COP26: From the blue zone – The role of private finance in building resilience


On the finance day of the COP26 climate change conference in Glasgow, former Bank of England Governor Mark Carney unveiled $ 130 trillion in commitments to reach Net Zero. This promise is made through the Glasgow Financial Alliance for Net Zero (GFANZ), a private sector alliance of insurers, banks and asset managers representing 40% of global financial assets. GFANZ signatories have committed (among others) to applying scientific guidelines to invest and finance in a way that will lead to net carbon emissions by 2050 at the latest, in accordance with the UN Race to Zero Criteria.

This is the first time that private finance has been addressed in the framework of international negotiations on climate change, which so far have mainly focused on public finances. In 2009, an alliance of developed countries pledged that $ 100 billion in public finances would be made available to the poorest nations by 2020. This goal has yet to be met, although last month the President of COP26, Alok Sharma, published Climate finance implementation plan: meet the US $ 100 billion target, confirming that the fund would be fully constituted, albeit three years later than originally planned. In this context, the extent of private sector engagement is encouraging.

It is clear that states cannot implement the transition to Net Zero and build resilience to the impacts of rising temperatures without assistance. To this end, the finance day also saw the event titled Closing the Protection Gap: How Disaster Finance Partnerships Can Protect More People on the Frontlines of the Climate Crisis held in the flag of the UK Presidency. Speakers criticized that humanitarian response to disasters has always been reactive and “after the fact”, despite the fact that 55% of natural disasters are predictable. Jamaican Minister Pearnel Charles Jr. pointed out that countries like Jamaica are suffering the disproportionate consequences of climate change – Jamaica is one of the lowest emitters but loses between 1 and 3% of GDP each year due to climate-related disasters. weather. In addition, due to the backward nature of disaster relief programs, states often experience significant delays in receiving funding; this makes recovery more difficult and means there is less capacity to build resilience to future climate-related weather events.

All speakers argued that private finance must, among other things, go to “before the fact” disaster preparedness systems. Minister Charles notably called for a resilience-building program whereby a fund disburses countries in the event of climate disasters, similar to parametric insurance, a product that we can provide through our smart contract consultancy Clyde Code.

Last week also saw the launch of a Partnership between Start the network and the Insurance Development Forum focusing on a humanitarian funding paradigm. The partnership is designed to help communities get ahead of growing climate risks through the provision of pre-approved funding. By helping to build resilience and implement climate-related disaster preparedness systems, a substantial part of this funding (Minister Charles argued it should be 50% of the sum) must go adaptation to climate change.

If managed well, private finance can play a very important role in helping states meet their NDCs and build resilience to extreme weather events that are increasing in frequency due to climate change.

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