Private finance fraught with problems
United Nations negotiations on climate change must deliver a global agreement that the costs of climate adaptation in developing countries will be paid mainly from public coffers, states ACT Alliance, a global network of churches and related organisations.
Climate change threatens millions of poor people's lives, livelihoods, and chances of development worldwide. Climate adaptation strategies – technologies, building methods, approaches to community planning and protection – are urgently needed to enable them to survive and thrive. But, in a world where even developed countries have seen their economies decimated by the global financial crisis, who will foot the bill?
Private finance – commercial sector investment - has been put forward as the new silver bullet. The two words have become a mantra for industrialised countries in the talks about climate finance taking place in Durban, South Africa, under the United Nations Framework Convention for Climate Change (UNFCCC). On the surface, private finance offers an attractive solution for many governments struggling to fund their climate finance commitments of US $100bn a year by 2020.
But ACT Alliance, a global network of churches and related organisations, says the international delegates need to clarify what kind of private finance can be considered climate finance. They need to determine how funds from private sources will be mobilised. And, most importantly, they must indicate how – if at all – private finance will benefit the poor, who are most vulnerable to the adverse effects of climate change.
A recent paper from the Stockholm Environmental institute (SEI) suggests that the international debate about private climate finance needs to give much greater attention to the adaptation needs of poor and vulnerable communities in developing countries. The author, Aaron Atteridge, Research Fellow at the SEI, says that “many of the least developed countries have great difficulty attracting private investment, particularly in sectors that need support for adaptation such as water and agriculture”. The ability of private finance to contribute towards adaptation demands much greater scrutiny, SEI concludes.
Mattias Söderberg, co-chair of ACT Alliance’s working group on climate and disaster risk reduction, argues that, because private finance is by nature related to private interests, it should only be considered for climate finance if it is used for agreed public policy priorities, with safeguards in place to ensure it contributes to addressing the rights and the needs of poor and vulnerable people.
"Some private investments may bring in new capital and create positive results”, he says, “in line with domestic climate change strategies. But others may merely consist of figures on paper shifting hands inwestern banks. There is a need for a thorough and critical debate about private finance in relation to climate adaptation.”
But ACT is certain that the real answer lies with new sources of public finance. It means using innovative mechanisms such as the proposed International Financial Transaction Tax or an aviation and maritime emission tax – the so-called ‘bunkers’ - which could provide important sources of funds. “As it will be difficult to find sufficient funds from current public sources, we urge the governments to agree on the introduction of innovative financial instruments in Durban”, says Söderberg. “This is ultimately about ensuring that we are focusing on bringing about real change on the ground and that the money will reach the people who most need it.”
About ACT Alliance
ACT Alliance is a global network of 125 church-based organisations and churches working in over 140 countries with humanitarian assistance, long-term development and advocacy for justice of the poor. ACT is present at the Durban UNFCCC negotiations to campaign on three core issues: finance, adaptation and low carbon development.