Image credit: Ny Menghor via unsplash
Financing for Human Mobility at COP26
Remotely from Tuvalu and submerged in the ocean, with water-logged shoes and a wet suit, the Island nation’s foreign minister delivered an urgent appeal to this year’s COP audience, “we cannot wait for speeches when the sea is rising around us all the time; climate mobility must come to forefront, we must take bold alternative action today to secure tomorrow”.
Indeed, speeches alone won’t bring action, but action also won’t come independent of the necessary financing needed to address climate mobility, a much-heated topic at every COP-edition. Financing and notion of responsibility, two of the historic elephants filling the COP-conference halls, converged this year especially on the discussions of ‘Loss and Damage’.
Financing via Loss and Damage would see funds flow from developed nations to developing ones to address the impacts of climate change on livelihoods and infrastructure based on the understanding that historically large emitters have an obligation to pay dues for the climatic effects they helped cause. Despite lobbying from the G77 to create a financing facility to this end and the two Million GBP committed by Scotland, further structured financing options for Loss and Damage were stymied.
If bold alternative action to address climate mobility (or rather human mobility in the context of climate change) won’t, at least in the short-term, come from arrangements under the COP-banner, then where should it come from and what does bold alternative action look like? What is certain is that outcomes for human mobility (the term encompassing migration, displacement and relocation) can positively be affected by the role of targeted financing. This being said, there is no one-size fits all approach that would unilaterally better outcomes. The type of financing that is useful is context dependent and best served up in combination with other policies, or often other financing options themselves.
Before looking at what other viable options there are to finance activities related to human mobility in the context of climate change it is worth deviating briefly into the role that risk plays in climate finance decision making. The reason why a combination of financing approaches is needed boils down to the role of risk and being able to manage said risk.
Broadly defined, you can categorize the role of financing along three risk strategies: risk transfer, risk reduction, and risk retention. In any given situation, employing one of the three risk management strategies will only in turn manage part of the related risk. For example, in the case of a tsunami, a national government can draw on contingent budgeting (risk retention) to ex-post address related damages, though had financing been utilized to shore up vulnerable infrastructure (risk reduction) or had microinsurance policies been common practice (risk transfer), the cost to each individually would have been less than the sum of its parts. That is, the employment of a mix of appropriate risk strategies results in costs that are on aggregate lower than if one strategy alone would have been used.
Where does the money come from?
Even if the costs are lower, there are still costs and those need to be financed. Where does this financing then come from? Here it is useful to distinguish between different financing levels, namely between domestic, multi-/bilateral, and private. The majority of domestic financing comes from the national budget or national administrative bodies, such as government agencies, trusts, and funding pools, or regional and municipal administrations. Multilateral and bilateral financing for human mobility is facilitated by (multilateral) development banks (MDBs) and agencies, multilateral organisations and their funding arms (e.g., the Adaptation Fund (AF) or Green Climate Fund (GCF)), and disaster response organisations (DRO). One long-term bilateral example is the sector programme “Global Programme on Human Mobility in the Context of Climate Change”) by the German Development Cooperation (GIZ). In the private domain, the majority of financing stems from remittances and thereafter from private companies, especially the insurance branch.
What can be said about the level of financing for human mobility is that it occupies a marginal space in any of the above mentioned non-private domains. The trend is upwards though, with, for example, the general strategic aim of MDBs to move more funding towards these areas and with DROs taking on more reactionary targeted approaches to more efficiently target their relief efforts.
With an increase in the role of migration in the climate funding portfolios on the multilateral level there is an inherent impact on the national level, where here too new programmes are sprouting to better integrate climate risks in national financial planning and budgeting.
Timing is the key for risk reduction
The type of tool or policy employed depends greatly on the time of climactic shock or event. Timing is key for people with little to no liquidity, whose entire asset-base might too be endangered by climate shocks. This is especially true in the case of sudden-onset events. The quicker relief can come, the greater the amelioration of the effects of the climactic shock. Under the general heading of forecast-based financing (FbF), financing is being used to move livestock before a storm hits, provide resources to shore-up vulnerable homes and structures, and evacuate people to safety. These initiatives have been for the most part financed by the Red Cross and rely on weather data to and strategic plans called early action protocols which set out guidelines for how to react anywhere from one month (for foreseeable droughts) to 24 hours (before, e.g., a storm) in advance of an event. This type of financing falls into the risk reduction category, though no matter the amount of funding diverted to early action, there will still likely be some unavoidable damages.
Strategizing risk transfer
To accompany risk reduction, it is important to employ risk transfer strategies. Microinsurance policies provide peace of mind for those liable to the uncertainties of climactic shocks. Despite the word micro embedded in the name of the tool, there is an important role for national and multilateral institutions to play in this domain. Uptake of microinsurance policies can greatly be increased by information campaigns and policies can also in part be subsidised to make them more affordable. On the national level, governments can band together to form joint risk pools, where a grouping of politically connected but sufficiently geographically dispersed sovereigns pay into a pot to in part transfer the risk of otherwise having to deal with the full financial impact of a climate shock. Examples include, among others, the African Risk Capacity and the Caribbean Catastrophe Risk Insurance Facility.
Risk retention as a last resort?
Similar to how there are costs not covered by risk reduction strategies alone, even with the use of risk transfer, only so much of the risk can be reduced or shifted. To this end, risk retention strategies can help cover remaining costs associated with climate shocks. For governments, this would take the shape of budget contingencies, i.e., money set aside in the national budget or contingency loans made from (mostly) multilateral development banks. For individuals, risk can be retained by accessing microcredit, or better yet microgrants if available (in order to avoid debt-spirals), and through remittances, if these too are available.
The role of risk retention is especially important when it comes to slow-onset events. Here the livelihood impacts are often more fundamental and the risks often cannot simply be reduced or transferred. People displaced by slow-onset events cannot return and rather need to seek or ideally be provided with opportunities elsewhere. The large-scale changes must in-turn be supported by large-scale financing, on a level above the individual, e.g., on the national level. Tools to address slow-onset events are relocation schemes or the use of a so-called climate land bank. A relocation fund has been established in Fiji to provide capital, financed via a climate change levy, to eventual necessary relocation efforts as a result of sea-level rise. Another risk retention strategy, a climate land bank, currently not yet in use, would see national governments finance a repository of land-assets that can be distributed to those whose current place of residence would become uninhabitable as a result of climate change.
The way forward: the role of policy making and legal considerations
Ultimately, the implementation of tools and policies will look differently in different contexts as their implementation is embedded in the cultural frameworks in which they are deployed. The role of legal frameworks ranging from e.g., laws around access to financial institutions, to social protections to labour rights to property rights, etc., all will impact the outcomes of the strategies discussed above.
Work Package 6 of the Habitable Project will take precisely these considerations into account, evaluating both existing legal and policy frameworks (which to some extent include the role of financing options) to identify the best practices for creating the best outcomes for human mobility. What is certain is that the notion of risk is at the heart of any mobility decision and that balancing and tackling risk, will reduce losses, both human and financial.
Whether Loss and Damage will gain more traction next year at COP27 in Sharm El-Sheikh is yet to be seen, but in the meantime national governments would do well to tap existing multilateral and bilateral funding pots as well as their own abilities to manage risk through the financial tools and instruments available to them. This would help create the most humane and cost-effective conditions for those most vulnerable and susceptible to the effects of climate change.