Over the next decade the UK will work alongside the World Bank to provide billions of pounds of climate aid to help accommodate the global transition to net zero, as announced at COP28. The plans of this initiative are set to release investment from within the private sector in order to fund new innovative projects that will help the world to combat the effects and challenges climate change imposes.
The initiative, known as the Climate Investment Funds (CIF) Capital Market Mechanism, will launch next year. Due this new mechanism we should see bonds increase to $750 million each year as part of the UK’s climate finance. Over the next decade this finance should total roughly $7.5 billion.
There is also the potential for the climate aid to attract further finance of over $50 billion through co-financing. During COP28, the UK claimed that this extra financing will help emerging and developing countries to benefit from climate projects that will help them to mitigate the effects of climate change.
Treasury Minister Baroness Vere, the UK’s Treasury Minister stated during her COP28 speech that:
“As a world leader in green finance the UK has a responsibility to lead by example in
the climate transition – a responsibility to deliver on our international commitments and help in both greening the international financial system and supporting developing countries in their own transition.
Mobilising billions in climate finance alongside direct investment in – and partnerships with – emerging economies shows that we take this responsibility seriously, and that
we will take the long-term decisions necessary to keep 1.5 alive.”
The UK also hosted an event this year at COP28, during this time the world saw many of its biggest creditors offer Climate Resilient Debt Clauses, or CRDCs. UK Export Finance, UKEF, the UK’s export credit agency, has announced it will add CDRCs to its new and existing loan agreements it has with Senegal and Guyana. This offer is also being considered by ten other countries.
The UK’s Minister for Development and Africa, Andrew Mitchell and Barbados’s Prime Minister, Mia Mottley addressed those at COP28 and claimed that all creditors by 2025 should offer CRDCs. Currently, 73 nations are calling for action on this statement.
Andrew Mitchell stated that:
“Like many other African countries, Senegal is already suffering from the effects of
climate change. By including a climate resilient debt clause in our loan from
UK Export Finance, Senegal will be able to pause payments when a climate disaster
strikes, releasing much needed finance when we need it most to focus on resilience
and boosting our economy instead. We call on other creditors to offer climate resilient
debt clauses by the end of 2025.”
UK Export Finance have also made a stand at COP28 in order to bring export credit agencies together to launch the Net Zero Export Credit Agencies Alliance. This alliance will work towards banks and export credit agencies increasing their efforts for achieving net zero by 2050. The alliance is supported by the UN and will work with the Glasgow Financial Alliance for Net Zero (GFANZ).
The CEO of UKEF, Tim Reid stated that: