In 2017, when Jibon Kumar Ray was 11 years old, a flood warning was raised, but the flood never came. When a flood did arrive two months later, in Kurigram, northern Bangladesh, where he lives, this time it was unannounced. ‘We had a small piece of land where we had a house and used to cultivate rice, but with the flood, everything went away,’ recalls Jibon. ‘The river caused huge damage … everything was under the water. It caused us huge trouble. We were under huge mental pressure. Our education was hampered as well. We could not go to school.’ His father, the sole breadwinner in the family, lost his livelihood and ability to earn. After losing their house, they were initially moved by the government to public land. But soon the land was reallocated for other purposes, and his family was moved on again. Their latest home is precarious. He expects they will be moved again at any moment. They survive on loan money, which allows them to live and eat, he says. ‘But afterwards, we face huge problems returning the loan instalments.’

Jibon’s life has ebbed and flowed with the impacts of climate change and the cycles of poverty it entrenches. Nearly 80% of Bangladesh is floodplain formed by three major rivers – the Ganges, Brahmaputra and Meghna – interlaced with 700 other rivers. Two-thirds of the country is less than 5 metres above sea level.² Climate change is causing further rises in sea levels and coastal erosion, and making a vulnerable land ever more vulnerable. Now 18 years old, Jibon is already a veteran of environmental catastrophe. A high-school student majoring in Business Management,Footnote ^a his hopes and aspirations are constantly at risk of being washed away. ‘We do not have money stored in the bank … we must take loans from relatives or NGOs or cooperative society. After that, we live off that money. And then slowly when we make money, we return it to them.’ His words have a familiar echo throughout CVF-V20 member countries.

Extrapolate Jibon’s story out to a national level, and the Bangladesh Ministry of Finance projects that the annual cost from loss of capital and reduced economic activity from sea-level rise could range between 1.49% and 3.02% of GDP by 2031.³ One-third of Bangladesh’s population is estimated to be at risk of displacement because of rising sea levels. ‘No one helps us,’ states Jibon, bluntly. The aid they require is fundamental – clean water, food, shelter during floods, and education. When these needs remain unmet, they are left to fend for themselves in times of crisis. Jibon’s message to the world, and to the UN, is a plea to provide the basic necessities to withstand the challenges of climate change. He hopes for a future where his family has the financial means to handle the recurring disasters that disrupt their lives. Because climate change is so much more than an ‘environmental’ problem. It is an economic one.

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Sara Jane Ahmed, Managing Director and V20 Finance Advisor of the CVF-V20 Secretariat, points out that the CVF-V20 were among the fastest-growing economies in the world prior to the pandemic.⁴ But while the COVID-19 lockdowns caused temporary turbulence, the longer-term impacts of climate change were already adding up. By 2020, the mounting debt in climate-vulnerable developing countries came to more than $2.3 trillion. This, in combination with a collapsing GDP, a 10–40% decline in remittances, and a large fiscal effort during the COVID-19 lockdown, left vulnerable developing countries even more vulnerable to future shocks.

‘Conventional financial theory already significantly underestimates risk and consequently underestimates the importance of investments and action to reduce climate vulnerability,’ wrote Ahmed in 2020. ‘Risk underestimation damages economies, in particular micro, small and medium enterprises (MSMEs), and the poor and vulnerable that rely on them.’⁵ She highlighted that financial protection for poor and vulnerable people remained low, with disaster risk reduction financing per capita at just 66 US cents between 2010 and 2018. By 2020, $48 billion had been committed by international institutions to help countries manage the fallout from the COVID-19 pandemic.Footnote ^b Of this, 96% came in loans, and 27% with concessional terms attached. Yet, at COP15 in Copenhagen in 2009, developed countries had committed to a collective goal of mobilising $100 billion per year by 2020 for climate action in developing countries.

With that deadline expiring against the backdrop of a pandemic, Ahmed wrote, ‘only 25% of bilateral financing and less than 50% of multilateral financing has targeted the most climate vulnerable countries with climate change adaptation funding … Prior to COVID-19 and compounding damages of climate change, the annual international funding gap for social services and social protection alone was $84 billion, with 87% of the total required in low income countries.’ Resources on the ground, she said, ‘are not correlating to where science and practice indicate vulnerability is located.’ According to work by the Caribbean Policy Development Centre (CPDC), the Caribbean region alone has estimated adaptation investment needs that total $100 billion, but has only received around $0.8 billion in climate funds,⁶ while funding dedicated to adaptation programmes only represents 7% of total climate finance.⁷

Speaking in late 2023, experts associated with the UN spoken to for this book, who preferred not to be named, said that the COP15 $100 billion annual climate finance pledge, which was finally achieved in 2022,Footnote ^c is still falling short of expectations, particularly in light of the debt burden faced by vulnerable countries. Central Asia in particular ‘traditionally receive[s] less official development assistance, financing can be a significant challenge … The political situation and geopolitical context, as well as the presence of natural resources, play a crucial role in determining the availability of financing. In places like Uzbekistan, mobilising financing is difficult, with international financial institutions often prioritising low-risk investments.’ International financial institutions have typically focused on disbursing funds rather than ensuring their effective use or social impact, he says. This approach has led to the funding of projects that do not result in the desired ‘socio-economic or environmental impact.’ In neighbouring Kyrgyzstan too, a Green Climate Fund Readiness report finds that ‘several key barriers and challenges need to be overcome’ in order to access climate finance, with limited ‘domestic capacities to identify suitable project ideas that are in line with climate policy objectives … investment criteria, and the compliance to due-diligence standards on fiduciary, gender, and environmental and social safeguards.’⁸ In turn, there are already questions in the press about how Kyrgyzstan will repay its already ‘swelling state debt – a significant proportion of which is owed to China’.⁹

Debt within V20 countries is substantial, with combined debts reaching $686 billion in 2020.¹⁰

As just one example of how climate catastrophe can quickly morph into an economic crisis, in June 2015, heavy rains in Ghana led to floods in the capital city, Accra. A gas station where people found shelter exploded, causing more than 150 casualties. In the immediate aftermath of the floods and the gas station disaster, the national currency (GH₵ cedi) fell by 1.4% against the dollar, its lowest level since 1994. This decline further aggravated the already weak GH₵ that had dropped by 22% against the dollar since the beginning of 2015. Ghana’s debt yieldFootnote ^d also increased from 8.25% to 8.89%. At a time when the government needed to borrow several hundreds of millions of dollars for reconstruction in the aftermath of the floods, its ability to access the international market was severely constrained by both the lowered local currency value and the increased debt yield. It has since been estimated that Ghana will need to spend a total of $473 million just to maintain and repair the cumulative damages to its road infrastructure caused by climate change from 2020 to 2100.¹¹ In some ways it echoes Jibon Kumar Ray’s story, played out on a national scale.

