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World’s finance ministers urged to align portfolios to climate change goals

Addressing the fourth meeting of the Coalition of Finance Ministers for Climate Action, UN Secretary-General Antonio Guterres urged ministers to see the COVID-19 crises as a dress rehearsal for the even greater climate emergency faced by all nations.

Guterres said the leadership that finance ministers show right now is crucial to charting a recovery that will accelerate the decarbonisation of the global economy to build a more inclusive and resilient future. “Your recovery plans will determine the course of the next 30 years,” said Guterres.

He highlighted five measures finance ministers could apply. “First, you must serve as models and advocates for a green recovery. Government need to align COVID-19 recovery and stimulus plans with the goals of the Paris Agreement on climate change.”

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Guterres was unequivocal in explaining how investing in “green and decent jobs” could be achieved: “Do not bail out polluting industries. End fossil-fuel subsidies and take climate risks into account in all financial and policy decisions.”

He said he was encouraged by the coalition of minister’s Santiago Action Plan to embed climate goals such as carbon pricing and subsidies for renewable energy, into macroeconomic policies and recovery measures.

“But, more is needed. Greenhouse gas emissions need to fall sharply and permanently. Coal should not be part of any recovery plans. And, governments should secure Paris-aligned comments from high emitting sectors such as shipping, aviation and heavy industry, prior to providing bailout support.”

World must take climate change into account in every decision

Secondly, he urged all coalition members to commit to achieving carbon neutrality before 2050 and submit more ambitious nationally determined contributions before the 26th UN climate change conference of the parties (COP26).

“We need all of you, through your nationally determined contributions and net-zero plans, to send a clear and unambiguous signal to markets that the decarbonisation of the global economy is inevitable.

“Third, ministers of finance working with central banks and financial regulators must ensure that every financial decision takes climate risk and opportunities into account. This includes improving the quality and quantity of climate-related financial disclosures, ensuring that the financial sector can measure and manage climate-related financial risk and creating approaches and frameworks for measuring portfolio alignment with the transition to net zero.”

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The fourth measure he spoke about was that international cooperation and solidarity has to be part of any country’s economic recovery. “Debt and sustainability measures will be essential for all to recover together. I invite public and private creditors to explore deb sustainability measures beyond the expansion and extension of the Debt Service Suspension Initiative to benefit counties in dire need of liquidity and support, including through measures like debt for climate swaps,” explained Guterres.

Everyone has to work together to wind down dependency on coal

He pointed out that as financial authorities the ministries owned stakes in national, regional and multilateral development finance institutions and could thus help shape strategic direction. “I urge you to use your voice and voting power to ensure that by COP26 all national, regional and multilateral development banks agree to align their policies, portfolios and pipelines with the 1.5 degrees Celsius goal of the Paris Agreement.

“This will mean an end to new coal power plants and a phasing out of fossil fuel investments; more ambitious climate finance goals and targets; increase support for adaption and resilience for the most vulnerable; and rapidly scaled up investments in renewable energy,” said Guterres.

At the same meeting, World Bank group president David Malpass reiterated Guterres call to action, re-emphasising the need for countries to work together towards climate and environmental goals.

“A high priority for the world is to lower carbon emission from electricity generation, including the termination of new coal and oil-dependent power generation projects and the wind-down of existing high-carbon generators. Many of the world’s largest emitters, both developing and developed countries, are still not making sufficient progress in this area,” said Malpass.

Theresa Smith
Theresa Smith is a Content Specialist for ESI Africa.