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I return to my native Scotland next week for the first time since the early days of the pandemic. My visit has huge personal significance, but professional, too – as I’m back to attend one of the most important international meetings in modern history, Cop26 – the world’s best last chance to get runaway climate change under control.
In my role as the vice president of the Asian Infrastructure Investment Bank (AIIB), I am there to represent the bank’s members – including some of the most vulnerable in the world to climate change. Countries such as Bangladesh, India and Nepal – those that have been on the frontlines of climate change, suffering a deluge of monsoons and drought disasters throughout 2021 – which are among the least equipped to deal with the consequences of the climate crisis.
Over the past few weeks, friends and colleagues in Beijing have asked me whether we should be optimistic about the summit and its ability to avert catastrophic climate change. My feelings are mixed. On the one hand, there are reasons to be positive. Unlike previous years, there is no longer a fundamental debate – it’s now unequivocal that people want action and there is a sense of momentum going into the conference. The intergovernmental panel on climate change, or IPCC, warns us in its latest scientific report that climate change is not just a challenge in the future, but a threat in the present.
But I am cautious, too. The risk is that we spend the fortnight talking about protesting tactics and who is attending; and that the conference becomes something of a beauty pageant for richer nations to show off their green domestic agendas.
To succeed, the conference must address the big picture: the challenge of how we direct finance, urgently, to communities who need it most.
We cannot afford for this Cop to be derailed by geopolitical debates that serve no one, and to be dominated by richer nations.
It is hugely significant and welcome that so many developed countries have made ambitious commitments to reduce emissions and move to net zero. But to say that these commitments “set the example” for other countries to build back greener misses half of the argument.
This is true, of course, for those nations who can afford fiscally to incentivise heat pumps and home insulation upgrade programmes. It is less true for developing countries who are feeling the impacts first and worst because of vulnerable geography and lesser ability to cope with damage from severe weather and rising sea levels.
For Cop26 to be constructive, it will need to answer fundamental questions about how we direct finance to these communities so that we can help them mitigate and adapt to climate change, in line with countries’ own development priorities and long-term strategies. These priorities vary across geographies. Indeed, within the Asia-Pacific region, climate priorities are very different between developed and developing countries, and indeed, among developing countries. To ensure climate finance reaches those most in need, we, the financial institutions, need to devise financial instruments and solutions that are tailored to each recipient country’s needs.
Multilateral development banks, like AIIB, are already playing a crucial role and will need to rapidly scale up their efforts to support the transition. In our case, at least 50 per cent of AIIB’s lending will be climate finance by 2025. By 2030 this will total $50bn (£36.3bn) – a quadrupling of our 2019 annual climate finance when AIIB started publicly reporting the number.
The developed world has greater resources and is responsible for the majority of historical contributions, so there is a moral imperative, but a self-serving one, too. However, public financing from the rest of the world to the global south alone will not be sufficient. In order to achieve the scale and pace of change required, we need to make sure that all trade, investment and private sector financing is aligned with the temperature and resilience goals of the Paris Agreement.
Rapidly increasing urbanisation, economic and population growth will lead to huge rises in emissions across emerging and developing Asia over the coming decade, risking our ability to keep the 1.5C goal alive, calling for urgent mitigation finance. At the same time, many of the countries in the Asia Pacific are experiencing losses from catastrophic climate change today, and are thus in need of urgent financing for adaptation. In our annual meeting, AIIB just committed to align all its new financing activities with Paris goals by mid-2023. We believe we can support our members to continue receiving the economic development benefits of our high-quality projects while meeting their own Paris Agreement obligations.
By investing now in low-carbon, climate-resilient and sustainable infrastructure in these countries, and directing global financial flows to climate-vulnerable countries, we can mitigate the climate consequences of today, whilst targeting the roots of future issues.
Sir Danny Alexander is vice president for policy and strategy at AIIB bank and former chief secretary to the Treasury