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Coalition of Finance Ministers meeting – Paris aligned?

In line with the broader theme of COP27, the main theme of the Finance Ministers’ meeting was adaptation, economic policies and access to financing, with a secondary theme: the role of Finance Ministers in action against climate change. The meeting was chaired by the Sherpas of Indonesia and Finland and Mohamed Maait, the Minister of Finance of Egypt, gave an opening speech.

The general aim of the Coalition is to strengthen the role of the Ministries of Finance to drive climate action into operation. Nicholas Stern, representing the Grantham Research Institute underlined that the central role of Finance Ministers is recognised now. They are the ministers who worry about growth, fiscal stability and budget, they tackle the turbulence we currently face. He outlined a vision for the central role of Ministries of Finance in securing a sustainable, inclusive, resilient future – and a framework for achieving that vision. It is important for them to understand why they should strive to enhance their leadership on climate change and how they can do so, across a range of their core functions and capabilities.

He summarised the draft report Climate Change Adaptation and the Role of the Coalition of Finance Ministers for Climate Action by the Coalition of Finance Ministers for Climate Action. The report recommends that Ministries of Finance strengthen their role in driving climate action. It lays out a framework and a guide for how they might mainstream climate action into their core functions and build the necessary capabilities to act based on their existing core business and responsibilities. It aims to connect and leverage the current workstream products of the Coalition of Finance Ministers for Climate Action across all six Helsinki principles, to help ensure the whole adds up to more than the sum of its parts.

Mohamed Maait, the Minister of Finance of Egypt added that the coalition meetings are already institutionalised at COPs which sends a clear message to decision-makers worldwide, especially to developing countries which desperately need finance.

The World Bank Group (WGB) continued that resilience is more important than ever. Adaptation finance is less than 10 per cent of international climate finance today, although investments in resilience and adaptation can be highly cost-efficient. Taxonomies and reporting need to be standardised and harmonised. We need more climate and sustainability-related funds. He mentioned the joint G7 and V20 ambition: working towards a Global Shield against Climate Risks, financed by the WGB. The urgent needs of vulnerable economies and people in the face of increasing climate risks need to be addressed. When a climate-related disaster strikes, we need to have better systems in place that provide immediate finance in the most efficient, effective and fast way for the most vulnerable. So far, financial protection is not systematic, coherent and sustained enough. The G7 in partnership with the Vulnerable Twenty Group (V20) of Finance Ministers from the most climate-vulnerable countries decided to help close the protection gap for poor and vulnerable people against climate-related losses and damages.

The International Monetary Fund mentioned that Rwanda (also participating in the meeting) was one of the first to access 310 million US dollars under their new resilience and sustainability trust facility.

It has generally been emphasised that Multilateral Development Banks (MDBs) are a vital piece in the finance jigsaw. Keeping the goals of the Paris Agreement requires MDBs to align with the Paris Agreement and fundamental shifts in the way financial flows from international financial institutions are channelled and managed.

Indeed, we need to cut across all sectors, we need to look for systematic solutions and act across silos. Our challenges are interrelated and can only be addressed through revitalised multilateralism with connected responses. Unprecedented coherence is needed in climate finance. Ministers of Finance will have a critical role in that. This coalition has so far talked about what needs to be done, but today they started to talk about the how.

Photo: Dr Barbara Botos.

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