‘Many of our countries face limitations in accessing concessional financing,’ says Jevanic Henry in Saint Lucia, a CVF country. ‘It’s like being punished for making progress, and the cost of borrowing internationally can be extremely high. Most of our countries have high debt levels above the 60% debt-to-GDP ratio, which the IMF advises to stay below … This limits our ability to invest in resilience initiatives, so we focus on acquiring external grant funding. That’s how we got into the debt situation.’

It’s crucial to understand the historical context. The dichotomy is that developed countries are largely responsible for historical CO₂ emissions, yet the countries most affected by climate change are the least responsible for CO₂ emissions. Historic biases ingrained in the international economic system also charge higher interest and impose crippling austerity on developing countries – but ignore the very same or worse excess from ‘developed’ countries. Finance for developing (until very recently still openly called ‘Third World’) countries is categorised as ‘aid’ rather than ‘investment’ or ‘partnership’. ‘Our finance ministries are up to speed, they know what needs to be done,’ says Renato Redentor Constantino, International Policy Advisor to the CVF Secretary-General, and a veteran climate negotiator. ‘But when they face developed country officials, their counterparts say, “raise this with our aid department”. Our agenda is about development and partnership and investments. We don’t bring a begging bowl, yet we’re often forced to work with aid offices and development agencies. It’s a mismatch borne out of limited thinking, a mindset that thinks climate change is external to them, a poor people’s issue that needs charity.’ The CVF’s 70 countries and 1.75 billion people is ‘a big market,’ stresses Constantino. ‘China understands this, they’ve always approached this in a practical way. But unfortunately, for North America and Europe, it’s still far from their consciousness.’ Constantino highlights the frustration with the traditional climate negotiation process, especially regarding the ineffectiveness of the $100 billion annual climate pledge, which he describes as ‘a joke’. He contrasts this with China’s recent $110 billion green initiative, which effectively topped ‘in one stroke of a pen’ what developed countries had collectively been unable to do since 2009.

This also suggests a time lag in development mindsets. Again, ‘the Earth Summit hangover’ as Constantino calls it: ‘It started in ’92. The understanding then was that this is an “environmental” issue. But it’s not. At its core, it is fundamentally a development crisis. That’s why we continue to make a Herculean effort to ensure our finance and economic planning ministries take the lead, but it’s become difficult because often there’s no one on the other side of the table ready to roll up their sleeves to attack the problem as an investment challenge rather than as an aid response. Certainly, environment ministries will not have any idea what to do with SDRs,Footnote ^e the IMF, debt, cost of capital challenges’. Ghana’s recent severe fiscal and debt vulnerabilities which required IMF support, says Constantino, ‘were further exacerbated by significant external shocks which include climate change – cyclical and recurring extreme weather events, as well as slow-onset events that significantly impacted national budgets and ultimately the economy. As a result, the programme includes structural reform such as strengthening policies to adapt to and mitigate climate change, as well as, investments in resilient public infrastructure – particularly in agriculture, urban development, and coastal protection – which will mitigate the effects of climate stressors and enhance Ghana’s resilience to climate change.Footnote ^f If debt issues are not addressed, in approaches representing the opposite of austerity, then everyone’s going to sink.¹² That’s what we need governments of the North to really understand,’ asserts Constantino. ‘We have to make debt work for the climate, we have to invest our way out of the climate crisis.’

Vulnerable countries are, in essence, both climate vulnerable owing to the emissions caused by developed countries, and economically vulnerable owing to a financial system also created and largely run by developed countries. ‘Debt relief is essential to provide countries with fiscal space to invest in various areas, including climate adaptation,’ argues Sara Ahmed. ‘The current debt architecture doesn’t align with long-term climate investment needs. To address this, we need to focus on risk-sharing, concessional capital, and long-term financing, which will require guarantees and good investment plans from countries.’ The V20 has been pushing for debt relief as part of the Accra to Marrakech Agenda (A2M) as a climate adaptation mechanism. The V20’s A2M Agenda, was a strategic initiative aimed at reforming the global financial system to make it more responsive to the climate crisis and the development needs of the world’s most climate-vulnerable economies. It advanced bold, proactive proposals to address rising debt burdens in V20 countries, including the call for partial debt suspension, in order to ensure fiscal space for climate-resilient development. ‘However, it shouldn’t be a blanket relief,’ clarifies Ahmed. ‘We need to attract investors to countries and ensure countries have good plans for utilising the new funds to avoid repeating the cycle of debt relief without real change.’ Not all debt is ‘bad,’ Ahmed explains: ‘Good debt leads to productive outcomes or revenue streams. For example, investing in public infrastructure for adaptation is good debt. However, debt sustainability analysis often focuses on a short-term view, typically around 7 years, while the benefits of adaptation have a 20-year horizon. This mismatch in analytical tools prevents us from securing funds for adaptation. It’s essential to recognise that climate-related challenges are physical shocks … The current financial system isn’t equipped to respond effectively to these physical shocks. Debt relief, therefore, is a critical part of the solution.’

The V20’s total external public and publicly guaranteed debt amounts to $946.7 billion in 2022.¹³ Multilateral Development Banks (MDBs) comprised the largest share of external debt stocks in V20 countries at 39%, followed by the World Bank at 19%. In terms of bilateral (i.e., country-to-country) credit, Paris Club nationsFootnote ^g and China follow at 11% and 9% respectively. External debt servicing is expected to escalate to $122.1 billion in 2024. V20 members are expected to pay $904.7 billion in debt service over 2022–2030. Like debt stock, MDBs are the most significant credit class with payment obligations totalling 33% of the total. Bondholders come second with 25%, followed by Paris Club and China at 15% and 13%, respectively.¹⁴ As damaging as the pandemic was, then, the trajectory had already been set. In addition to increasing the availability of global finance and insurance, the V20 released a statement in 2021 calling for a global debt restructuring scheme that would link debt relief to climate and development goals (also known as ‘debt-for-climate swaps’).

