The Hague, February 1, 2024

Ministries of Finance from 92 countries work together for climate action

The Coalition of Finance Ministers for Climate Action met on February 1-2 in The Hague, the Netherlands. The Coalition offers a platform for ministers and ministries of Finance from 92 countries and several international organizations to discuss the financial aspects of climate change. Co-chairs Ralien Bekkers (the Netherlands) and Masyita Crystallin (Indonesia) sat down to discuss their goals and hopes for the meeting.

Bridging the gap between countries is part of the Coalition’s core. This is also reflected in its structure. Masyita: ‘The co-chair position by design is filled by one advanced economy, and one emerging or developing economy. Because countries come with different initial conditions, financial situations, emission accumulation, and overall stage of development.’ Countries take the position of co-chair for at least two years, with two possible one-year extensions. Indonesia will soon enter its final year; the Netherlands started as co-chair last year.

Honest conversation

The Coalition offers a platform for members to speak plainly. Masyita: ‘We have created a safe space for members to discuss things that are important for climate action but not yet implemented in their own country, or even are still politically sensitive.’ This puts the Coalition in a unique position. ‘We are not making formal decisions, but that also has a positive side’, Ralien adds. ‘Because it is not a formal process, there is room for honest conversation about what is actually working or not.’ She hopes these efforts will find their way into policy. ‘We would like to have more and more Ministers of Finance to take what’s discussed within the Coalition to a G20, to the COP, to other global fora – and of course to their own countries to advance implementation of actions on the ground.’

Peer network

But it is about more than just convening and speaking. Being able to call upon already proven ideas and ways of implementing climate action as ministries of Finance is an invaluable resource for members, despite the differences between countries. Ralien: ‘Policy instruments – practical implementation – are one of our key focuses as co-chairs. To collectively grow our understanding of what we can do in our own countries and how to do it. To achieve that, we are working to strengthen the peer network and facilitate the exchange of experiences through the Coalition.’

Growth

This year marks the fifth anniversary for the Coalition. In that time they have grown substantially, which provides both opportunities and challenges, Masyita states: ‘At the size we’re at right now, you run into the risk of becoming too big. You need a better mechanism to be able to hear everyone’s voice, so we really want to activate our members’ involvement in the Coalition.’ Ralien adds: ‘We want our members to become leaders and champions in their own regions, activating others. Our current chairmanship term will end in 2025, which coincides with an important UN Conference of Parties (COP) and a deadline for the next round of national climate plans. The Coalition advocates for ministries of finance to be more involved in those.’

Impact

There are, understandably, some that ask why the ministry of finance is involved in handling climate issues. Masyita: ‘Ministries of Finance are often outside of climate conversations. For example at the COP, Ministries of Finance are generally not part of the “parties” that represent their governments in the negotiations. But the involvement of our ministries helps move climate policy forward. This is part of why the Coalition was formed.’ The climate issues are also often so complex that they touch on many political and societal aspects. Ralien: ‘Climate is becoming part of our core business. It impacts fiscal affairs, it impacts costs; it impacts finance.’

Dubai, 4th December 2023 

Meeting at the UN Climate Change Conference COP28 in Dubai, Finance Ministers attended the Ministerial Meeting on "The role of Finance Ministers in mobilizing public and private climate finance" organized by the Coalition of Finance Ministers for Climate Action. The Ministerial Meeting was convened under the leadership of Sri Mulyani Indrawati, Minister of Finance of Indonesia and Sigrid Kaag, Minister of Finance of the Netherlands, Co-Chairs of the Coalition.  

“Effective climate action, right decisions and prioritization rest on the shoulders of Ministers of Finance” said Sigrid Kaag, Co-Chair of the Coalition, in her opening remarks. 

Opening remarks were further provided by Kristalina Georgieva, Managing Director of the International Monetary Fund, Axel von Trotsenburg, Senior Managing Director of the World Bank, Ambassador Majid Al Suwaid, COP28 Director General, and Simon Stiell, Executive Secretary, UNFCCC. 

The Ministerial Meeting took place as countries discuss the Global Stocktake which shows that the world faces substantial gaps in achieving the goals of the Paris Agreement. Responding to the challenges faced by Ministries of Finance, Lord Nicholas Stern and Vera Songwe of the London School of Economics Grantham Research Institute on Climate Change and the Environment, presented the Coalition’s flagship report "A Climate Finance Framework: Decisive action to deliver on the Paris Agreement". Key recommendations to Finance Ministries include prioritizing subsidies, focusing on carbon pricing and mobilizing private sector finance. 

