The fairy tale of climate justice
As children, many of us grew up with fairy tales, magical stories with imaginary characters who experienced an adventure that ended with a satisfying and heart-warming ending. These exciting stories of victory and overcoming adversity instilled in young readers around the world hope and dreams of what our own lives may hold. Interestingly, we recently came across alternative grim origins of some fairy tales. Point in case is Little Red Riding Hood where the widely narrated version sees our heroine saved by the woodsman, who kills the wicked wolf, but in a French version authored by Charles Perrault, the attractive well-bred young lady is deceived by the dangerous wolf into confiding the way to her grandmother’s house and is then eaten by the wolf! Thinking of climate justice and the current narratives from predominantly developed nations, are we trying to convince ourselves that it’s a reality our world is working towards or simply another fairy tale with a disturbing ending?
Tragedy of the Commons
Climate justice, simply put, aims to support the most vulnerable people and places who face the direst and most dramatic impacts of the climate crisis while in tandem considering the roles that various actors have played in causing the crisis together with their responsibilities in supporting those most affected. Many see the climate crisis as a “tragedy of the commons” with gluttonous self-interests, driving actors at the tragic expense of the greater good.
Small Island Developing States (SIDS) are at the forefront of the most vulnerable nations. Not only are their blue ocean economies laid bare to the ravages of climate change, but SIDS also face the hardest challenges of accessing much-needed climate finance. While developed countries have contributed 79% of historical global carbon emissions  in stark contrast, SIDS contribute less than 1% to global emissions . The world’s Least Developed Countries (LDCs) and SIDS are on a desperate quest for climate justice.
Rich nations historically pledged at COP15 in 2009 to provide US$100 billion a year to less wealthy nations by 2020 to help them fund their necessary adaptation and mitigation efforts but to this day, this amount has fallen short, signaling a systemic failure on the part of rich nations to honour their commitments. While there is a wide disparity in the actual numbers, often stemming from the way in which the numbers are estimated, e.g., OECD estimates US$80 billion in 2018 compared to Oxfam’s estimate of up to US$22.5 billion in 2017-2018 , the overriding conclusion is that developed nations have not stepped-up to their commitments and are still coming up short even to this day. In the fight for climate justice, developing countries have for decades been calling for “loss and damage” compensation from developed countries, which for the large part have fallen on deaf ears. Very recently, conversations have gained greater traction, with a small number of countries making pledges directly.
Shortfalls in Climate Financing
COP27’s headline-grabbing establishment of a “historic loss and damage fund”, while a landmark statement for climate justice, will remain sparse on its funding commitments and implementation strategy over the coming year as the “transitional committee”, initiated by governments and tasked with how to operationalise the fund, is only expected to share their recommendations by COP28, scheduled in November 2023 . Nations will continue to pontificate on priority recipients and future donors as countries grapple with outdated definitions of developing countries under the 1992 United Nations Framework Convention on Climate Change (UNFCCC), which still includes China, now the world’s second-biggest economy and second-largest contributor to historic cumulative greenhouse gas emissions.
Similar to the protagonist in our fairy tale, developing countries have every reason to question the sincerity and commitment of wealthy nations following their actions taken during the pandemic, which resulted in i) a globally inequitable vaccine rollout ii) the financial response and mobilisation of US$16 trillion essentially within the developed world and iii) effectively no debt relief for developing countries .
Climate funding shortfalls dramatically exacerbate current economic hardships faced by LDCs and SIDS. Funds that could have been meaningfully deployed on goods and services focused on benefitting societal well-being, including health and education, are having to be funneled towards climate change projects and tragedies, ultimately sacrificing stronger foundations needed in building a more prosperous society.
Alongside grave societal challenges, SIDS and LDCs are facing more frequent catastrophic impacts from climate-induced natural disasters. SIDS, in particular, are facing an existential threat from rising sea levels e.g. the Maldives is only 1 meter above sea level , coupled with the devastating human, societal and economic fallout from climate-related natural disasters. Putting numbers on the economic aspect, the expected losses from climate change for SIDS are estimated to be up to 6.5% of annual GDP, in stark contrast to a global average of 0.5%  , clearly articulating the severity of the risks faced amongst SIDS.
Adding to the “perfect storm” faced by LDCs and SIDS is the substantially higher borrowing costs they face. The Brookings Institute  highlights that LDCs pay far higher debt costs compared with developed countries. The impact is amplified as LDCs have to allocate on average 14% of their domestic revenue to interest payments compared to only 3.5% by developed countries, despite far larger debt stocks in developed countries. These globally disproportionate borrowing costs translated into the UN  describing at the beginning of 2022 that 3 in 5 of the poorest countries are already in or at high risk of debt distress, rendering them unable to meet their financial obligations.
Innovation and paradigm shifts are integral to how our future plays out; these have been in the works by forward-thinking proponents, often met with mixed levels of acceptance from wider stakeholders. In a bid to wrest control from a GDP-obsessed world, the Commonwealth Secretariat launched its Universal Vulnerability Index (UVI) (2021) geared to capture more nuanced insights on the state of a nation’s vulnerability and resilience. During the launch, Commonwealth Secretary-General Patricia Scotland described GDP as an outdated, “blunt, singular” and “overarching touchstone” whose usefulness had been waning in a “much more complex world”.
Making the global headlines at COP27 has also been the avant-garde Bridgetown Initiative, championed by Prime Minister Mia Mottley of Barbados . This ambitious, detailed, and necessary policy system initiative fundamentally aims to collaboratively work with stakeholders to redraw the global financial architecture and solve many of the current climate-funding roadblocks for LDCs and SIDS. Adding to the wealth of solutions is the valuable work carried out by the Independent High-Level Expert Group on Climate Finance whose insightful, perceptive, and thoroughly-researched actionable recommendations are shared in their comprehensive report “Finance for climate action – Scaling up Investment for Climate and Development” . Alongside a global chorus, they too emphasize “current action is too weak and slow; to delay is dangerous.”
At the University of Cambridge’s Centre for Resilience and Sustainable Development, we’ve embarked on action-based research to support the deployment of greater sustainability-related funds into SIDS. Our systems policy grassroots work has captured two plentiful “untapped” assets, namely “nature” and “youth” which have the potential to innovatively catalyse greater climate finance flows into SIDS.
On the dawn of our global population crossing the threshold of 8 billion people, will our future generations share a children’s “climate change” story of noble ambitions winning out over selfish interests? As our clock counts down, tipping points, cascading risks and the hope of limiting global warming to below 1.5 degrees all desperately hang in the balance, we look to our jury, who are still deliberating on how our climate change fairy tale will end…
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About the authors
Arun Kelshiker was the former Head of Asset Allocation and Portfolio Strategy at Standard Chartered Bank and a senior portfolio manager/country Chief Investment Officer with Allianz Global Investors/Allianz Group. He is a Lecturer on ESG / Risk Management at the Frankfurt School of Finance & Management and currently provides sustainable investing advisory for asset owners, asset managers, and stakeholders.
Dr. Nazia Mintz Habib, FRSA, is the Founder and Research Centre Director for the Centre for Resilience and Sustainable Development (CRSD). She is an Associate Professor with appointments at the Department of Engineering and Department of Land Economy at the University of Cambridge.