V20 & G7 launch financial initiative to fight climate change at COP27

The Vulnerable 20 Group of Finance Ministers (V20) of 58 climate vulnerable economies and the Group of Seven (G7) have officially launched the Global Shield against Climate Risks, an initiative for pre-arranged financial support designed to be quickly deployed in times of climate disasters at the 2022 United Nations Climate Change Conference (COP27) currently being held in Sharm El Sheikh, Egypt. Initial contributions include around €170 million from Germany and more than €40 million from other countries.

In addition, a broad coalition of countries, multilateral institutions, non-state, and private sector partners has underlined their full institutional commitment to Global Shield. The first recipients of Global Shield packages—called Pathfinder countries—include Bangladesh, Costa Rica, Fiji, Ghana, Pakistan, the Philippines, and Senegal, according to a press release by V20, G7, and the German ministry for economic cooperation and development.

The Vulnerable 20 Group of Finance Ministers (V20) of 58 climate vulnerable economies and the Group of Seven (G7) have officially launched the Global Shield against Climate Risks, an initiative for pre-arranged financial support designed to be quickly deployed in times of climate disasters at the COP27 currently being held in Sharm El Sheikh, Egypt.

Germany is providing some €170 million as seed contribution, of which €84 million are core funding to the Global Shield and €85.5 million for related climate risk finance instruments. Further pledges of core funding to the Global Shield include 35 million Danish kroner (about €4.7 million) from Denmark, €10 million from Ireland, $7 million from Canada, and €20 million from France. Further contributions by donors are expected to materialise soon, added the release.

In terms of implementation, the Global Shield will align behind vulnerable country strategies for closing protection gaps using a broad range of appropriate instruments. At the household and business level, these instruments comprise, for example, livelihood protection, social protection systems, livestock and crop insurance, property insurance, business interruption insurance, risk-sharing networks, and credit guarantees. At the level of (national and subnational) governments, humanitarian agencies, and NGOs, the Global Shield will support the integrated development of instruments used to ensure that money is available when needed (money in), and the processes to ensure that the money is spent on providing what affected individuals and communities need when they need it most (money out).

The Global Shield will start its implementation immediately after COP27. The V20 and G7 have decided that it will be steered by the Global Shield High-Level Consultative Group, which includes representatives of the V20, G7, G20, think tanks, civil society, multilateral organisations, and the private sector. A financing structure with three complementary funds forms the foundation of the Shield: the Global Shield Solutions Platform, which builds on InsuResilience Solutions Fund, the Global Shield Financing Facility at the World Bank, and the Climate Vulnerable Forum (CVF) & V20 Joint Multi-Donor Fund.

“As part of our Climate Prosperity Plan to reduce the 98 per cent financial protection sinkhole, the Global Shield will play a key role in resourcing financial and social protection packages to protect our economy, our enterprises, and our communities,” said Ghana finance minister Ken Ofori-Atta, V20 chair.

Recent V20 research found that 98 per cent of the nearly 1.5 billion people in V20 countries do not have financial protection—a massive sinkhole for these countries whose workforce is mainly employed by small and medium enterprises. According to this research, V20 countries have lost a total of $525 billion to climate impacts since 2000. As risks of losses and damages from climate change escalate further, the cost of capital and debt have risen to unsustainable levels, especially across climate vulnerable economies.

The Global Shield addresses current weaknesses in the financial protection structure in climate vulnerable economies via pre-arranged finance which disburses quickly and reliably before or just after disasters happen. It expands instruments of financial protection for governments, communities, businesses, and households, thus, lessening the impact of disasters, making vulnerable economies resilient, safeguarding sustainable development, and protecting lives and livelihoods.

Fibre2Fashion News Desk (NB)