By Meegan Scott
TORONTO, Canada – At the Toronto Centre’s climate finance talks in Ottawa, Timothy Antoine, Governor of the Eastern Caribbean Central Bank (ECCB) said the climate crisis is an existential threat to the Caribbean.
With climate risk emerging as the hot and urgent issue facing the global financial sector, leaders and citizens of the region have good reason to be on edge.
Antoine and fellow panelists Nezha Hayat, Chairperson and CEO of the Moroccan Capital Market Authority (AMMC) and Anthony Nyong, Director of Climate Change and Green Growth at the African Development Bank (AfDB) recently called for the speeding up of efforts to “green finance” within Caribbean and African countries in order to ward of the catastrophic threats posed to the regions by global warming and the resulting climate crisis.
Antoine cited the case of Dominica where tropical storm Erika wiped out 90% of GDP in 2015; fast on its heels in 2017 hurricane Maria caused damage totaling 226% of its GDP.
“Monster storms”, now devastate across countries instead of sections of them. Those typical 100-year phenomena have not only intensified, they now occur in two-year periods. Next to no time is being left for financial or ecological recovery.
He further pointed out that some Caribbean islands would be under water by the 2100s, if financial resources were not rechanneled to provide more and new climate finance to the region.
The panel of financial regulators pressed home the need for developed countries including top emitters like Canada to live up to their moral obligations to reduce their investments in the brown economy. That is economic development or “brown growth” that relies on the use, production of and trade in fossil fuels such as coal, oil, gas and related activities that dramatically increases carbon emissions and are environmentally damaging.
The speakers expressed gratitude to Canada for its significant contribution in helping them to tackle the challenges posed by climate change, but were steadfast in their call for Canada to do more.
Each panelist highlighted the work that their region is carrying out to combat the crisis― including greening finance.
They stressed their need for help with developing strategy guidelines, roadmaps, legal infrastructure, financial risk assessment, awareness creation within their financial sectors, and general how-to, in addition to finance in order to deliver the needed and desired results that could save their countries.
High on their wish list was more capacity building support from the Toronto Centre for Global Leadership in Financial Supervision (Toronto Centre). They were speaking at the fireside chat “Greening Finance: Climate Change and its Impact on the World’s Financial System”.
The event was hosted by the Toronto Centre in celebration of International Development Week (IDW) which was observed between February 2-8, 2020.
This year marks the 30th edition of the celebrations which are convened by Global Affairs Canada. The theme of this Year’s celebration is “Go for the Goals”.
Greening finance requires the alignment and direction of financial flows towards sustainable low-carbon industries and the climate change targets―including the UN Sustainable Development Goals. The need to “better manage environmental and social risks, take up opportunities that delivers both a decent rate of return and environmental benefit as well as greater accountability” is a fundamental part of the process (United Nations Environmental Programme, UNEP).
Delivering SDG 8, decent work and economic growth and upholding the duty of “ fair share” in benefits and burdens necessary to win against the dangers of climate change presents a sustainability and growth dilemma for developed and developing countries.
Case in point is Canada, relies heavily on the brown economy for its growth. Figures presented by the Canadian Energy Research Institute (CERI, July 2019), shows that while Canada champions combating climate change it invests heavily in “oil sands development which is expected to contribute over $1.0 trillion to the Canadian economy from 2019 – 2029”. The investments are also expected to generate growth from 332,847 jobs in 2018 to 532,673 jobs in 2029”. “ Government will use taxes from these activities to finance healthcare, education and public infrastructure (CERI)”.
At stake are:
- attaining the crucial target of keeping global warning below 1.5°C ―largely dependent on reducing the use of fossil fuel.
- the destruction of African countries and the disappearance or water inundation of the Caribbean.
- reputational risk.
- a financial meltdown driven by the stranded assets in the brown economies of developed countries; and greater impoverishment of women and girls.
All disastrous outcomes which are neither farfetched nor in the distant horizon.
Last November, Canada made headlines on the reputational risk front when The Riksbank, became the world’s first to exit public debt because of climate exposure, when it sold sub-sovereign notes from Queensland, Western Australia and Alberta, Canada as a result of their high levels for carbon emissions.
Ignoring the call of developing countries to reduce emissions could present sudden existential threats to developed countries.
In last month’s report the Bank for International Settlements (BIS), warned that “A future climate disaster or green swan event could bring down the global financial system”― a sentiment echoed during the discussions by Babak Abbaszadeh, President and CEO of the Toronto Centre. Like the monsters storms in the Caribbean the green swan event comes like a violent thief in the night.
Despite the herculean challenge Caribbean and African countries made it clear that they were not about playing a blame game in the battle against climate change, even though they are carrying 80% of the burden while contribution under 4% of emissions.
Nyong, says “Africa is a solutions provider”, 54 African countries have signed their commitments to reduce emissions. They have established knowledge sharing hubs, legal support for matters relating to climate change, and disaster reduction strategies.
The Caribbean now has the Caribbean Catastrophe Risk Insurance Facility (CCRIF) which payouts in 14 days after a disaster; and disaster linked hurricane clauses which provide a loan repayment holiday after a disaster; they are also pursuing geo-thermal energy market development as part of owning their responsibilities.
Besides Jamaica the pursuit of catastrophe bonds (cat bonds) have not been successful, Antoine wants to see more citizens investing in the Eastern Caribbean Stock Exchange for wealth and capturing the opportunities presented by cat bonds.
Antoine cited further barriers such as the use of income per capita as a measure for financing which does not work for the region. He illustrated, “when hurricane Katrina hit the USA the cost was 4% of GDP, but the monster storms in Dominica” and another country “cost more than 200 % of GDP. An entire island gets destroyed”. He argues for change and was unapologetic in stating that the US $100 bn commitment made by 197 countries at 21st Conference of Parties (CoP21) in 2015 was not enough.
Nezha Hayat and Christine Hogan, moderator and Deputy Minister of Environment and Climate Change, Government of Canada, made case of SDG 5 (Gender equality). Hayat has delivered remarkable results in that regard, but she points out the importance of political commitment and the changes implement under King, Mohammad VI with the 2004 family code in making the changes possible. Hogan says, “the business case for gender equality is there but challenges exist”.
The bottom line: developed countries must reduce emissions, developing country and developed country leaders in the financial sector, citizens and the private sector can no longer ignore the risks posed by climate change to the financial sector and their economies.
The Toronto Centre is funded by Global Affairs Canada, The Swedish International Development Cooperation Agency (SIDA), The IMF and World Bank.
About the author: Meegan Scott, B.Sc. Hons, MBA, ATM-B, CL, PMP., is Jamaica-born Strategic Management Consultant, at Magate Wildhorse Consulting in Toronto & New York. This is a syndicated article.
