World Bank leader says climate loss and damage fund is a ‘beginning’

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World Bank president Ajay Banga said the hundreds of millions of dollars committed to a fund to help poor countries with climate loss and damage would not be spent on any projects before a raft of technical analysis.

Speaking at an FT Live event at COP28 in Dubai, Banga said the fact that $420mn had “already showed up” on the first day of the summit was “a good sign”. The next phase would require much more assessment, with the World Bank playing a trustee role rather than allocating the capital itself.

“That’s going to be the beginning,” he said. “Otherwise, $420mn is not going to take us very far in a loss and damage situation. So it’s really about getting the numbers established.”

It could be “some time next year” before “you will start seeing money actually put out to help countries on the ground”, Banga said.

Five countries plus the EU pledged the seed money to the historic new loss and damage fund on the first day of the UN climate summit, marking an early success for negotiators. In addition, France and Italy each pledged €100mn ($109mn) on Friday, while Canada set aside $16mn — taking the tally to about $655mn by the weekend.

Banga, the former Mastercard chief executive appointed by US President Joe Biden, also announced the World Bank would boost the share of total annual climate finance to 45 per cent by 2025, up from its present goal of 35 per cent.

The World Bank confirmed it would also expand “pause clauses” on outstanding debt, to allow poor countries hit by disasters to suspend repayments. In June, it said it would embed the clauses into new loans.

The focus on finance for vulnerable countries echoed across the speeches by some 145 world leaders gathered for the opening of COP28.

In his opening address, the UK’s King Charles said that “public finance alone will never be sufficient” to address the huge challenge the world faced in shifting to greener energy and adapting to global warming.

Speaking during the leaders summit, Sultan al-Jaber, president of COP28, also announced a new framework for climate finance, backed by the UAE, the US, Germany, Kenya and Barbados and six other countries.

The framework builds on existing efforts such as the Bridgetown Initiative, which pushes for reform of the World Bank and other multilateral development banks, and the so-called Nairobi Declaration by African heads of state this year, which called for a carbon tax.

Jaber also launched the Global Climate Finance Centre, a private sector-focused think-tank, saying it would drive “fit-for-purpose financial policies and project pipelines to unlock funds at unprecedented scale”. 

This comes as the UAE aims to position itself as a centre for global climate finance. Since taking on the COP28 host duties a year ago, the country has been under pressure to use its vast financial resources amassed as one of the world’s biggest oil and gas producers to help deal with climate change.

The UAE also confirmed it was planning a $30bn climate-focused fund, as first reported by the Financial Times. Named Altérra, it would be the largest private sector climate fund in the world, said the UAE, and would aim to mobilise $250bn of private sector investment by 2030.

Separately, the UAE said it would commit another $200mn of so-called special drawing rights, a reserve asset, to the IMF to support climate resilience in developing countries.

Additional reporting by Alice Hancock in Brussels