At a recent climate finance focused event, Pakistan’s Minister for Climate Change, Sherry Rehman, called on international governments to place climate finance and losses at the heart of COP 27 talks next year, with catastrophe bonds one instrument seen as having a role.
Loss and damage has been a key sticking point in climate talks so far, with at this time no significant progress made, but growing calls for some type of financial solution to provide contingent capital that can be disbursed to those suffering climate related loss and damage.
Pakistan is currently the Chair of the Group of 77, an international organisation formed in 1964 and that now counts 134 member states.
At an event to discuss a climate roadmap for a technical assistance program named the Climate Finance Accelerator (CFA), Rehman noted that weather related losses are increasing and in her country of Pakistan casualties from the monsoon grew this year, needing a response.
This response needs to be better optimised, she explained, calling on climate financial solutions to help countries feeling the effects of climate change in their weather patterns.
She cited “unprecedented climate events” in Asia and “extreme temperatures” in Europe and the United States, saying there is currently a commitment gap between countries when it comes to how to finance climate losses.
Loss and damage is central to the agenda, Rehman said, as countries like Pakistan feel they are bearing the brunt of climate losses, while being much smaller emitters of greenhouse gases than larger economies of the world.
“Climate finance needs to level up the infrastructure, through catastrophe bonds, blue bonds, and other such workable initiatives,” Rehman is reported to have said.
“We need large-scale, fresh initiatives focusing on climate finance innovations. These should range from catastrophe bonds and climate risk insurance to nature performance bonds and other climate financing instruments that eventually scale it up to the entire country.
“Markets need to create instruments that are just and equitable, not just profitable for the rich. Markets must also wake up to the reality that many of their free operations leave countries with less resilience and more unsustainable debt. We need to design new and effective climate finance instruments,” she explained.
It’s encouraging that catastrophe bonds continue to feature in discussions related to climate loss and damage, as well as how to create a climate finance infrastructure that can tap private capital appetites to support mechanisms to protect those suffering from climate losses.
Rehman said that “equitable and just” climate financing solutions are needed to help protect nations, reimburse their losses, and fund future mitigation, adaptation, and resilience projects.
We’ve been writing about the role of instruments such as catastrophe bonds in climate loss and damage for almost a decade, but so far there hasn’t been any significant progress in integrating risk transfer into the provision of loss and damage financing.
While there’s a clear need for a reimbursement mechanism, for countries at the forefront of climate change related impacts and this has been the main focus of recent COP’s and other meetings, alongside this a broader financial framework, or toolkit, for providing contingent climate damage capacity to support recovery when climate disaster strikes is also critical.