After the May ministerials: where does Germany’s G7 presidency stand on climate impacts finance?

A critical analysis of G7’s progress on climate finance. Photo: Bundesregierung

A busy month for Germany’s G7 presidency has come to an end, with preparations for the G7 leaders’ summit in the Bavarian mountains,  scheduled from the 26th to 28th of June, heating up.

A number of climate action relevant ministerials took place in May. The Foreign Ministers kicked off this series from the 12th to 14th of May, followed by the development ministers who convened on the 18th and 19th of May (including a joint meeting with health ministers), and then the finance ministers met from the 18th  to 20th of May. Finally, environment, climate and energy ministers had the opportunity to address key challenges at their gathering from the 25th to the 27th of May.

These ministerials were preceded by the culmination of civil society’s preparatory work at a C7 summit, which handed over key recommendations to the German chancellor on the 4th and 5th of May. CARE, Germanwatch and Oxfam also actively engaged in the C7 process and also laid out five key climate finance expectations in an early joint output with Germanwatch and Oxfam, summarised in a specific blog article.

So after all those meetings, where do we stand with regard to G7 delivering progress on climate finance for gender-transformative actions, in particular for those countries and communities most affected by the impacts of the climate crisis?

This article summarises key achievements (or lack thereof) in four areas, a) the USD 100 billion climate finance goal, b) tapping into new finance for addressing loss and damage, c) increasing finance for adaptation, and d) enhancing the integration of gender equality in climate actions.

No acceleration on the delayed fulfillment of the USD 100 billion commitment in sight

In 2009, developed countries committed to mobilising 100 bn USD annually by 2020 in new and additional finance to support adaptation and mitigation action in developing countries . Obviously the G7, as the economically most powerful, and emission-wise most responsible of the developed countries, must play an instrumental role to achieving this goal. In 2021, developed countries conceded that they have failed to deliver on this goal which was, and continues to be, a central element of the Paris Agreement’s architecture and a cement or mutual trust between Parties.

After the G7 ministerials, any mild hope that this goal might be achieved in 2022 is barely alive. Interestingly, or even more concerningly, the development ministers’ communique (as also the foreign ministers’ statement) did not even mention the 100 billion goal, despite development finance budgets – due to the lack of true additionality in most G7 countries – being the major source of public finance to meet the 100 billion goal. The finance ministers reiterated their commitment to achieving the goal by 2023, including that they “agree to continue to strengthen and, where possible, increase public climate finance”. However, this does not sound like a determined commitment to do everything they can to make it happen, despite the critical role of finance ministers on this. They committed to “more detailed work in the Finance Track by our October meeting ahead of COP27,” but it is unclear what this work  may be if it is not actually delivering the finance.

At least in their 40-page communique the environment, climate and energy ministers  “reiterate the deep regret expressed  by Parties in Glasgow that this goal has not yet been fully delivered,” and agree that they will “together with other developed  country parties, work  on a progress report ahead of COP27,” which is important from a transparency perspective. However, they should seek to correct some of the weaknesses and flaws in last year’s report, including the lack of disaggregated information as it missed country specific indications of finance increase, and the lack of attention to the issue of additionality of climate finance.

First G7 specific loss and damage statement mainly recooking established language

As the impacts of the climate crisis are causing unprecedented levels of losses and damages in developing countries, with human suffering at its core, the G7 are under scrutiny as to whether they manage to recognise their responsibilities and step up to advance lasting solutions for poor countries and communities to address loss and damage. Obviously, this is needed in addition to adaptation efforts, which can help to minimise losses and damages, and mitigation as a key strategy to avert loss and damage. While the foreign ministers managed to link  climatic and environmental change with the wider security, economic, humanitarian, environmental and societal challenges it creates, they did not manage to speak out clearly on the growing threat of losses and damages.

While contextualising loss and damage mainly through the lens of mitigation and adaptation, the development ministers recognized “the urgent need for scaling-up action and support, as appropriate, including finance, technology and capacity-building, for the implementation of relevant approaches to averting, minimising and addressing loss and damage in developing countries that are particularly vulnerable to the adverse effects of climate change.” Those who frequently follow the UNFCCC negotiations – with the same countries at the negotiations table – surely feel they have heard and read this before, literally, more than once since the Paris Agreement with a specific L&D Article 8 came into force. However, this has resulted in limited additional actions in the past, and no progress at all in the delivery of new and additional finance to address loss and damage beyond adaptation and mitigation finance.