A panel discussion followed by Tatiana Rosito, Deputy Secretary for Sustainable Finance, Ministry of Finance, Brazil, Benjamin Diokno, Secretary of the Department of Finance, Ministry of Finance, Philippines, Charlotte Vere, Parliamentary Secretary, HM Treasury, United Kingdom. 

Building on the publication of its first Climate Action Statement at the 10th Ministerial Meeting during the Annual Meetings in Marrakech, the Ministerial Meeting invited Finance Ministers to share the impact of the policies they are implementing to unlock investment opportunities and mobilize climate finance, as well as share best practices, lessons learned and experiences. 

In response, Mihaly Varga, Minister of Finance, Hungary, Azucena Arbeleche, Minister of Economy and Finance, Uruguay, Achim Steiner, Administrator, UNDP, and Werner Hoyer, President, EIB, Wale Edun, Minister of Finance, Nigeria, Mohamed Maait, Minister of Finance, Egypt, Alexia Latortue, Assistant Secretary for International Trade and Development, US, Daniella Stoffel, State Secretary for International Finance, Switzerland, Jennifer Carroll MacNeill, Minister of State Department of Finance, Ireland, Magnus Brunner, Minister of Finance, Austria, Jeppe Bruus, Minister of Taxation, Denmark, Francesca Utili, Director General for International Financial Relations, Italy, Thierry Watrin, Green Economy Advisor, Ministry of Finance, Rwanda made interventions highlighting the role of Finance Ministries in offering the scale, speed and effectiveness of climate action. 

In her closing remarks, Sri Mulyani Indrawati, Co-Chair of the Coalition, highlighted the task as well as opportunities ahead for Ministers of Finance to develop and implement ambitious climate action. Sri Mulyani Indrawati also announced the collaboration with the NDC Partnership to provide targeted resources and expertise for Ministries of Finance to actively engage in the development of NDCs and LT-LEDS. 

The Coalition of Finance Ministers for Climate Action was invited to present our flagship guide and capacity building catalogue at the second High-Level Dialogue of the Regional Climate Change Platform of the Ministries of Finance, Economy and Finance of Latin America and the Caribbean, in Santiago – Chile. 

The Regional Climate Change Platform of the Ministries of Finance, Economy and Finance of Latin America and the Caribbean is an awe inspiring space for knowledge exchange and a unique collaborative work mechanism, which seeks to strengthen economic and fiscal policies in the region to address the challenges that climate change demands.

At their second annual meeting, representatives issued for the first time a joint statement to align their fiscal strategies to promote the transition to low-carbon and climate-resilient economies. The declaration recognizes the strategic role that ministries of finance can play in promoting a sustainable and just transition to net-zero carbon economies and ratifies their commitment to promote green fiscal policies in the region to support the mobilization of private capital towards investments in green technologies and the mitigation of risks associated with the transition to decarbonized economies.

The member countries of the platform committed to contribute to the development of innovative financial mechanisms, improve investment flows, and create pathways for effective resource allocation to support these goals. During the same meeting, Chile's Ministry of Finance assumed the pro tempore presidency of the platform, where the Inter-American Development Bank acts as Secretariat. At this event, the work plan for the period 2023-2024 was also presented and approved, which was prepared based on the main interests expressed by the various countries in the region.

The Platform invited member countries of the Coalition for Finance Ministers for Climate Action to share their experiences in the context of the guide, followed by a brief presentation. Jaime Tramon, representing the Chile Ministry of Finance (and chairing the Platform), offered introductory remarks. Laura Tellez, gave insightful views from the Ministry of Finance of Mexico, followed by Juan Labat’s experience and that of Uruguay. Nick Godfrey presented the Guide, and Frank van Lerven discussed the Coalition’s Climate Action Statement and the rich network of capacity building programs provided by our Institutional Partners.

This blog is authored by Frank van Lerven

Cover photo by victor san martin - Flickr, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=3233275

This blog is authored by Ohla Krushelnytska, Frank van Lerven and Camille Maclet

Please note: this blog has been cross-posted on the WBG website.

During COP15 of the Convention on Biological Diversity (CBD), in December 2022 in Montreal, a message was clear: Ministries of Finance play a critical role in achieving commitments set out in the Kunming-Montreal Global Biodiversity Framework (GBF).

As a parallel to the 1.5 degree goal set out in the Paris Agreement, the GBF hinges on a vision to “live in harmony with nature by 2050”. To achieve this, the GBF sets a mission to halt and reverse biodiversity loss by 2030, underpinned by 23 action-oriented targets.  These cover protecting 30 percent of land and sea, restoring 30 percent of degraded habitats, restoring ecosystem functions and services, ensuring just and equitable access and benefit-sharing to all people. The GBF also calls for aligning financial flows to support this vision and mobilizing resources for implementation.

