May 26, 2024

UK to create climate joint ventures with Africa and the Caribbean

UK to create climate joint ventures with Africa and the Caribbean

UK to create climate joint ventures with Africa and the Caribbean

Andrew Gibbens in France

UK Minister for Development and Africa, Andrew Mitchell, recently made an announcement (22 June) at the Summit for a New Global Financing Pact in Paris. He will reveal that UKEF is in talks with 12 partner nations in Africa and the Caribbean to incorporate Climate Resilient Debt Clauses (CRDCs) into its current and upcoming loan agreements.

The Clauses enable governments to postpone their debt payments, thereby releasing funds for disaster mitigation and recuperation efforts. The initial CRDCs helmed by the UK are anticipated to commence operations in the following months.

The UK recently revealed at COP27 that UKEF will be the pioneer export credit agency to provide CRDCs in its direct lending to small island developing states and low-income countries. The UK Export Finance (UKEF) has allocated a £2 billion fund exclusively for providing loans to support eco-friendly development projects in foreign countries.

President Macron will be leading the Summit with the goal of creating a fresh agreement for an international financial system that includes everyone and works towards solving issues like climate change and poverty. This plan also strives to bring back momentum towards accomplishing the United Nations’ Sustainable Development Goals. The primary objective of the UK is to ensure that the Summit meets the needs of developing nations.

Minister for Development and Africa, Andrew Mitchell, said:

“Developing countries face painful trade-offs between rebuilding their communities and making debt repayments in the wake of climate shocks.”

“The partnerships with Africa and the Caribbean I’m announcing today are a milestone towards reducing these pressures, with Climate Resilient Debt Clauses providing relief for those countries hit hardest by extreme weather events.”

“Allowing for a temporary pause in debt repayment is important because it gives affected communities the breathing space they need to focus on the urgent task at hand: recovery.

I’m proud that the UK is leading an international coalition committed to strengthening the resilience of vulnerable countries in responding to climate catastrophes, and I strongly urge more of our partners to follow suit,” he said.

The United Kingdom is at the forefront of urging international creditors to provide CRDCs. The Minister will preside over a side-event discussing how to establish a financial system that can withstand shocks, and will urge lenders to emulate the strategies adopted by the UK. Minister Mitchell will collaborate with France and Barbados to urge bilateral, multilateral, and private lenders to provide CRDCs before 2025. The first movers should offer CRDCs by COP28 in November. This will allow vulnerable countries to allocate resources towards post-disaster recovery.

During the secondary occasion, the United States is anticipated to announce its readiness to provide CRDCs when possible, and France will explain how it incorporated CRDCs into its recent loan agreements. In addition, nine Multilateral Development Banks (MDBs) will collaborate under the guidance of the Inter-American Development Bank to investigate the possibility of providing CRDCs. Additional collaborators are anticipated to declare their intention to test CRDCs.

To assist other official creditors in implementing comparable clauses, UKEF has made its template clause available as a standard inclusion in all its loan agreements with qualified countries and will now publish it.

It is expected that Minister Mitchell will declare the readiness of the UK to aid other countries in examining CRDCs via the funded Centre for Disaster Protection and Financial Sector Deepening Africa. This will involve exchanging expertise on debt provisions and possible triggers, developments relating to climate change and debt, and ensuring high standards.