Barbados has one of the higher national debts in the world, at 114.9% of GDP, over $7 billion in real terms.^{15, 16} Debt relief there ‘would greatly benefit the citizens,’ says Geneva Oliverie from Barbados. ‘Barbados is a water-stressed country with infrastructure issues. High taxes and cost of living here are partly due to [government] debt servicing limiting funds for essential services like water and education.’ While Barbados hasn’t faced as many direct landfall hurricanes in recent years as some neighbouring islands, ‘the indirect impacts of nearby hurricanes have been significant, like roof damage and power outages. When the island shuts down, even for a short time, it affects revenue and income, which is significant for a small, tourism-dependent economy. Coastal erosion is another issue affecting the beaches, crucial for tourism.’ Following Hurricane Elsa in 2021, the Government of Barbados borrowed funds for rebuilding, adding over half a billion to the debt coffers (see Figure 7.1).¹⁷ ‘The main economic driver has been tourism since the decline of the sugar industry,’ continues Oliverie’s colleague, Christon Herbert. ‘COVID significantly impacted tourism, leading to increased borrowing for social welfare … The tax burden to service this debt is substantial, affecting the cost of living, people can’t even afford to travel around the island – this could potentially lead to unrest.’

Figure 7.1

Government debt in the Caribbean and global developing economies. General government gross debt (% of GDP).

Figure 7.1 Long description

The horizontal axis represents years from 1980 to 2025 in increments of 5 years. The vertical axis represents numerical values ranging from 0 to 200 in increments of 50. Line 1: Emerging markets and developing economies. This line starts around 2000 at 45 percent, decreases slightly to 30 percent by 2008, then rises gradually to 65 percent by 2020. It shows a projected slight increase to 70 percent by 2025. Line 2: Caribbean. This line begins at 1999 around 48 percent, increases to 60 percent by 2003, decreases to 45 percent by 2008, then rises steadily to 75 percent by 2020. It projects a slight decrease to 50 percent by 2025. Line 3: Barbados. It starts around 1994 at about 50 percent, rises to 100 percent by 2010, then increases sharply to 150 percent by 2015. It peaks at 160 percent in 2017 before declining rapidly to 120 percent by 2019. The projection shows a continued decrease to 110 percent by 2025. The values are approximate.

(Created by author using IMF Data Mapper)18

International benchmarks suggest that debt service payments should not exceed 15% of government revenue. This benchmark is important since paying back high debt (euphemistically called ‘debt servicing’) forces governments to reduce critical social spending on health, education, and infrastructure, which, in turn, compromises prospects for sustainable growth – which in turn reduces incomes and tax take. The vicious spiral just keeps turning. Many Caribbean small island developing states (SIDS) are stuck in that loop, according to an article from the CPDC: ‘Interest payments on the existing debt stock in the six most highly indebted Caribbean SIDS currently consume between 10–25% of total revenues. Even the primary fiscal balance, which excludes interest payments, has deteriorated in almost every Caribbean SIDS. This has resulted in further debt accumulation because budgetary resources have not been sufficient to meet interest costs and cover recurrent expenditure.’ Most of the region’s unsustainable debt ‘can be linked to climate change and natural disasters … Since around 1995, there appears to be an upsurge in tropical storm activity in the North Atlantic basin, marked by a distinct increase in the number of intense hurricanes.’¹⁹ Much of the Caribbean’s debt, then, is due to climate change. Therefore, write the CPDC authors, ‘Without substantial debt relief, projections for the future debt sustainability of Caribbean SIDS are grim.’

While the world has waited for international climate funding, China has often stepped in to fill the void. Oliverie says that ‘China is now our largest bilateral lender’, offering easier access to funds. But some are concerned about the lack of transparency in these agreements. Often, such loans are tied to capital investment projects. There’s anxiety about ‘potentially selling off the national jewels’ in these borrowing arrangements, says Oliverie, ‘with China gaining stakes in national assets like airports. This raises concerns about the nature of these agreements and what we are compromising for support.’ In Kyrgyzstan too, China is the largest bilateral lender, holding 42.6% of the country’s overall sovereign debt.²⁰ Of Kyrgyzstan’s $5 billion foreign debt, $1.8 billion is reportedly owed to the Export-Import Bank of China for a series of infrastructure projects over the last decade under the Belt and Road Initiative (BRI), Chinese leader Xi Jinping’s signature foreign-policy project.²¹ ‘If we do not pay some of [the debt] on time, we will lose many of our properties,’ said Kyrgyz President Sadyr Japarov in February 2021.²²

China is the biggest creditor in the Maldives, too. Maldivian economist Mohamed Shahudh explains why: ‘Bilateral deals can be quicker. For example, loans from Chinese, Indian, and other regional banks usually have a quicker process because negotiations happen bilaterally and quickly. Maldives, in the past 10 years, has borrowed from both India and China for various development projects … The president of Maldives was recently in China, and it was announced that China would cooperate with the Government of Maldives for better loan terms. China is doing the same with other countries where it is a major creditor. China has now emerged as one of the biggest official creditors, surpassing institutions like the IMF, World Bank, and ADB in many developing countries.’

‘In general, the government has relied on two ways to finance,’ continues Shahudh. ‘One is borrowing from international markets, convenient for countries with good credit ratings to get cheaper financing. The other avenue is bilateral arrangements … if you can’t borrow on your own, you’re left with this option of borrowing bilaterally through Export–Import banksFootnote ^h of countries that are friendly to you. The other option is to borrow domestically, but that has consequences as it pulls away funding from local banking systems, affecting private sector investments. So, you’re really left with bilateral arrangements.’

At the Maldives Ministry of Finance, Fathimath Mohamed Didi, on the Debt Management Executive, sheds further light on this: ‘We have a substantial budget for shore protection and harbour expenditures, which is a significant burden on the government budget, leading to a large deficit. Our main responsibility is to bridge this financing gap, often through domestic sources like Treasury bills and other international means. This is costly and adds risk to our debt management.’ Her colleague Abdulla Hassan adds that the dying of coral reefs due to climate changeFootnote ⁱ also has ‘an economic impact, especially on tourism, a major activity in Maldives … tourism contributes about 66% of the GDP … Tourists are attracted to the live coral reefs, not dead ones.’ Not just that, but the destruction of coral reefs further contributes to increased island erosion, as the natural buffering of the waves that reefs provide is removed. ‘On one island, over 100 feet of shoreline has eroded in just five years,’ says Hassan. Fighting against this is very costly, leading to a debt burden of over 100% of GDP. ‘The Government of Maldives has to carry out [climate-resilience] infrastructure projects on many of its 1,200 islands,’ explains Hassan. ‘The costs are high, and without substantial international support, the government budget bears a significant burden. Our expenditure on climate adaptation projects has grown exponentially. Five years ago, we spent less than $10 million a year on such projects, but now it’s more than $100 million annually, not including [land] reclamation.’ By contrast, the Maldives is forced to spend an average of $300 million a year just on servicing foreign debt. ‘We spend about 22% of our revenue on debt servicing and 30% on wages and salaries,’ confirms Hassan. ‘Our capital expenditures, including climate change projects, add to our interest payments, increasing our debt service burden.’ Didi adds, ‘A large portion of our revenue is spent on debt servicing, and we must simultaneously fund climate mitigation projects. Our islands are highly climate-sensitive, and these projects are essential. However, we lack sufficient concessional financing for these projects.’ That is the climate-vulnerability bind in a nutshell.

