Barbados, OPEC Fund launch climate financing initiative

Barbados and the OPEC Fund for International Development have launched a new initiative aimed at helping climate-vulnerable countries secure more affordable financing for development and climate resilience projects, as Bridgetown continues to press for reforms of a global financial system seen as penalising those most exposed to climate shocks.

The Vulnerability to Viability (V2V) Compact was unveiled at the OPEC Fund Development Forum in Vienna, Austria, bringing together 78 climate-vulnerable economies and more than 15 development finance institutions in a bid to improve access to capital for countries on the front line of the climate crisis.

The initiative comes amid longstanding concerns from small island developing states and other vulnerable nations that they face high borrowing costs despite contributing little to global greenhouse gas emissions, while remaining among the most exposed to hurricanes, droughts, flooding and other climate-related shocks.

The Compact builds on the principles of the Bridgetown Initiative, an effort to improve access to development financing for the approximately 1.7 billion people represented by the Climate Vulnerable Forum and V20 finance ministers.

Under the Compact, participating countries will seek to access financing on more favourable terms, including longer repayment periods and stronger alignment between national development priorities and development funding.

The initiative is a joint undertaking between the OPEC Fund and the government of Barbados in its capacity as chair of the Climate Vulnerable Forum and its V20 finance ministers.

Prime Minister Mia Mottley said the Compact was designed to address inequities in the global financial system and place vulnerable countries at the centre of decisions affecting their development.

“Countries lead, and finance institutions align,” Mottley said in a statement. 

The approach would allow countries to organise development financing around their own priorities rather than navigating fragmented funding arrangements spread across multiple institutions, she said.

The Compact will focus initially on three areas identified as critical to resilience and human development: water, education and health.

“This Compact is about securing not just survival, but viability and prosperity. Our countries deserve sustainable pathways to development, and that can only happen by unlocking affordable capital,” Mottley said.

Participating institutions include the Caribbean Development Bank, African Development Bank, Asian Development Bank, Inter-American Development Bank, World Bank Group and International Fund for Agricultural Development, along with members of the Arab Coordination Group.

According to information released at the launch, the initiative combines affordable and predictable financing, private capital mobilisation and shock-responsive financial tools intended to help countries maintain essential services and strengthen resilience before and after climate-related disasters.

President of the OPEC Fund, Abdulhamid Alkhalifa, described the Compact as an example of “solidarity, partnership and practical action”, noting that the institution has provided approximately US$17bn ($34bn) in support to V20 countries over the past five decades.

Work is already underway to operationalise the initiative. A white paper outlining implementation mechanisms is expected to be presented at the annual meetings of the World Bank and International Monetary Fund in Bangkok in October.  

(SM)