In the November 2022 COP27, climate finance was given the highest priority to scale up climate action to prevent the most devastating impacts of climate change and help countries prepare and adapt to it.
The “loss and damage” funding for vulnerable countries hit the hardest by climate change defined last year’s COP27.
The Philippines’ vulnerability and exposure to extreme weather events are well-known. Its large population is part of its high vulnerability, and a high percentage (74%) is projected to be impacted by natural disasters.
In the last 20 years, the country has been ranked 4th among countries most affected by extreme weather events like cyclones, floods, landslides, severe drought, and heatwaves, and this is only projected to increase.
Every year, an average of 20 typhoons hit the country, with floods affecting over 3 million Filipinos.
Heavy losses from extreme events
Data from UNESCAP’s document, “Climate Finance in the Context of the Philippines“, reveals that the number and severity of typhoons entering the country are increasing, creating more losses and damage.
The report estimates that the government will incur around Php 177 billion or US$3.6 billion in public and private yearly losses due to typhoons and earthquakes. And, in the next 50 years, the Philippines has a 40% chance of reaching a loss of nearly Php 1 trillion and 20% of exceeding Php 1.5 trillion.
To prevent such significant damage and losses to extreme weather due to climate change and other natural disasters, in 2021, the country announced an ambitious climate target – to revise its target to cut GHG emissions from 70% four years ago to 75% by 2030, under its Paris Agreement commitment.
But of its 75% GHG emissions target, only 2.7% is financed through domestic resources, while 72.3% is conditional on climate finance, technologies, and capacity development support from developed economies.
The good news is that globally private investors are seeking to finance green projects in developing countries.
The Philippines’ first sovereign sustainability bond issuance raised $ 1 billion for green projects in 2022,” and there are climate funds like the regional ASEAN Catalytic Green Finance Facility and the national Peoples’ Survival Fund that offer financing and technical advice to help design projects (Connect & Morgado, 2022).
Connect & Morgado (2022) provide five recommendations on how the country can unlock the financing it needs:
- Increase government budget allocations for the climate. Effective government budgeting is critical to building institutions, as well as the teams of people needed to convert climate ambition into action. Maintaining and increasing budget allocations – from the 6.27% of the annual budget allocated for climate resilience in 2021 – will be critical. The national Climate Change Expenditure Tagging system supports government agencies to better budget and tracks what they spend on climate activities.
- Mobilize international climate finance. The Philippines’ climate ambitions will not be met without support from development partners and philanthropies. In 2018-20, donor governments and multilateral institutions provided $2.4 billion in climate-related development finance. More of these funds are needed and fast. A pipeline of projects needs to be built, and project sponsors need more capacity to mobilize funds, design projects, and engage investors.
- Green the financial sector. Banks will be vital to financing the lion’s share of climate initiatives in the Philippines. The central bank, Bangko Sentral ng Pilipinas, and other financial regulators have implemented a suite of policies to integrate environmental, social and governance issues into banking practice, encourage green lending, and support banks considering climate risks affect their lending. Banks and financial institutions need greater capacity to take on this agenda.
- Attract private investors. With renewable energy prices decreasing rapidly, private investors want to finance clean energy projects. Investment in geothermal, solar and wind projects can be unlocked by updating regulations and implementing the right incentives to help address investment risks. At the same time, innovative solutions are needed. The Energy Transition Mechanism, for example, is piloting an approach to mobilize funds to help retire coal power plans early and provide for affected communities.
- Mobilize local governments. Local governments – as future leaders of climate security for most Filipinos – are vital to building pipelines of low-carbon and climate-resilient projects. National platforms like the Peoples’ Survival Fund can help channel funds to projects, but local governments need awareness, know-how and capacity to roll out local climate change programs.
The article highlights the urgency of climate action, citing that during the COP27 in Sharm El-Sheikh, the message was clear that the world has only until 2030 to limit global warming or else it will be too late – reasons for the Philippines to mobilise climate finance and actions as quickly as possible.
Connect, D. & Morgado, N. (2022, December 13). Five Ways to Fund the Philippines’ Fight against Climate Change. Asian Development Blog. Retrieved from https://blogs.adb.org/blog/five-ways-fund-philippines-fight-against-climate-change
Philippines raises carbon emissions reduction target to 75% by 2030. (2021, April 16). Reuters. Retrieved from https://www.reuters.com/business/environment/philippines-raises-carbon-emission-reduction-target-75-by-2030-2021-04-16/
Climate Finance: Helping the Philippines to Cope with Climate Change. (2022 August 2). AFD. Retrieved from https://www.afd.fr/en/actualites/climate-finance-helping-philippines-cope-climate-change