The international community met in Bonn in early June as part of the United Nations Framework Convention on Climate Change process to agree on major issues regarding climate response ahead of the COP30 climate gathering later this year.
On the agenda was climate finance, particularly for emerging market nations that are bearing the brunt of a rapidly changing climate that they did little to bring about. It’s proven difficult to secure commitments at scale, from private or public sources.
No new climate finance pledges or disbursements were announced in Bonn, pushing the climate finance agenda to COP30 in Brazil in November.
The delays provide an opportunity to expand the definition of global private capital providers to include actors such as asset managers, impact investors, credit unions and local banks that have the capacity to channel capital towards climate resiliency, particularly for small and mid-sized businesses in the Global South — an overlooked part of the climate solution.
Ecosystem strengthening is an area that requires greater attention, not only to address weaknesses and barriers for funding SMEs but to expand opportunities. The tools to do this include traditional technical assistance and extend into investor readiness, capability building and direct early-stage support for firms.
One such example of the kind of initiative that can be brought to bear is the Global Climate Finance Forum, or GCFF, a newly launched collective group of 50 investors, philanthropists, climate venture founders, policy makers and advisors that are committed to mobilizing and channeling capital to locally driven climate and nature-based solutions that lift the local economy and Indigenous communities in the Global South.
This work is even more critical given that the Fund for Loss and Damage, established at COP27 to help lower-income countries recover from climate-related disasters, has been under-supported. Domestic climate change responses are also under threat.
Proximity matters
GCFF commitments were based on a shared understanding that increasing proximity between providers and users of financial capital improves outcomes in multiple ways. First, stakeholders can see improved risk measurement and management. Second, knowledge about context and multiplier effects is better. And finally, screening for outliers and innovators is better done close up. Fifty committed individuals drawn from 17 countries, determined to work together to improve private climate finance.
Ahead of COP30 in Brazil, GCFF invites policy makers, climate scientists and diplomats to consider the following practical strategies and recommendations to advance climate finance and policy agenda forward:
- Integrate private climate finance in Nationally Determined Contributions and reaffirm their commitment to achieving Global Stocktake outcomes.
- Affirm the Baku to Belém Roadmap:
- By focusing on developing national financial sectors, transition planning, and developing options – to support the implementation of the New Collective Quantified Goal (NCQF) of $300 billion per year by 2030.
- Raise awareness of innovative sources of finance and financial regulation as two key priorities and bring this to the attention of The Circle of Finance Ministers convened by the Brazilian COP30 Presidency, High Level Champions and other leaders.
- Learn and scale up blended finance architectures, including those such as the Triple B Framework developed by Resilience Capital Ventures, a founding member of GCFF and coauthor of this article, that focuses on combining non-financial capital (knowledge, social, political and cultural for example) and financial capital from multiple sources and different asset classes.
- Draw attention to the importance of resiliency finance sourced from private capital. Research from The World Bank shows that developing nations face crushing debt burdens, leaving them unable to meet their obligations to fund schools, hospitals, and deteriorating infrastructure. This plight underscores the importance of financing resilience, not as a substitute for mitigation but in order to address current and future needs of the most vulnerable countries and communities.
- Recommend and facilitate consultations with experts on private climate finance for SMEs in Roadmap-related consultations at COP30.
- Work with counterparties to showcase examples of SME-led climate solutions in an effort to better understand and calibrate the value and potential.
- Global Stocktake: As part of the stocktake, GCFF is able to provide examples of SMEs that contribute to food systems transformation, food sovereignty, regenerative agriculture, waste management, and clean energy at the grassroots and community levels. For example, Stush in the Bush, a sustainable SME in rural Jamaica, blends agroecology, local plant-based cuisine, and community empowerment to produce retail food items that value land stewardship and community investment. Many such examples are ready to scale if challenges around high interest rates and currency volatility are properly addressed.
- Amplifying Private Resilient Mitigation Finance: GCFF members recognize that SMEs drive investments in climate mitigation in low- and middle-income developing countries and therefore investing in them will help to reduce the finance gap. Climate SMEs are filling critical gaps where neither traditional market actors nor financiers are willing or able to go, making them essential to inclusive and locally-rooted climate action. GCFF can serve as a force to elevate discussions and outcomes related to climate resiliency and mitigation, as it impacts LMI and SIDC countries.
- Just Transition: As part of this important agenda which will hopefully be codified as a work plan, incorporating principles to address national and international inequities, GCFF can showcase SMEs that are currently delivering on the climate mandate while providing livelihood opportunities for indigenous communities in several African countries, Jamaica and India. This portfolio of work can be a momentum builder to address finance-related barriers and amp up solutions for climate SME financing.
- Small Island Developing States. President Ramkalawan of Seychelles called for embracing the interconnectedness of the global world and for small island developing states (SIDS) to access financing that can measure outcomes on SDG, climate resiliency and supporting youth – a critical part of climate justice and just transition. Seychelles, as an SIDS, has set the example on climate action by prioritizing resiliency against flooding, restoring mangroves and engaging youth in climate, and reducing emissions from the transportation sector. Such demonstrated climate action deserves attention from private climate investors who can turn the tide, especially when access to public finance is challenging.
- Mitigation Ambition and Implementation Work Program: Success Stories. GCFF seeks to showcase SMEs such as Courageous Land. The Brazilian SME’s biodiverse agroforestry approach integrates regenerative food production with large-scale reforestation, by drawing on traditional and indigenous knowledge to design productive forest systems that sequester carbon, restore ecosystems, generate rural employment, and cultivate native fruit and timber trees to support biodiversity.
In its work, GCFF notes the nexus between climate, nature, food and wellbeing. Therefore, we look forward to being able to engage on the synergies and the cross-cutting factors in these domains. We are concerned because SMEs face strains when declining biodiversity leads to resource scarcity and increased costs. These connections must be made.
Finally, we welcome the opportunity to contribute to and engage the UNFCCC secretariat on the development of an interactive web portal with information reported in Biennial Transparency Reports.
GCFF members call for the UNFCCC to consider and integrate these recommendations to gain a better understanding of climate risks in the Global South, and the challenges and opportunities for financing SMEs driving innovation and impact. GCFF also welcomes enquiries and offers of collaboration, and these can be directed to the Secretariat at [email protected].
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Dr. Gillian Marcelle leads Resilience Capital Ventures LLC, a boutique capital advisory practice specializing in blended finance, and is a founding member of the Global Climate Finance Forum.