True climate justice, in a form that most helps vulnerable countries, cannot happen without some form of debt relief. In practice, debt relief means that ‘everyone involved, including creditors, takes a financial hit,’ says Shahudh. ‘Countries will receive less than they owe, and this may discourage private sector investment in those countries. To address this, we need guarantees in place to encourage private sector participation. Debt relief isn’t a one-size-fits-all solution; it’s about reorienting debt burdens to prioritise areas like education, health, conservation, and climate adaptation. This helps countries allocate their resources more effectively.’ Crucially, unlike IMF grants of old, this must not come with austerity measures imposed which cause the furthering of poverty, reducing money for infrastructure and healthcare – both, as we have seen in this book, essential adaptation measures. ‘Austerity is typically a result of mismanagement in response to a financial shock,’ he says, ‘but the climate crisis is a physical shock that requires a different approach.’

A different approach would include more transactional, profit-orientated debt-for-climate swaps which benefit both lender and debtor. So-called ‘debt-for-climate swaps’ involve countries reducing their debt in exchange for achieving certain environmental or conservation outcomes, which are quantified and monetized. ‘The key point is that debt-for-climate swaps don’t necessarily reduce the overall debt burden but reorient it toward environmental and climate goals,’ says Ahmed. ‘They help countries redirect their resources from debt servicing toward critical areas like education, health, conservation, and climate adaptation. It’s a way to shift priorities without completely eliminating the debt.’ Vulnerable countries, especially those with valuable environmental assets like forests, mangroves, and biodiversity, can leverage these assets in debt-for-climate swaps. ‘It’s a win–win situation where countries can address their debt burdens while contributing to environmental and climate objectives,’ says Ahmed. This approach is also attractive to creditors, as it allows them to grow their ESG (environmental, social, governance) investments.

Such a reform in the international financial system, argues Jevanic Henry in Saint Lucia, ‘would give us more flexibility and ease of access to funding … debt-for-nature swaps, and other financing tools like climate bonds. Direct debt forgiveness is rare, but linking it to climate action is one angle. Saint Lucia, Barbados, and others are including natural disaster clauses in debt arrangements. For example, if a natural disaster occurs, we can pause payments for a period, allowing resources to be dedicated to rebuilding the economy. This is a practical step, but the larger landscape is to see how we can reform the sector to make access to funding easier and cheaper’. He describes it as ‘a double standard where developed countries don’t face consequences for financial missteps, while developing countries do. If we reach high debt levels, we face harsh IMF programmes with socio-economic implications. Developed countries with high debt levels face no such consequences.’ Yet doing nothing is not a feasible economic option either. The cost of climate adaptation inaction in Saint Lucia would be 12.1% of GDP by 2025, rising to 24.5% by 2050 and 49.1% by 2100.²³ The mounting debt burden accrued by both action or inaction is, says Henry, ‘a stranglehold of injustice.’

In Tonga, the Joint National Action Plan 2 on Climate Change and Disaster Risk Management (JNAP 2) 2018–2028 identifies ‘a lack of coherence to financial management of aid activity relating to climate resilience.’²⁴ Speaking in 2024, Ilaisaane Lieti Lolo, Deputy Chief Executive Officer at the Ministry of Finance, Tonga, elaborates: ‘To date, there is progress with Tonga’s adaptation to climate change, but more work still needs to be done to realize these climate actions.’ Much of the progress rests on the implementation of the JNAP 2, ‘However, to realize the JNAP 2 requires around $147 million to implement,’ explains Lolo. ‘The large infrastructural adaptation projects such as the coastal area protection, road maintenance, urbanisation and water supply, safe and resilient schools etc. are yet to be realised due to significant financing gaps. In 2019, it is estimated that about $671 million is needed for climate related projects while Tonga’s overall budget is roughly around US$200–300 million.’

Tonga, then, is similarly trapped in a stranglehold of injustice. ‘The Government has been accumulating a burden in its current debt portfolios,’ confirms Lolo, with new initiatives and priorities ‘toppled when disaster strikes, resulting in increased budget deficit’. Tonga experienced a category 5 cyclone in 2018, and another in 2020 coupled with the COVID-19 pandemic, followed by the Hunga Tonga–Hunga Ha’apai volcanic eruption and tsunami of 2022. Recovery from one disaster to the next has been ‘very challenging and constrained economic development,’ says Lolo. And yet post-disaster funding remains more available than adaptation funding to become more resilient to future, seemingly inevitable, shocks. ‘Much of the funding after climate-related disasters have been considered by the government for response and recovery,’ says Lolo. ‘The recovery and response contain elements of restoration of damages to its initial stage including climate protection towards unforeseen disasters … Such funding is mainly sourced from Development Partners … from multilateral finances including contingency facilities, insurance drawdowns and pledges from bilateral partners.’ Yet Tonga’s ongoing adaptation projects to slow-onset events ‘remain a [funding] concern’.

The ability to fund such projects is also hamstrung by credit ratings. Credit rating agencies have a huge impact on the accumulating debt, and again hark back to Colonial-era biases. ‘A credit rating is almost like your credit card check,’ explains Maldivian economist Mohamed Shahudh. ‘If you go to the bank and ask them to lend you money, they will look at your credit history as your ability to service a loan. It’s nothing different; credit ratings are performed on countries by credit rating agencies. And globally, there are three large credit rating agencies who do that … For example, “AAA” is the highest level awarded to countries like the United States. Depending on your credit rating, your cost of borrowing is determined. If you’re poorly rated, your borrowing cost will be very high.’ Many vulnerable countries are again trapped in a stranglehold of poor credit ratings. The Maldives is rated B-minus, one of the lowest grades. ‘We recently looked at the data,’ says Shahudh, ‘and with the exception of Singapore, which is still considered a SIDS country, there were 16 SIDS countries that have actually gone down in credit rating … This means their cost of borrowing is prohibitively expensive.’ Whereas countries with AAA ratings, already the world’s richest economies, can expect to pay 3–5% on loans, the yields on current Maldivian government bonds are in excess of 20%, explains Shahudh. In 2020, Maldives has 75 percent debt to GDP ratio which is classified as ‘high risk’ to debt distress by the IMF.²⁵ Like many other SIDS, ‘they are probably among the most heavily indebted countries on Earth … That effectively means most of them are locked out of international markets. They can’t borrow on their own and therefore have to rely on the international system and foreign aid to adapt and mitigate [climate change].’

