By Nicholas Woolley
The warning bell on climate change was sounded decades ago, and we ignore it at our own peril. Climate change is not just an environmental problem, but also a developmental, economic, and business sustainability problem with global, national, and individual implications. Developing countries are least able to cope, and Zambia falls squarely in that category.
Like any problem with far reaching consequences, solutions to climate change are multi-pronged, but all are underpinned by the need for finance. A key challenge we face is how to speed up progress towards a zero emission and climate-resilient global economy, while at the same time creating jobs and supporting communities through the transition.
This will require the whole economy – every company, bank and insurer, investor – to adjust their business models, develop credible plans for the transition, and implement them effectively. The low carbon, climate resilient economy is also the growth story of the 21st century.
This is why building a financial system to support climate adaptation and mitigation is a core campaign of the COP26 Climate Change Summit to be held in Glasgow in November 2021. COP26 is a global gathering of all countries to come together to agree common targets and ambitions for tackling climate change.
John Kerry, the US Climate Envoy has referred to COP26 as “the last best chance” to avert the worst environmental consequences of climate change for the world. Here in Zambia we have already seen impacts such as more regular floods and droughts that have wide-ranging socio-economic impacts. We are also seeing emergence of Zambian leadership on some of the actions that can be taken to adapt and mitigate, whether it be renewable and climate-resilient energy sources, new insurance products, or other forms of action and finance.
The Climate Finance COP26 campaign looks at two distinct areas. Firstly, raising the funds needed to deploy significantly more finance overall – there is a $100bn target overall and the UK has already committed to double its contributions to over $11bn in the next 5 years and is encouraging other developed countries to also increase their ambition.
Secondly, stimulating a fundamental transformation of the finance system itself, especially on four discrete areas of activity: reporting, risk management, returns, and mobilisation. The latter is the topic in focus here.
To build momentum for the COP26 finance campaign and explore options for what more can be done to mobilise private financial products for climate change action, the British High Commission hosted a virtual Private Sector Climate Finance event on 18th March 2021. A panel of experts spoke on particular areas of climate finance, followed by a lively discussion with members of the British Chambers of Commerce in Zambia, Malawi, and Zimbabwe present, as well as the EU Business Club, Zambia Association of Bankers, members of UNZA Business Club, and the Zambian diaspora as part of the Watt Club.
Our first speaker, Dolika Banda from the CDC Group highlighted the urgency of shifting our financial system, and how this requires efforts from the government, businesses and investors, and recognition of our individual responsibilities to champion change. CDC, the UK’s Development Finance Institute, has developed an ambitious new investment strategy aligned to the Paris Agreement that will focus on the climate impact of the investment portfolio and future-proofing delivery of both financial return and development impact.
Nachilala Nkombo, WWF Country Director, then took up the baton and spoke about how nature is humanity’s support system, our first line of defence in the fight against climate change, and what drivers our economy. She highlighted debt for nature swaps as a financial instrument that could be explored in Zambia.
This is where a portion of debt is written off or reduced in exchange for commitments to invest in biodiversity conservation. About 40 debt for nature swaps have been finalised around the world, and WWF has been a key player in many of them.
Peter Vivian-Neal, CEO of Kalahari GeoEnergy, provided an industry story of a clean energy company that has successfully accessed finance to start operations in Zambia. Geothermal energy is a renewable resource derived from harnessing heat generated underground.
It does not generate harmful emissions and so is a clean alternative to oil and coal, and is not affected by changing rainfall patterns and so is more reliable than hydropower. Kalahari GeoEnergy has successfully secure climate financing through the UK’s Renewable Energy Performance Platform.
Finally, Betty Wilkinson from Financial Sector Deepening Zambia (FSDZ) discussed two exciting financial products. Firstly, she spoke about weather index insurance for farmers to help them manage climate risks.
This was initially trialled by FSDZ in 2014 before being rolled out to over a million farmers through the Farmer Input Support Programme. Over 240,000 farmers have received pay-outs after their crops were damaged by having too much or too little rain.
The second financial product she highlighted was the development of green bonds. FSD Africa has signed an agreement with the Southern African Development Cooperation Association of Stock Exchanges to facilitate the issuance of green bonds across the SADC region.
These bonds act as vehicles to raise money for investments associated with climate change under international standards for fundraising, use and reporting. Zambia’s Securities and Exchange Commission and Lusaka Securities Exchange are receiving support from FSDZ to create the opportunity for engaging in green bonds in Zambia in the future.
Overall, there were three key take home messages from the event. The first is that critical to delivering these solutions are leadership: urgent, dynamic, and authentic leadership with a call to action at national, business, and individual levels.
The speakers at the event were a clear demonstration that Zambia possesses leaders capable of sparking change and inspiring others to follow. The members of the UNZA Business Club represent the new generation of business leaders, and it is crucial that they have access to education on climate risks and climate finance to give them a head start in the zero emissions economy.
Ensuring that women’s voices are heard more strongly in leadership positions at the decision-making table at all levels is crucial; women often experience the impacts of climate change differently to men and may bring innovative perspectives on solutions. Second, Zambia has an active and high-profile diaspora around the world, and these groups can bring international expertise and resources back home to stimulate further action on climate financing in Zambia.
The Watt Club of alumni from Herriot-Watt University in the UK is a good example. Finally, although there are certainly challenges and gaps in access to finance for climate action in Zambia, this event demonstrated that the building blocks are there to create a better future for our children: innovation in financial products and committed and inspirational leadership.
This Op-Ed was written by His Excellency Nicholas Woolley, the British High Commissioner to Zambia.
