At the COP28 World Climate Action Summit, the UAE committed USD 200 million to help low-income and vulnerable countries fight climate change through the International Monetary Fund Resilience and Sustainability Trust (RST).

New Delhi (ABC Live): December 4, 2023, was organized as COP28 Finance Day in Dubai, wherein significant progress on international financial architecture reform to support low-income and vulnerable countries in fighting climate change was reported.

It is pertinent to mention that The Convention, the Kyoto Protocol, and the Paris Agreement call for financial assistance from Parties with more financial resources to those that are less endowed and more vulnerable. 

At COP 16 in 2010, the Parties decided to establish the Standing Committee on Finance (SCF) to assist the COP in exercising its functions concerning the financial mechanism of the Convention.

The ABC Research team working on COP28 reports that on COP28 Finance Day following reports were released and progress on Climate finance was reported.

Report on the doubling of adaptation finance

Report on definitions of climate finance

Work relating to Article 2.1(c) of the Paris Agreement

SCF Forum on Finance for Financing Just Transitions

Part from the above Major international financial institutions and countries made new commitments to offer climate-resilient debt clauses (CRDCs) in their lending. These clauses allow debt service to be paused to provide breathing space when countries are hit by climate catastrophes.

The UK announced the first-ever climate-resilient debt clause to Senegal, the first in Africa.

The IDB announced it had already offered $1.2 billion of loans covered through CRDCs.

The World Bank announced it will start offering CRDCs in existing loans, which will pause debt as well as interest for two years in the event of a natural disaster, the World Bank has committed to covering all transaction costs.

AfDB, EBRD, and the French Development Agency also announced plans to integrate these clauses in sovereign loan agreements. 

Japan announced a commitment to support the innovative facility developed by the AfDB and IDB to leverage Special Drawing Rights (SDRs) for climate and development.

France announced its commitment to support this facility through a guarantee and Spain and the UK indicated their willingness to further explore this solution.

The African Development Bank (AfDB) and the Inter-American Development Bank (IDB) have developed a hybrid capital-based mechanism to channel unused SDRs through MDBs. Using this model, wealthy countries lend their SDRs to MDBs, who can use them to issue bonds, multiplying the available capital.

This marks significant progress in reforming the global climate finance architecture by making climate finance available, accessible, and affordable. This has been the central vision of the COP28 UAE Declaration on a Global Climate Finance Framework launched at the World Climate Action Summit at the beginning of COP28.

These innovative financial instruments announced at COP28 can help provide countries with fiscal space to invest in climate resilience and recovery. These instruments are critical in the context of rising debts as well as a need to address loss and damage. The Declaration is endorsed by India, France, Barbados, Kenya, Ghana, Germany, UK, USA, Senegal, and Colombia. It lays out defining principles for a climate finance architecture that delivers for all.

At the COP28 World Climate Action Summit, the UAE committed USD 200 million to help low-income and vulnerable countries fight climate change through the International Monetary Fund Resilience and Sustainability Trust (RST).

Also, Read

Explained: The Climate Technologies Progress in 2022

Explained: Why Global Stocktake is Crucial for Climate Action?