Infrastructure upgrades within vulnerable countries are also expensive to build to climate-resilient standards. ‘Every project that is done in Maldives, whether you build a school or a bridge, still needs to be climate-proofed, which means it is not the same cost that you spend on a similar project in an advanced country where you don’t have those challenges,’ argues Shahudh. ‘So inherently, the cost of infrastructure in SIDS is expensive, and we are dealing with a situation where our cost of borrowing is just as prohibitive.’ Climate justice then needs to shine its light on credit rating agencies too, he suggests: ‘It’s like a death sentence on a country’s ability to borrow, especially for SIDS countries. And there are very few parties who can realistically influence the practice of credit rating agencies. They are based mostly in the US and UK, they are regulated completely differently to other entities, and all of them, the major three credit rating agencies, are privately held.’Footnote ^j An Informal Summary produced for the UN by Yuefen Li, an independent expert on foreign debt and human rights, puts it in even stronger terms: ‘ … the big three which control over 92% of the global market … suffer from birth defects, notably conflict of interests, biased decision-making, oligopoly, wrong business model and lack of transparency. Often, gradings are procyclical, which carry risks of triggering a self-fulfilling prophecy of debt crisis, affecting the livelihoods of the population.’ Credit rating agencies, she summarises, ‘have an outsized role in debt crises’.²⁶

Several proposals have been mooted for reforming credit rating agencies and their practices. One proposal is to suspend credit ratings during humanitarian crises and emergencies, as downgrades during such times can significantly hinder recovery efforts by increasing borrowing costs. This idea has received support from the UN Human Rights Office of the High Commissioner.²⁷ Another suggestion is for credit rating agencies to issue long-term ratings that remain stable, reflecting a country’s fundamental economic and demographic conditions, which are less affected by short-term fluctuations. Additionally, the UNDP has proposed the creation of more localized, region-specific credit rating agencies. These agencies would be closer to the markets they serve and better informed about local conditions, addressing potential biases of current global credit rating agencies.

In April 2022, Sri Lanka defaulted on its foreign debt. The whole region watched in horror as the Sri Lankan economy contracted by 7.8% in 2022, and income poverty was estimated to double between 2020 and 2022 to around 25% of the population.²⁸ The reality of such a default is similar to, but worse than, austerity measures. ‘What happened in Sri Lanka could be the case in Maldives,’ says Abdulla Hassan at the Finance Ministry. If that scenario were to unfold, ‘we would have to ration fuel and then ration electricity. Also, we might have to ration the food, because we might not be able to import as much as food. We might have to ration spending on clothes, on consumer goods.’ Such consequences, he points out, all mean ‘suffering for the general public’. Avoiding default, he says, is therefore the number one priority, and the government’s fiscal responsibility is closely watched. The UK, by contrast, over the same period experienced political turmoil with three prime ministers in just two years, a bungled budget that caused widespread market panic, and a huge spike in national mortgage rates and inflation, leading to a cost-of-living crisis. And yet, it still held its AA rating. Developing countries are given no such leeway.

*

Daniela Saade Ortega, climate advisor to the Ministry of Finance, Colombia, has recently returned from a week-long working group at the IMF. ‘Our President has been advocating for Special Drawing Rights (SDRs),’ she says. ‘The IMF’s position is that SDRs were already allocated during the pandemic and not fully utilised, suggesting that we should [just] use what was allocated in the past years.’ The IMF’s response was not ‘what our President wants, which is more allocation,’ she says. An SDR is allocated by the IMF to supplement the official reserves of a member country, effectively providing a country with liquidity. Close to $1 trillion of SDRs have been drawn since their creation in 1969. But around 70% of that came during the pandemic alone.²⁹ ‘Many SDRs go to large economies that don’t need them and remain unused,’ argues Ortega. Again, the rules for developing and middle-income countries seem to differ.Footnote ^k ‘The Resilience and Sustainability Trust,Footnote ^l for example, often takes the form of debt, with some interest charged and strict conditions. I believe in clear governance and accountability for the use of funds, but sometimes the conditions are overly strict.’ While the market and private sector are important, she says, ‘the government also has a significant role in transformation and change. We’re at a crossroads where governments need more leadership.’

Such leadership can be found in the Global Shield against Climate Risks (Global Shield), led by the G7 and V20. Over the past decade, climate change has intensified, with storms, droughts, and floods becoming more frequent and severe, disproportionately affecting vulnerable countries and communities. Despite efforts to adapt, residual risks persist, leading to ongoing losses and damages. Addressing the urgent needs of vulnerable populations requires faster and more efficient systems for providing immediate financial assistance after climate-related disasters. In response, the V20, in collaboration with the G7 presidency of Germany and other supporting nations, launched the Global Shield to enhance financial and social protection through pre-arranged and trigger-based funding and financing at COP27 in November 2022. The aim of the Global Shield is ‘to increase protection for vulnerable people and countries and contribute to effectively responding to loss and damage from climate change.’³⁰ It includes supporting vulnerable countries with informed risk prioritisation, inclusive governance, streamlined access to finance, and stimulating innovation.³¹ In its initial phase, the Global Shield started activities in eight pathfinder countries and one pathfinder region, namely Bangladesh, Costa Rica, Ghana, Malawi, Pakistan, the Philippines, Senegal, and the Pacific. In April 2024, the Global Shield Board endorsed additional Global Shield countries to access support, namely the Gambia, Madagascar, Peru, Rwanda, and Somalia. At the time of writing, the Global Shield has mobilized around €350 million.

