An after-the-fact insurance program has been set up to provide emergency funds when countries which are unable to pay for climate damage themselves suffer catastrophic harm. It is woefully underfunded and insulting to the nations which are paying the price for global heating while the wealthy countries mostly ignore them.
Protesters from some of the countries most at risk from the climate crisis are shown here demanding financial support for the damage already done to them. Many are worried the Global Shield "insurance fund" may be an attempt by wealthier nations to evade their responsibilities. Photo: Context Climate, via Twitter
Yesterday at the UN COP27 Climate Conference in Egypt, a group of 58 nations calling themselves the V20 announced the creation of “The Global Shield for Climate Risks” disaster fund.
The V20 organization, with its name derived from its original incarnation as the “Vulnerable 20” countries who are most likely to suffer disproportionately from the direct and indirect impacts of the climate crisis, was formed in October 2015 at the Lima, Peru Annual Joint Meeting of the International Monetary Fund and the World Bank. Its world headquarters are located in Geneva, Switzerland.
It was formed as an activist organization, with twenty founding members: Afghanistan, Bangladesh, Barbados, Bhutan, Costa Rica, East Timor, Ethiopia, Ghana, Kenya, Kiribati, Madagascar, the Maldives, Nepal, the Philippines, Rwanda, Saint Lucia, Tanzania, Tuvalu, Vanuatu and Vietnam. Each joined because of their high exposure to climate impacts such as sea level rise, life-threatening storms such as category five hurricanes and cyclones, extended drought, heat waves and more. Each also joined because the lives and livelihoods of those nations are being destroyed by the crisis, despite that it is the wealthier nations, such China, the United States, and the European Union, which through their increasing carbon emissions are accountable for the crisis.
“We unite for what we believe is the fundamental human rights issue threatening our very own existence today,” declared Cesar Purisima, finance minister of the Philippines, and chair of the group in 2015 at its founding. “In the absence of an effective global response, annual economic losses due to climate change are projected to exceed $400 billion by 2030 for the V20, with impacts far surpassing our local or regional capabilities.”
Today the original V20 group has expanded to encompass 58 member nations:
Within Africa and the Middle East, 27 in total have joined: Burkina Faso, Benin, Chad, Comoros, Côte d’Ivoire, Democratic Republic of the Congo, Ethiopia, eSwatini, Gambia, Ghana, Guinea, Kenya, Lebanon, Liberia, Madagascar, Malawi, Morocco, Nigeria, Palestine, Rwanda, Senegal, South Sudan, Sudan, Tanzania, Tunisia, Uganda, and Yemen.
In the Asia-Pacific Region there are 20 members: Afghanistan, Bangladesh, Bhutan, Cambodia, Fiji, Kiribati, Kyrgyzstan, Maldives, Marshall Islands, Mongolia, Nepal, Palau, Papua New Guinea, Philippines, Samoa, Sri Lanka, Timor-Leste, Tuvalu, Vanuatu, and Vietnam.
Latin America now has 11 members: Barbados, Colombia, Costa Rica, Dominican Republic, Grenada, Guatemala, Guyana, Haiti, Honduras, Nicaragua, and Saint Lucia.
On November 14, the Vulnerable 20 Group of Finance Ministers, the G7 group of nations (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States), and the German Ministry for Economic Cooperation and Development issued a joint statement announcing the formation of “The Global Shield for Climate Risks” fund. It is designed, the fund founders explained, to make available "pre-arranged financial support designed to be quickly deployed in times of climate disasters".
In announcing the plan, Ghana Finance Minister Ken Ofori, the current V20 chair, explained the criticality of the fund for the nations his organization represents.
“This is a path-breaking effort,” he said. “Our fiscal space is under constant threat and the inflationary pressures of climate change are closing out our options. As part of our Climate Prosperity Plan to reduce the 98 percent financial protection sinkhole, the Global Shield will play a key role in resourcing financial and social protection packages to protect our economy, our enterprises and our communities.”
“The Global Shield is long overdue,” he continued. “It has never been a question of who pays for loss and damage because we are paying for it – our economies pay for it in lost growth prospects, our enterprises pay for it in business disruption, and our communities pay for it in lives and livelihoods lost.”
The fund will be available, the announcement explained, to “close protection gaps” for the V20 countries. The monies put up for the fund will address, among other things, “livelihood protection, social protection systems, livestock and crop insurance, property insurance, business interruption insurance, risk-sharing networks, and credit guarantees”.
In calling for the fund, research carried out by the V20 estimated that that 98% of the 1.5 billion people in the Vulnerable 20 group, a number which works out to 18.8 percent of the world’s population, have no financial protection to deal with the next sudden-impact megastorm or heatwave, or the slow death of sea level rise which will soon wipe out much of nations such as Bangladesh or Vanuatu.
The initial $200 million in funding comes primarily as a pledge of €170 million (US $176 million) from Germany as a seed contribution. That investment is broken up into €84 million ($87 million) directly for the Global Shield fund itself and €85.5 million ($88 million) towards the creation of special financial instruments to support climate risk payouts. Other initial pledges for the fund include €20 million ($21 million) from France, $12 million from the United States, €10 million ($10.4 million) from Ireland, US $7 million from Canada, and €4.7 million ($4.9 million) from Denmark.
According to the V20 and its partners, management of the Global Shield Fund including decision-making as to how it will be allocated will be handled by something called the Global Shield High-Level Consultative Group. That will include representatives of leadership from the V20, G7, and G20 groups of nations, as well as from “think tanks, civil society, multilateral organizations and the private sector”, according to the announcement.
The financing structure behind the fund is based on three complementary financial entities: the Global Shield Solutions Platform, which enhances the existing InsuResilience Solutions Fund, the Global Shield Financing Facility at the World Bank, and the Climate Vulnerable Forum (CVF) & V20 Joint Multi-Donor Fund.
The initial recipients for money from the Global Shield Fund will include Bangladesh, Costa Rica, Fiji, Ghana, Pakistan, the Philippines, and Senegal. They are being referred to in press announcements as the Pathfinder countries.
The Global Shield fund announcement came at the same time as the UN Climate Change COP27 conference was attempting to wrap up a related high-priority objective for the event. That is the formal agreement on liability for the climate crisis especially among the high carbon emitting countries and providing for a means for those countries to pay for the loss and damage they have already caused.
As with most things in the COP27 conference, this initiative has not made it much past basic policy statements. At the present time, the group working on this has agreed on just three primary points regarding the need for a “loss and damage” plan. It agreed first that there was a need to talk about it, second that there financing should be made available to address it, and third that countries needed to come up with a means of carrying out that financing.
Ambassador Wael Aboulmagd, special representative of the COP27 president and Egypt’s ambassador to Brazil, was vague about progress beyond those three points when asked about the separate loss and damage deal this week. He said simply that all proposals offered to address the loss and damage issue were being considered, and that he hopes “the countries will reach results consistent with the climate repercussions and the need for implementation measures”.
Though there will almost certainly be some final loss and damage agreement, the problems with that and the Global Shield insurance program just unveiled yesterday will be somewhat similar. The platitudes about what the agreements are supposed to do will sound good, but the funding will be far less than needed, the path to payout burdened with bureaucracy, and the entire plan lacking sufficient vision to do much more than patch the world’s current climate problems.
The UN COP27 Climate Change conference at which all this is supposed to move forward began on November 6 and concludes on November 18.