The GBF does not only focus on nature conservation or restoration - it aims to address the causes of nature loss throughout all of the economic activities.   This means the GBF targets are being directly relevant to “green financing” as well as all other “non-green” activities, in particular key productive sectors in need of transition such as agriculture, forestry, extractive industries, and infrastructure. Domestic implementation of the GBF is through national biodiversity strategies and action plans (NBSAPs) that all parties to the CBD have committed to updating by COP16 in 2024.

What do GBF targets mean for the Ministries of Finance?

A high-level roadmap for aligning financial flows with the GBF, released in July, provides a plan of action for the financial industry.  The roadmap draws upon various publications and other guidance from financial sector initiatives and coalitions, including the reports on Climate- and Nature-related Financial Risks by the Coalition of Finance Ministers for Climate Action (Coalition). The following table highlights those actions particularly relevant for the Ministries of Finance.

Aligning financial sector flows with the GBF: Actions relevant to the Ministries of Finance

Source: Adapted from High-level Roadmap for Aligning Financial Flows with the Kunming-Montreal Global Biodiversity Framework, published by UNEP FI and partners on 13 July.

Coalition members are working towards meeting the GBF targets.

In Chile, the establishment of a Natural Capital Committee consisting of representatives from various government bodies – including the MoF - offers policy advice by measuring and preserving the country's natural capital, making it a central consideration in public policy and decision-making. The MoF will be reviewing  its financial strategy for climate change, along with the development of a financial strategy for biodiversity, which will be merged as the next step. Additionally, Chile intends to identify nature-based investment solutions through Biodiversity, Ecosystems, and Landscape Assessment (BELA) initiative.

In France, the MoF is actively working on mainstreaming biodiversity through green budgeting. The MoF is evaluating with the Ministry of Environment the environmental impact of state budget expenditures, including biodiversity. The Energy and Climate Law enacted in 2019 encourages nature-related risk disclosure in the private sector. The country also aims to reduce harmful incentives by 2030, and with an independent report estimated estimating nearly $10 billion in harmful incentives in 2022.

In Mexico, the federal budget is aligned with the SDGs and includes 18 programs linked to SDG 14 (Conserve and sustainably use the oceans, seas, and marine resources) and 17 programs linked to SDG 15 (Life on Land). In March 2023 the MoF published Mexican Sustainable Taxonomy, which includes objectives on climate change mitigation and adaptation, and gender equality, and it is on track to include biodiversity as its objective as well. In addition, the MoF participated in the GBF Fund negotiations and is working with other line ministries on updating the National Biodiversity Strategy to incorporate the GBF’s targets.

In Uganda, the The Ministry of Finance, Planning and Economic Development (MoFPED) is integrating biodiversity in long-term public sector strategies. The MoFPED also fiscally decentralizes funding for biodiversity policy goals: for example, allowing Uganda Wildlife Authority, an agency responsible for managing important biodiversity areas - to deploy revenues as they come in based on the urgency of actions. The MoFPED, in cooperation with other ministries, is working on implementing a budget tagging tool, to allocate funds specifically for nature and biodiversity-related initiatives. Additionally, to inform policy makers an ecosystem services account in addition to other natural capital accounts have been prepared. The MoFPED is also working with Bank of Uganda and  development partners to mobilize private sector resources for nature, and work is underway to establish nature-related disclosure requirements.

In the UK, significant progress has been made in natural capital accounting, especially to inform spending reviews and fiscal events. The UK’s supplementary Green Book guidance on “’Enabling a Natural Capital Approach’ to Policy and Decision-Making" provides guidance on evaluating and monetising natural capital impacts. The UK has set a goal to mobilise £500 million of private finance per year into nature’s recovery in England by 2027. The UK has also launched: the Green Financing Programme, launched in 2021, has raised £29 billion to support projects with clear climate and environmental benefits; The Big Nature Impact Fund, launched at COP 27, combines £30 million public and private investment to finance high-integrity nature projects, such as carbon sequestration. The UK also supports the Taskforce on Nature-Related Financial Disclosures (TNFD) and looks forward to the upcoming publication of their framework.

While there is still work to do, the high-level roadmap and the experiences of implementing it as presented by the six countries, offer the insights into the practical steps necessary for the aligning the financial sector flows with the GBF. What is clear is that an environmentally sustainable future will require increasing MoF involvement - and understanding of its role is a first important step for achieving global biodiversity goals.