One of the examples include the V20’s Loss and Damage Funding Program, which is funded through the CVF & V20 Joint Multi-Donor Fund Financing Vehicle of the Global Shield. It aims to plug the loss and damage finance access gap in four key areas, namely community infrastructure, private assets, coral reef regeneration and an adaptation component. The first phase of the V20 Loss and Damage Funding Program supported by the Open Society Foundations has been implemented by CARE International and completed in June 2024. The programme delivered over $565,000 for concrete loss and damage responses to vulnerable communities, while also enhancing their climate resilience for the future. Specifically, 40,468 individuals (18,664 women, 21,804 men), from 7,000 households, were supported in targeted communities affected by Cyclone Amphan (2020) in Sharankhola (Bangladesh), severe flooding (2022) in Garissa (Kenya) caused by El Niño in arid and semi-arid lands, and Tropical Cyclone Freddy (2023) in Chikwawa (Malawi).³² Perhaps if this had been in place when the family of Jibon Kumar Ray (whom we met at the opening of this chapter) was relocated, it might have helped him and his family transition to a protected new environment, rather than their current cycle of insecurity.

Animesh Kumar at UNDRR serves as a Coordination Hub Member for the Global Shield. While it is not directly part of the Loss and Damage Fund, ‘it is definitely a key mechanism to address loss and damage,’ explains Kumar. ‘It started with the InsuResilience Global Partnership developing the financial architecture to bring together different elements of financing.’ But it ‘isn’t just insurance,’ he says. ‘What the Global Shield is doing is pre-arranged financing. Insurance is an expensive risk management tool and may lead to moral hazards. If communities and countries know they are protected from losses, why not take risks? So, there’s a cycle we need to break and use pre-arranged financing to build confidence in taking risks rather than committing them.’ In this case, taking risks implies a calculated decision to receive potential rewards, but committing risks suggests ignorance towards the risks. For example, says Kumar, ‘One key means would be ensuring no time is lost between when an early warning is triggered and a disaster happens. The best use is in the case of drought, where there is a good lead time between the early warning and the actual impact. Action needs to be taken during this period. Scaling up livelihood programmes and social protection programmes to shield populations is essential.’ This model was used in Ethiopia through the Productive Safety Net Program (PSNP) and in Kenya through the Hunger Safety Net Program (HSNP), he says. ‘In the context of more sudden or fast onset disasters like cyclones and flash floods, pre-arranged financing can be automatically triggered as soon as an early warning is issued, addressing liquidity-related challenges.’

The PSNP in Ethiopia, launched in the early 2000s, signalled a shift in approach at the time. Developed as the largest safety net programme in Sub-Saharan Africa, its inception marked a transition from traditional emergency relief methods to a more sustainable, economic development focus. At its core, the PSNP is designed to address the chronic issue of food insecurity by ensuring a consistent food supply for the most vulnerable households, typically residing in Ethiopia’s drought-prone areas. Direct support involves food or cash transfers to households most in need, especially during times of scarcity. This ensures that the basic nutritional needs of the vulnerable population are met, preventing the deepening of poverty during difficult periods. PSNP also provides payments to members of the community for participation in labour-intensive climate adaptation projects, including community-based watershed development.³³

The PSNP concept has since ‘been replicated several times in different parts of the world,’ continues Kumar. ‘When I left Ethiopia in 2012, seven million people were benefiting from it. We added an innovation called the risk financing mechanism to the safety net programme. It had four key elements: an early warning system, early action finance, pre-planning, and institutional capacity development. The model was that once an early warning indicated an impending drought, we had an action plan ready to scale up the number of beneficiaries and cover more areas. This required additional money, which was set aside and not to be touched until the early warning triggered it. Theoretically, that was the model.’ In practice, politics can sometimes get in the way. But when correctly utilised, the model should work: ‘Whether it’s pre-arranged financing or insurance, it doesn’t work in isolation. It needs a vehicle for implementation, and social protection programmes have proven to be a good vehicle. Releasing a payout for insurance or pre-arranged financing is one thing, but having a ready-made channel for it to reach the communities is another.’ The PSNP achieved the Holy Grail of ‘social protection mechanisms and safety net programmes that provide a delivery channel to reach the most at-risk communities, quickly.’

It perhaps illustrates a depressing point that the Maldives, one of the most climate-vulnerable countries in the world, has yet to significantly access climate finance. ‘The Loss and Damage Fund could be helpful, but our access to climate financing, including this fund, is very limited,’ says Fathimath Mohamed Didi, of the Maldives Government’s Debt Management Executive, speaking in January 2024. ‘And even when available, they are not on favourable terms due to our high debt portfolio. We prefer grants over loans, but the financing available doesn’t meet the country’s needs. There are some small grants and concessional loans, but they’re not sufficient for Maldives.’ When asked if it’s surprising that climate financing options are still so limited for the Maldives, a decade and a half on from Mohamed Nasheed’s famous stunt as President where he convened an underwater cabinet meeting in scuba-diving gear to highlight the plight of SIDS,³⁴ Didi agrees. ‘There hasn’t been much change … we still have to go to the market for funds. Despite being under an ESG framework, investors will focus on returns and the country’s rating, so we won’t get financing on favourable terms.’ In reality, she says, ‘Despite hearing about many funds, accessing them is challenging.’

The Maldives was forced to issue a $500 million bond on the New York Stock Exchange in 2021 with an eye-wateringly high yield of 9.875%, following a severe GDP contraction in 2020. This was in part due to the need to repay bonds issued in 2017. The UNDP Maldives Economic Bulletin 2023 pointed out that while ‘Moody’s sovereign debt rating in 2017 had a stable outlook with B1 in 2017, Moody’s downgraded it to Caa1 … Comparing the Maldives with other Caa1 ranked countries illustrates the economic vulnerability.’Footnote ^m Such factors ‘put SIDS in situations where mounting costs of losses and damages lead to economic downturns that create climate investment traps or … cycles. Starting with the mere risk or the occurrence of climate hazards, those factors lead to losses and damages on public accounts. They divert public funding to address the negative climate impacts accordingly.’ With studies by the US Geological Survey and NASA predicting that 80% of the Maldives islands could be uninhabitable by 2050 because of sea-level rise, the implications are existential. In October 2023, the V20 adopted its A2M Agenda, stating that ‘Aligning the financial system to serve the most vulnerable is not only pivotal for those least responsible and most exposed to the climate crisis but also imperative for global shared prosperity and stability … It is time to make debt work for the most climate vulnerable economies, to overcome costly capital hurdles to investment, and to facilitate global carbon exchanges.’ The V20 immediately established a V20 Central Bank Governors Working Group to work on improving our understanding of macroeconomic impacts of climate change, liquidity options, and mobilising resources for climate action.³⁵

