be seeking, with partners, “to drive a systemic change in the way governments, businesses, financial institutions and civil society think, act and take decisions on resilience”. That, they believe, “is the best way to avert and address the threat of loss and damage”.304
166.The devastation that Cyclone Idai caused across three countries has brought into sharp focus the terrible loss and damage that extreme weather events can leave in their wake. As global temperatures rise, loss and damage will also increase. It is imperative that the international community faces this issue head-on. We are pleased that the Government has indicated that loss and damage will be addressed as part of their work on resilience at the UN Secretary-General’s Climate Change Summit in September this year. This should not mean that the issue is subsumed into a wider conversation on resilience, which fails to discuss loss and damage directly. The Government cannot rely on co-benefits from other streams of work on resilience to address loss and damage. As part of its leadership on resilience at the Summit in September, the Government should explicitly open a conversation around loss and damage and how it can best be addressed, by developed and developing countries in partnership.
Climate change and migration
167.In March 2018, the World Bank published a report warning that the impacts of climate change could compel over 140 million people to move within their countries’ borders by 2050, in Sub-Saharan Africa, South Asia and Latin America.305 Evidence to the inquiry strongly suggested that migration and displacement as a result of climate change is set to be a growing issue. The Overseas Development Institute (ODI) told us that the levels and patterns of migration “are likely to change substantially as a result of global climate change”.306 Taking into account the work recently done by the Warsaw International Mechanism for Loss and Damage (WIM) on the issue of climate change, migration and displacement, ODI said:
In some instances, the additional stresses posed by climate change are facilitating migration. Extreme events, on the other hand, are triggering forced displacement; one has to move when one’s house is under floodwater. Such displacements have so far tended to be temporary, and most of the displaced stay within country. There may be instances in the future where sea level rise or extreme desertification render some areas uninhabitable, and people might be permanently displaced.307
Dr Saleemul Huq told us that, in Bangladesh, whilst it is currently difficult to attribute migration to climate change, “we can with a great deal of certainty ascribe climate migration to the future.”:
We know now that in low-lying coastal Bangladesh, the salinity increase is going to drive out people from those areas in the millions. We are talking about roughly 10 million over the next 10 to 20 years.308
In our one-off evidence session on the humanitarian response to Cyclone Idai in April, Ben Webster, Head of Emergencies at the British Red Cross, also identified displacement resulting from climate change as a problem that we can expect to grow.
In terms of displacement, we are seeing that climate change is a threat multiplier. We will continue to see growing displacement in these low-lying areas as average sea levels rise.309
168.However, ODI told us that anticipating future migration scenarios associated with climate change was difficult due to the “insufficient data on mobility within country and cross border, as well as tracking of drivers”.310 ActionAid’s submission agrees that there is insufficient data and calls for the UK Government to fund research “on the role of climate change in displacement and migration, with women-focused data”, in order to better understand the causal links between irregular migration an climate change.311
169.We were also told that, at the moment, aid delivery structures are not set up to address this issue. The Glasgow Caledonian University Climate Justice Centre, drawing on a research into climate migration in Zambia and Nigeria by Sennan Mattar and Enyinnaya Mbakwem, told us that “international policy frameworks, aid interventions, and national instruments do not adequately address the needs of people forced to move as a result of climate change”.312 It seems that this is partly the result of a lack of international framework for addressing migration and displacement as a result of climate change. The Climate Justice Centre said
there is ambiguity on what kind of role the international community should have in ensuring the rights of those displaced or forced to migrate due to climate change, especially in circumstances when individuals are within their own country.313
ActionAid’s written submission points out how a lack of common definition of climate migrants and climate refugees means that they are not recognised by UN legal frameworks for responding to refugees and migration.314
170.Dr Saleemul Huq told us that this issue is slowly being recognised by the international community as one which will need to be addressed, as demonstrated by the adoption of the WIM’s conclusions on climate migration and displacement at COP24.315 He told us that this acknowledgement of the potential impacts of climate change on migration is key for finding solutions.316
171.As the impacts of climate change worsen, migration and displacement as a result of climate change will rise. The international community should ensure that it is prepared to manage and address this inevitable change. We welcome the fact that climate migration and displacement is increasingly being recognised as an area that requires attention. The UK Government should play a role in supporting research and improving data on climate migration, as well as leading conversations around how aid delivery structures and international frameworks may need to adapt. The UN Secretary General’s upcoming Climate Summit provides an ideal opportunity for the UK to advance this conversation as part of its leadership on resilience.
246 Department for International Development; the Department for Business, Energy and Industrial Strategy; and the Department for Environment, Food & Rural Affairs (CCC0023)
247 Ibid.
250 https://www.nytimes.com/2018/09/09/world/asia/green-climate-fund-global-warming.html ‘Rich countries vowed billions for climate change. Poor countries are waiting’, Sept 2018
251 Devex, At the UN’s Green Climate Fund, the honeymoon is over, July 2018
252 Reuters, Green Climate Fund says ‘in great shape’ to push for new cash, February 2019
255 Ibid.
257 Department for International Development; the Department for Business, Energy and Industrial Strategy; and the Department for Environment, Food & Rural Affairs (CCC0023)
261 DFID (2016) Multilateral Development Review
262 Department for International Development; the Department for Business, Energy and Industrial Strategy; and the Department for Environment, Food & Rural Affairs (CCC0023)
265 Overseas Development Institute (ODI), (2019), Transformational change in the Climate Investment Funds: a synthesis of the evidence
272 Ibid.
274 E3G (CCC0035), referencing E3G (2018) Banking on Reform
278 Ibid.
279 IDFC-MDB Statement (2017) Together Major Development Finance Institutions Align Financial Flows with Paris Agreement
280 Devex, December 2017, World Bank to quit upstream oil and gas projects after 2019
281 The nine MDBs are: The African Development Bank Group, the Asian Development Bank, the Asian Infrastructure Investment Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank Group, the Islamic Development Bank, the New Development Bank, and the World Bank Group (World Bank,IFC,MIGA).
282 World Bank Group, December 2018, MDBs announced a joint framework for aligning their activities with the goals of the Paris Agreement.
291 https://unfccc.int/sites/default/files/resource/Online_guide_on_loss_and_damage-January_2019.pdf
292 https://unfccc.int/sites/default/files/resource/Online_guide_on_loss_and_damage-January_2019.pdf
297 Ibid.
304 See Department for International Development, Department for Business, Energy and Industrial Strategy & Department for Environment Food and Rural Affairs (CCC0037).
305 https://www.worldbank.org/en/news/press-release/2018/03/19/climate-change-could-force-over-140-million-to-migrate-within-countries-by-2050-world-bank-report
313 Ibid.
316 Ibid.
Published: 8 May 2018