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At a Press Conference on December 11, 2023 at the 28th Conference of Parties to the United Nations Framework Convention on Climate Change (COP 28), leaders from Kenya, Colombia and France launched the Global Expert Review on Debt, Nature and Climate.
A coalition of experts from countries across the world are going to independently review the relationship between sovereign debt and its impacts on hindering climate ambition. First proposed at the Summit for a New Global Financing Pact in Paris in June this year, the announcement signals movement on spotlighting the issue of debt distress in the context of climate change.
“We want experts to understand why debt is hindering climate action and (efforts towards) decarbonisation,” said Susana Muhamad, Minister of Environment and Sustainable Development, Colombia.
She added:
For developing countries the situation is critical, because many of our economies are highly indebted, especially after COVID-19. We require fiscal space capacity for climate action to start making the real commitments at COP28.
“We hope this review will give elements for global discussion, hope we have results next year to contribute to innovative financial mechanisms to help us manage the climate crisis,” the minister said.
The coalition comes as part of a slew of announcements at the climate change conference related to financial systems transformation for addressing climate change, starting with the UAE Leader’s Declaration on a Global Climate Finance Framework.
In the first week, an international taxation taskforce was launched by France with partners including Kenya, Barbados and Spain. Top multilateral development banks and international institutions announced a new global taskforce for scaling debt-for-nature swaps. At a side event, Multilateral Development Banks also released a common set of principles to track ‘nature-positive finance.’
Ali Mohamed, Special Envoy from the office of the President of Kenya for Climate Change underlined the urgency of bringing debt to the forefront of this conversation. “Unsustainable levels of sovereign debt and debt service plague many countries. They are left to choose between climate action and avoiding default.”
He highlighted that African nations are burdened with debt acquired during the pandemic. “They need to develop resilience but access to capital is hindering climate action. Out of 52 of the most indebted countries, 23 are in Africa.”
“The work of the task force we’re launching will take 9-12 months, inviting as many other partners to join us to look at who debt is inhibiting. At this juncture we are not giving solutions, we will wait for the independent expert review to analyse, study and tell us what’s possible,” Mohamed added.
The aim of the effort is to make structural economic transformation for low carbon economic growth, said Agnes Pannier-Runacher, Minister for the Energy Transition, France. She stated this needs to translate to concrete projects and financial incentives as part of means of implementation, especially for countries ridden with debt.
The key question, she added, is how to capture the positive impact of investing in climate initiatives; to monetize and capture that providing money to developing countries through the right investments will prove to be positive for the worldwide economic system.
As the final days of COP28 commence, Ethiopia is on the verge of joining Zambia and Ghana in the list of nations who have defaulted on sovereign debt. The coalition hopes to address the need to enhance the discourse on debt restructuring efforts, and move towards a global financial architecture that supports vulnerable countries in the face of rapidly increasing climate impacts.