*

Florent Baarsch is the Founder of finres, a French start-up focused on data-driven climate resilience. During his doctoral studies he focused on the connection between climate-related disasters and macroeconomic indicators, primarily GDP. ‘My methods back then weren’t labelled “machine learning”, but they did closely resemble machine learning,’ explains Baarsch from his office in Paris. He’s only just moved in, and the office walls remain blank, white and echoey behind him. ‘After that, I worked at the World Bank for nearly three years, where my role involved assisting African governments in investments in adaptation and resilience.’ By examining causal chains and storylines, he could pinpoint the most strategic intervention points within the broader economic framework. ‘I evaluated the vulnerabilities and risks in various regions and identified effective measures to enhance farmers’ resilience to climate change,’ he says. But while he enjoyed his work, he found himself ‘torn because I couldn’t fully apply the scientific training I’d received. I believed that the field of investments needed more scientific input to accelerate decision-making.’ And so finres was born. It has grown into a new Paris office with circa 20 employees when we speak at the end of 2023. One of finres’s first major pieces of work was the economics chapter of The Monitor, for the CVF. Baarsch’s work modelling vulnerable countries’ economies under climate stress ‘revealed a complex interplay between GDP, inflation, and interest rates, ultimately affecting societal stability,’ he says. ‘While most people focus on GDP reduction, increasing inflation, or rising interest rates, our narrative highlighted the broader picture: societal stability itself is at risk.’

Interest rates for example are projected by finres in The Monitor to change by varying degrees across continents. For instance, in Asia, it’s estimated to negatively change by 68 basis points in a ‘below 2.0 °C’ scenario and 61 basis pointsFootnote ⁿ in a ‘no climate action’ scenario (for some national examples, see Figure 7.2.) In Europe, the change is projected to be 165 basis points in the below 2.0 °C scenario and 163 basis points in the no climate action scenario. By the end of the century (2081–2100), interest rates in Africa are projected to change by 65 basis points in a below 2.0 °C scenario and a substantial 303 basis points in a no climate action scenario. If anything, The Monitor’s predictions lean towards the cautiously conservative. ‘Scenarios predicted for the coming decades are approaching much faster than anticipated,’ warns Baarsch. ‘My perspective might sound somewhat pessimistic, but it’s based on the data and trends we’re seeing. We are entering a phase of climate change that is accelerating at a rate faster than previously expected.’ For example, in 2012–2021 compared with 1991–2000, people experienced 281 additional hours annually with a higher risk of heat stress during light outdoor physical activity.³⁷ The economic impact is unfolding in real time too, explains Baarsch. ‘We’ve already seen instances of this in recent history, such as the drought in the Horn of Africa leading to a substantial increase in crude oil prices. In simple terms, as climate-related disasters become more frequent and severe, they can disrupt economic stability … For instance, the price of food in France has surged by at least 40% over the past five to six years, surpassing overall inflation rates.’

Figure 7.2

GDP growth reductions in Asia, due to climate change. Effects of climate change on GDP, 2005–2030, with no policy action.

Figure 7.2 Long description

The horizontal axis represents deviation in G D P per capita growth rate in percentage, ranging from negative 2.5 to 0.0 in increments of 0.5. The vertical axis lists the countries. The values are as follows: Laos: negative 2.7 percent, Nepal: negative 1.9 percent, Philippines: negative 1.6 percent, Myanmar: negative 1.5 percent, Vietnam: negative 1.4 percent, India: negative 1.0 percent, Bangladesh: negative 0.6 percent, Cambodia: negative 0.6 percent and Sri Lanka: negative 0.6 percent. The values are approximate.

(Created by author, data taken from CVM3 Economics Data Explorer)36

France, however, is the world’s seventh largest economy – what happens when such trends play out within vulnerable economies? The Monitor found that Southern African countries are set to experience a 9.9% drop in GDP, with the sharpest drop occurring in the largest economy in the region, South Africa. In a 3.6 °C world, South Africa’s annual GDP per capita growth is reduced by 13.5% per year by the end of the century.³⁸ ‘Southern Africa’s story is primarily one of desertification,’ explains Baarsch. ‘According to the IPCC projections and our past work with the World Bank, we see hotspots of extreme heat and low precipitation occurring in the northern regions of South Africa, Zimbabwe, Angola, Gabon, Botswana, Namibia, Zambia, Mozambique, and more. These regions are experiencing increasing dryness, which translates into the data.’ Southeast Asia, too, could lose $28 trillion in present value over the next 50 years and reduce annual GDP by an average of 7.5% if it fails to act on climate change.

In response to these findings, Brent Cloete of Economic Research Southern Africa, one of many regional partners which supported The Monitor, writes:

Ultimately, says Baarsch, ‘we need to move beyond viewing climate change solely as an environmental issue and involve key government departments like finance, economics, and the prime minister’s office to shift budget allocations.’ Climate Prosperity Plans (CPPs) are, the CVF believe, the way to achieve this. The CPPs pioneered by Bangladesh, Sri Lanka, and Ghana are now spreading throughout the CVF membership. They are rapidly emerging as essential tools for vulnerable countries to navigate the challenges of climate change, attract funding, and achieve long-term climate resilience and prosperity. They address climate adaptation as an economic prosperity measure, not one of environmental hand-wringing or calling for development aid. CPPs provide the framework to fund the infrastructure upgrades necessary to adapt to a changing climate.

The CPPs agenda has been led by Sara Ahmed, who worked closely on the draft documents for Bangladesh and Sri Lanka. ‘The CPPs are like business plans ready for investment,’ explains Ahmed. ‘They provide a costed, detailed roadmap for achieving climate goals. They demonstrate that climate adaptation is not just a theoretical concept but a practical, cost-effective strategy for addressing climate challenges. They offer a clear pathway to achieving development goals, which is crucial for attracting investors and mobilising finance. And the CPPs show that vulnerable countries are ahead in planning for climate adaptation and resilience, showcasing real-world solutions that can inspire action globally.’ The CPPs help to ‘bridge the gap between climate goals and practical implementation, making it more likely for climate investments to succeed.’

