Davos takes on climate finance: a lot of unanswered questions

The World Economic Forum (WEF) had promised to put climate change at the top of its agenda ahead of the five-day meeting in Davos. Its new climate chief, Gim Huay Neo, scurried about the many related panels in the frozen Swiss ski resort. But talks featuring government and private sector representatives often returned to business arguments in favour of climate finance, rather than getting down to the nitty-gritty of where and how that money should be spent.

Passionate interventions were made by the likes of former United States vice president Al Gore inside the WEF meeting venue and, on the fringes of the event, climate activists from around the world, including the Swede, Greta Thunberg, and Ugandan Vanessa Nakate. 

Scientists, such as Johan Rockström, director of the Potsdam Institute for Climate Impact Research in Germany, warned of the 16 environmental tipping points that regulate global climate systems, nine of which are “showing signs of instability”. This means that, if pushed too far, they may “undermine humanity”. Scientific evidence showing that the tipping points are interconnected suggests the possibility of a “cascade risk of dominoes”, he explained.

“Scientifically, this is not a climate crisis,” Rockström said at a conference. “This is a planetary crisis.”

The actual cost

Meanwhile, Nicholas Stern, a climate economist and head of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics in the United Kingdom, detailed the scale of finance that would be required.

Referring to research conducted ahead of the Cop27 climate summit held in November, he said $2.4 trillion will be needed annually in climate finance by 2030 for the energy transition, adaptation to climate change, loss and damage, and protecting natural capital in emerging markets (excluding China).

He echoed calls that had gained steam in Sharm El-Sheikh for reform within multilateral development banks to increase funding for developing countries. “You then need to discuss reform like when Bretton Woods was being discussed after the Second World War,” he said.

Given that most finance would originate within countries, Stern estimated that $1 trillion would be needed annually from external flows. A third of that would come from international governmental sources, such as multilateral development banks (MDBs) - that would contribute to the bulk of climate adaptation funding -  with the remaining two thirds of all climate funding coming from private sources. 

To achieve these levels of financing, MDBs would need to triple financing over the next five years, while multipliers would need to be increased in the private sector.

International schemes on the table

Massood Ahmed, president of the Center for Global Development, a think tank based in Washington and London, said the World Bank is expected to discuss how it will deal with issues relating to climate finance ahead of its annual joint meeting with the International Monetary Fund (IMF) in October, weeks before key climate talks take place in Dubai.

The Bridgetown Initiative, proposed ahead of last year’s Cop by Barbados’s prime minister Mia Mottley, called for a rethink in international lending as the climate crisis has left poor countries struggling with debt and unable to rebuild and prepare for ever more frequent and intense disasters.

Ahmed said: “Everybody sees that the best route to scaling up for development and climate-related development is by turbocharging the MDBs and the IMF in support.”   

“With many of the schemes that people talk about, the world would be three degrees warmer before we actually put those in place,” he added. 

Countries agreed in November to create a loss and damage fund, financed by developed countries, that would compensate vulnerable nations for disproportionate climate impacts. A transitional committee has been tasked with how to operationalise the fund, and is expected to meet for the first time before the end of March, though multiple challenges remain.

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Sherry Rahman, Pakistan’s climate change minister, said on Friday in Davos: “Serial catastrophe is putting countries like us into recovery traps.” Pakistan was one of the leading proponents of the fund at climate talks. The country recently raised billions at a conference in Geneva to help it recover from devastating floods in 2022.

“By the time we are rebuilding, adaptation and resilience cost money. And by the time you prepare the bankable plans, the next crisis is upon you,” she added.

Wealthy countries have failed to deliver on their promise to provide $100bn annually to help developing countries face climate change. Adaptation finance, which would help populations prepare for the impacts of global warming, has trailed behind funding for mitigation, or the reduction of carbon emissions, in developing countries. 

“A lot of emerging markets are submerged in debt,” Rahman said. ”We need structural reforms but there has to be some sensitivity to the scale of vulnerability and human fragility.”

Climate activists staging a small protest on Friday outside of the Davos’s Congress Centre claimed that the voices of those directly on the frontlines of the climate emergency were nowhere to be heard at the WEF meeting.

Davos’s philanthropy bid

Last week, the WEF’s own response to the crisis included the launch of a multi-trillion dollars philanthropic initiative, called GAEA, or Giving to Amplify Earth Action. The plan expects to “fund and grow new and existing public, private and philanthropic partnerships (PPPPs) to help unlock the $3 trillion in financing needed each year to reach net zero, reverse nature loss and restore biodiversity by 2050”, according to the forum. It includes the support of major foundations including IKEA, Bezos Earth Fund and the Rockefeller Foundation.

ClimateWorks Foundation estimated that only two per cent of global giving goes to climate change mitigation projects.

WEF’s climate chief, Neo, told Geneva Solutions that among business corporations that are strategic partners financing the organisation, “some are bolder than others in pushing forward the (climate) agenda”.

“One of the reasons we have engaged the philanthropic institutions is that philanthropy can help unlock obstacles to action,” she said. “It may mean doing things differently, by piloting new solutions around technologies. If philanthropy steps out to experiment and it works, the economic effects can pan out. We are looking at how to build that economic transition to that market place.”

Crescent Enterprises, an energy and logistics business based in the United Arab Emirates is among firms and groups supporting GAEA, and part of a large representation from the Gulf nation, including business leaders and government ministers, that attended Davos ahead of hosting this year’s climate summit.  

Days before the start of the conference, the head of UAE’s oil company, Sultan Al Jabar, was nominated to preside over Cop28. Campaigners were angered by the decision, worrying that the fossil fuel industry, already present in force at Cop27, may contribute to further stalling urgent climate action at the conference.

Badr Jafar, CEO of Crescent and Cop28 head of corporate and philanthropic engagement, told Geneva Solutions that while criticism is “healthy”, he felt the UAE can “showcase and demonstrate how (it) has moved from a fossil-based economy to a broader-based economy”. He said he hoped the next Cop could be “more inclusive” toward the private sector.

When asked about how much of his own philanthropy went toward climate adaptation, Jafar said that it was more focused on supporting academic institutions.