This month I had the opportunity to spend some time at COP28 in Dubai. Each year, this annual climate conference grows in importance as we collectively grapple with the challenges posed by the climate crisis – challenges that are becoming more complex and widely felt with each passing year, if not season.
This was my first time attending the climate COP (I had attended COP15, with its focus on nature and biodiversity last year in Montreal), and I wanted to share some takeaways.
Solving the Puzzle…
When I look back on the week, the metaphor of a jigsaw puzzle is what comes to my mind. For those who have worked on puzzles – particularly in partnership with others – you might see some parallels.
First, you have the picture on the front of the box. The goal. For some time that goal would have been keeping the Paris 1.5-degree objective in sight. Current modelling suggests that while technically still possible, this will be a challenge. Most certainly, though, an aggressive limiting of temperature rise must be the objective.
Second, you take out all the pieces and turn them over. You do this so that you have line of sight on everything you will need to complete the puzzle. At COP28, this meant days dedicated to key themes – financing, energy, water, food & agriculture, gender, trade, indigenous communities, health, etc. Climate is far more than an environment issue, and the thematic programming is intended to reflect that and ensure that all the pieces of the puzzle – and how they connect with one another – are socialized and understood.
Third, when you are working with others you need to divide up responsibility. Some work on the borders of the puzzle to give you structure. Others bring together the pieces that need to be closest to one another and then work on how to make them fit. At COP and beyond this means having the right people around the table; but focused on the areas where they contribute the most value and support in the face of the challenge. The division of labour will be a critical element of how we address the crisis.
At this point, the arduous work starts. Everyone focused on their task(s), aware of the objective and working towards it. Yes, it is a large puzzle. Innumerable pieces and complex connections. When several pieces fit and you think you have made progress, you then realize that where you thought you could connect them into another part of the puzzle does not work and you need to assemble more to make the connection fit. This is where we are today.
A little less conversation, a little more action please?
Events like COP28 are often unfairly subject to criticism related to a perceived imbalance between conversation and action. That this sense of imbalance can occur is not surprising, however, when consensus from a range of differing viewpoints is being sought. These conversations take time and at COP28 they bore fruit.
The announcement of a Loss and Damage Fund, and the inclusion of language related to the need to transition away from fossil fuels in what is being call the “UAE Consensus,” were the products of a lot of conversation. While those actions are not perfect, they are significant and represent important progress.
They signal the right direction of travel. Conversation did lead to action.
Wanted: Capital and Innovation
A persistent theme at COP28 and more broadly in the climate and development space is the critical role the private sector must play. The private sector’s capital and its ability to innovate must be mobilized at scale and with speed. But this is not happening at the levels required, partly because the private sector’s motivation and responsibility to manage to risk is not being sufficiently considered in any solutioning. The need to understand this risk-return dynamic, and the role that concessional capital must play must occur if we are to make real progress towards the level of mobilization required.
There is a key role for organizations like Development Financial Institutions (DFIs) – those who work with the private sector to affect these goals – in championing this issue and bringing visibility to what would have to be true to catalyze this needed mobilization.
It's more than “show me the money”!
Throughout COP28, as well as pre- and post-, there is a regular and accurate refrain about financing gaps. We know about the trillions that are needed, but which are not materializing. We know that every year we have a climate finance deficit, the overall gap grows. Bringing visibility to this is important.
But this is only part of the issue. Successfully addressing the climate crisis requires systems thinking. Like our jigsaw puzzle, we have a multitude of pieces that need to come together. Financing makes up a series of important pieces. But not all of them. We need to consider what must be true for financing to be impactful. This speaks to the role of governments in setting expectations and in establishing enabling environments with reinforcing policy, legal and regulatory frameworks. It speaks to the need for projects that the private sector can finance; projects which benefit from appropriate levels of preparation and structuring. It speaks to the need to meet the market where it is, and in the case of the private sector to understand its risk-return dynamic. All to say, money is part of the solution; it's not the whole solution.
Everything, everywhere and all at once
We know we are not playing a sequential game. We likely never were. But the sheer volume of issues that need to now be considered and addressed in parallel is daunting.
The Loss and Damage fund is an important success from COP28, but all of it is needed in relation to the damage caused by the carbon already in the atmosphere… never mind what is to come. More will be needed. Energy transition requires a fundamental re-wiring of how we develop, harness, transport, price, and access energy. The sheer number of variables in play for this to happen is, again, daunting. The need to develop an approach to value, price and factor in nature-based solutions into our climate response will require innovation, trust and a coming together of government, finance, industry, and local communities.
All of this is transformation. At scale. At once.
The Bottom Line: A DFI Perspective
While this post was not about DFIs, it speaks to issues that we must – and are – factoring into how we evolve our roles. FinDev Canada exists to enable development with and through the private sector. We do this through:
- Our financial solutions (debt, equity, and blended finance) and non-financial solutions like Technical Assistance which bring climate finance and knowledge to the table;
- Our thought leadership and the advancement of dialogue on key issues, including the intersectionality we are seeing between areas such as climate, food security, and gender;
- Our geographic focus – Latin America and the Caribbean, Sub-Saharan Africa, and the Indo-Pacific – regions on the front lines of climate change; and
- Our sectors of focus – sustainable infrastructure, agri-business & forestry and their values chains, and the financial industry – all of which are inextricably tied to both the effects of a changing climate, and which offer mitigation and adaptation opportunities.
And all of this is guided by our relentless focus on development impact in support of climate & nature action, gender equality, and market development. These goals are increasingly intersecting and mutually reinforcing one another. The space between them is narrowing. So, as we look forward as Canada’s DFI we recognize the key role we can and do play in bringing capital and knowledge forward to promote sustainable and inclusive growth in alignment with the goals of the Paris Agreement. Ultimately, COP28 was about that validation of our role.
So back to the puzzle. Our mandate gives us the responsibility to sit around that table, to look at the picture on the front of the box, select the pieces of the puzzle we need to focus on, and work with our partners to help us all move from words, to plans, to action – all with the capital and knowledge needed to help piece together the puzzle and solve it in support of our shared future.