It is investment – not development aid – that will ultimately enable both climate adaptation and economic resilience. As the Bangladesh CPP document states, it ‘shifts Bangladesh’s trajectory from one of vulnerability to resilience to prosperity. The Plan’s principal aims are to secure Bangladesh’s prosperity within a decade, launching an economic transformation … including by increasing gender responsiveness, strengthening the digital economy, enhancing financial protections, and expanding our green economic partnerships. This work aims to enable us to attain high upper middle-income status within a single decade.’ The Bangladesh CPP targets 30% renewable energy by 2030 and at least 40% by 2041, with grid resilience and modernisation. Coal plants will also be converted into green hydrogen plants. Overall, the investment opportunities in Bangladeshi energy, water, transport, supply chains, and value chains are projected to reach approximately $80 billion over the next decade – extremely attractive to international investors. Meanwhile Sri Lanka’s CPP represents an additional annual investment of $4.9 billion by 2030, or 3.7% of GDP (see Figure 7.3 for a more detailed breakdown).

Figure 7.3

Sri Lanka’s Climate Prosperity Plan (CPP) – investment breakdown.

Figure 7.3 Long description

The pie chart displays the breakdown of funding sources by percentage. The data points are as follows: government: 2.7 percent, domestic equity: 4 percent, domestic private loan: 3.8 percent, international equity: 13 percent, international private or bilateral loan: 33 percent, M D Bs: 30.2 percent, grants: 1.9 percent and guarantee: 11.5 percent.

(Government of Sri Lanka. Sri Lanka Climate Prosperity Plan. 2022)40

The market has already responded well to the CPPs, says Ahmed: ‘Private sector engagements have started, particularly around offshore wind [in Sri Lanka], involving companies like DJI in the US and Goldwind in China. We aim to initiate new deals at COP, focusing on the prosperity agenda. While progress is gradual, the pipeline is moving. The countries, however, are eager to see faster results, so we need to expand our team’s capacity for delivering more CPPs.’

The potential for CPPs to make vulnerable countries more climate-resilient and economically robust is remarkable. CPPs can support Nationally Determined Contributions (NDC) targets with a focus on driving new investments. CPP’s macromodel can also update the government’s NDC and Long-Term Low Greenhouse Gas Emission and Climate Resilient Development Strategy (LTS), ensuring these plans are more grounded in economic, social, and scientific realities. With a climate-adaptation focus, they position large infrastructure investments in vulnerable countries as attractive to international investors andmultinational construction firms. Given the challenges many countries face with debt repayments and the pressing need to secure funding for climate-related projects, such an injection of market-based capital is sorely needed. Governments can’t do this from their tax-base alone. Recent evidence confirms that the costs for global adaptation are 5 to 10 times higher than the current levels of finance flows to developing countries. If the risk of climate change is not mitigated, economic costs in developing countries would be between $15 and $411 billion a year by 2030.⁴¹ Aid alone will never be enough. Vulnerable countries need investment and partnership. We don’t need to tie already resource-sensitive countries up with even more planning, when what is needed is action. But the CPPs, Ahmed suggests, can simply combine aspects of existing climate reporting and infrastructure planning together into one investor-friendly package.

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Dina Zayed of the Climate Emergency Collaboration Group (CEGC) worked closely with the Egyptian COP presidency at COP27 in 2022. ‘They understood that the loss and damage agenda was the number one priority,’ she recalls. She describes her role there as ‘inside track diplomacy support’ including connecting the COP presidency with lawyers and advisors to help them ‘shape the text of the loss and damage outcome’. It was far from a done deal. ‘We saw in the last 48 hours stalemate and brinksmanship, especially the European position – it did not seem like it would go through … the European Union, developed countries, essentially tried to push for text that was not going to fly for most of the developed world … there was a real risk of a splinter [forming] … it took a huge amount of leadership from Pakistan at the time and from the Egyptian presidency to be able to hold the line.’ She is rightly proud of what was eventually achieved. An agreed Loss and Damage Fund ‘was a huge diplomatic triumph for Egypt … it felt impossible in Glasgow [COP26, just one year before]’.

But with the benefit of hindsight, and the war wounds from other COPs since, she says that while ‘there’s value in celebrating triumphs, we must not be seduced … The outcome felt like an early win, but in reality, it might not be as robust as needed. There are many loopholes, gaps, and unanswered questions. We are far from understanding how the funding will be disbursed, how equity will be addressed, or what the thresholds and tipping points will look like.’ Plus, as we know from as far back as COP15, ‘funding pledges are not the same as actual funding. The real work is just about to begin.’

For the Loss and Damage Fund to become an effective tool, she compares the experience to the Green Climate Fund (GCF), a fund for climate finance that was established within the framework of the UNFCCC with the objective to assist developing countries with climate adaptation and mitigation.

It took, she says, ‘over three years from pledge to disbursement – that indicates that we must deepen and strengthen our resolve on loss and damage rather than considering it a completed task.’ In particular, the need for reform is in ‘how you get access to these models,’ says Zayed. ‘A small fraction of the funding actually goes to communities. The GCF has committed around half or more of its portfolio to adaptation, but only a third of those projects approved are actually going to the world’s poorest and most vulnerable countries. Only about 7% of funding goes to these developing countries, highlighting big finance gaps. The GCF needs a reform process; it is an instrument that is working but requires further refinement.’

Take Egypt, for example, where Zayed is from. By early 2024, the country had accessed a total of $296.6 million in GCF funding, for four projects⁴² – on paper, this suggests a successful mobilisation of international climate adaptation finance. One of the larger projects addressed coastal flooding in the Nile Delta and improving the resilience of rural communities – a cause close to Zayed’s heart. A seven-year adaptation project in the Nile Delta was funded with a grant of $31.4 million – or $4.5 million a year – a drop in the ocean compared with what is needed to protect against the ocean itself. ‘Which means you’re making a lot of strategic trade-offs,’ comments Zayed. ‘The actual funding available, complemented by national budgets, which is the reality for most adaptation, loss, and damage funding, is insufficient. Countries are finding ways to further indebt their own systems and economies to pay for a problem they did not cause … rather than addressing socio-economic and political sources of vulnerability.’ In summary, she says, ‘Current climate finance is insufficient, inadequate, and unevenly distributed. We need a more serious conversation focusing on delivery, disbursement, and equity.’ It’s that serious conversation that we will focus on in our remaining chapters.

This insufficient, inadequate, and unevenly distributed finance system isn’t just harming vulnerable countries; it threatens to destabilise high-income countries, too. As former V20 Chair Mohammed Amin Adam, Finance Minister of Ghana, says, ‘In this critical moment, our commitment to sustainable development and climate resilience must be matched by an equally robust commitment to climate finance. The V20 calls upon the developing world to recognize that financial support is not aid – it is an investment in the global economy’s future.’