The world’s publicly financed development banks have pledged to tie together their efforts to rescue the global economy from the Covid-19 crisis and the climate emergency, using their financial muscle to assist a green recovery for poor countries.
But the banks stopped short of pledging an end to fossil fuel finance, and did not set out firm targets for how much funding they would devote to a green recovery in a declaration signed on Thursday by 450 development banks worldwide.
Poverty and climate campaigners said publicly funded banks and rich country governments needed to do much more to address the shortfall in finance to poor countries to help them reduce greenhouse gas emissions and cope with the ravages of climate breakdown.
A report by the OECD group found that rich countries provided about $79bn in climate finance in 2018, an increase of about 11% on the previous year. However, the annual growth rate has halved: in 2016 climate finance was $59bn, which grew by 22% to $71bn in 2017.
The total is also still well short of the target of $100bn a year of climate finance for developing countries from 2020, agreed under the UN more than a decade ago.
The $100bn pledge is one of the cornerstones of the UN climate talks, as poor countries have agreed to curb their greenhouse gas emissions in return for receiving such help.
The OECD also found that climate finance from private-sector sources was failing to grow at the levels needed to reach the $100bn target.
Developing countries received, in 2018, about $14.6bn in private-sector investment in climate-related activities, from green technology to increasing resilience to storms and floods. This figure was scarcely changed from the previous year, though was an increase of about $4.5bn from 2016. The average annual increase from 2016-2018 was $2.2bn.
There are also wide disparities in how the investment is distributed. According to the report, only about 14% of climate finance is going to the world’s least developed countries, and only about 2% is going to the “small island developing states”, which are in danger of inundation from storms and sea level rises.
Tracy Carty, senior policy adviser at Oxfam, said: “This is particularly unjust [as these countries] have done the least to cause the climate crisis but are being hit hardest. Climate finance is a lifeline for communities facing record heatwaves, terrifying storms and devastating floods.”
She also said that a large proportion of the publicly funded finance to poor countries came in the form of loans instead of grants. “Wealthy countries should stop inflating their [climate finance] figures with loans that will have to be repaid, and start increasing grants, especially for the most vulnerable countries to use for adaptation.”
The World Bank told the Guardian that definitions of climate finance were becoming problematic, as global investment had changed dramatically since 2009, when the 2020 finance goal was put in place.
Over the past 10 years the cost of renewable energy has plummeted, and in many parts of the world it is now cheaper than fossil fuel power. That has spurred record levels of investment in clean growth, which is not always captured in conventional measures of climate finance.
“A lot of how countries invest now is just considered as development, not climate-change investment,” a World Bank official said. “The discussion is very blurred about what is climate finance and what is not.”
However, campaigners said that too little assistance was going to help poor nations adapt to the impacts of climate breakdown, which rarely attracted private investors.
Jonathan Farr, senior policy analyst at the charity WaterAid, pointed out that water in particular was a crucial issue, as the impacts of extreme weather were felt in droughts, floods and other threats to water supplies.
He said: “We are calling on public development banks to support a package of essential public services, including ensuring access to water, sanitation and hygiene services. This will enable developing countries to be so much more resilient to all sorts of crises, both now and in the future.
“We must support the three billion people who are facing down a pandemic without access to the water and soap they need to wash their hands, and the two billion who don’t have access to safely managed drinking water and are under threat from the droughts, floods and extreme weather caused by climate change.”
Rémy Rioux, chief executive of the French Development Agency, called the pledge of public development banks to increase their focus on the climate emergency and UN sustainable development goals, a positive move. “This is a very significant part of the recovery [from Covid-19], these are concrete steps. It’s very important that this direction has been set.”
The banks’ declaration, which also includes commitments to biodiversity, gender equality and human rights, was made at the Finance in Common conference, organised by the French government in support of the fifth anniversary of the Paris climate agreement this December. It was held online at a time that had been scheduled for Cop26, the UN climate summit, now delayed to next November.
Odile Renaud-Basso, president of the European Bank for Reconstruction and Development, said: “The Covid-19 crisis has demonstrated that only joint action allows us to address the most urgent global challenges effectively and efficiently. In overcoming the crisis, our goal must be to build economies that are sustainable, resilient and inclusive.”
Marcos Neto, director of the finance sector hub at the UN Development Programme, said the pledge marked an important step by ensuring that the banks would align their lending and resources with the goals of the 2015 Paris climate agreement, and that it was now time for the governments that funded the banks to change their mandates – which could require legislation – to ensure their lending practices led to lower emissions.
“Should this have happened five years ago? Probably yes, but better late than never,” Neto said. “Now I hope there will be a much faster transition.”