In fact, despite the big action gap, the G7 and other developed countries have frequently silenced attempts by vulnerable developing countries (in the UNFCCC negotiations or the specific Warsaw International Mechanism’s Executive Committee) to expand the debate to also look into potential new and innovative sources of public-type finance, by limiting the scope of analytical reports or submissions under the UNFCCC to “available sources of finance”. Now the G7, in a lukewarm statement,  has managed to agree to “fully support and […] constructively engage in the Glasgow Dialogue among Parties”. Anything other than that would be a direct bad faith negotiation response to something they agreed to engage in just six months ago at COP26.

A stronger signal to vulnerable developing countries would have been to express that they would actively engage in considering arguments and proposals for a loss and damage finance facility – or a similarly labelled mechanism – and new sources of finance, as also demanded by the C7 or the V20 group of vulnerable nations. As the latter group also outlines, this could be one of several elements of a Global Shield against climate risks for closing the financial protection gap, a term which the German G7 presidency has brought to the debate  which is referred to both in the environment, energy and climate ministerial statement, and with a bit more detail in the development ministers’ statement. However, effectively this statement does little more than envisaging to “strengthen” existing frameworks and better coordinate within the global climate and disaster risk finance and insurance (CDRFI) architecture, including under the InsuResilience Global Partnership (IGP). It does not provide any clarity on how the G7 would significantly step up public finance for addressing loss and damage, and how they see a ‘global shield’ emerging.

CARE is an active member of the IGP and works with other civil society organisations to promote a pro-poor perspective on climate and disaster risk finance and insurance. Therefore we also welcome the adoption of the five Principles for SMART Premium and Capital support, which CARE contributed to. However, this engagement comes alongside advocating for developed countries to provide new and additional finance to address loss and damage, and to explore the potential role of a loss and damage finance facility.

No clear progress on doubling adaptation finance by 2025

One of the outcomes of COP26 was the commitment by developed countries to at least double adaptation finance by 2025 compared to 2019 levels, also building  on announcements made by several developed countries. Although it is missing in the finance ministers’ piece, this commitment was reiterated in both the development ministers’ communique as well as that of environment, climate and energy ministers. The latter communique fails to include clearer milestones as to how to get to that doubling, but refers to the above mentioned update on the climate finance delivery plan and also calls on Multilateral Development Banks (MDBs) and Development Finance Institutions (DFI) to “strengthen their efforts”. Positively, it notes the need to improve access to finance, a concern particularly raised by LDCs and SIDS, and the G7 support the “Taskforce on Access to Climate Finance’s Principles and Recommendations”.

Enhancing the integration of gender equality in climate actions

Positively, gender equality considerations with climate relevance feature across several ministerial statements. Environment, energy and climate ministers “acknowledge the need to make climate finance gender-responsive and enhance its effectiveness, especially to unleash the potential of women empowered to contribute to climate and sustainability action.”

A forthcoming “joint G7 Gender Equality and Diversity in the Energy Sector Report” is expected to provide further guidance and successful examples, and an annual progress report has been initiated. Development ministers overall have given more attention to gender equality across the different themes of their communique. A commitment to “make every effort to collectively increase the share of the G7’s bilateral allocable ODA advancing gender equality and women’s empowerment over the coming years” is surely welcome and would also have positive impacts on increasing gender aspects across climate finance (as mentioned before, unfortunately most G7 count most of their climate finance as ODA).

However, again, this is an extremely vague commitment lacking any clear aggregate baseline and target. The climate section of the development ministers’ statement further highlights the need for an “inclusive, gender equal and socially just” transition to net zero emissions and climate-resilient and nature-positive societies. The G7 further recognises “the importance of gender mainstreaming throughout targets and goals” of the UNFCCC gender work programme and action plan. Overall, the gender perspective lacks the measurable clear commitments  for action necessary to be seen as truly transformative.

Leaders at the summit must deliver more concrete action!

All of the above shows that, in addition to a lot of nice-to-have language, the G7 ministerial set up has so far delivered very few concrete next steps or commitments to boost confidence in vulnerable developing countries that climate finance has been  stepped up and key issues are being tackled. Of course, the focused analysis in this article cannot capture everything that is contained in the ministerial statements. But it shows that on the key issues investigated, less words and more concrete actions and commitments are required. This will be a key task for leaders when they meet at the G7 summit itself at the end of June. In particular, the host, Germany’s chancellor Olaf Scholz, can step up on climate finance, with recent analysis of the German 2022 budget negotiations raising serious doubts over the government’s determination to stick to its commitments to further increase climate finance to EUR 6 billion per year. This target has also been widely criticised by civil society as too low and instead should be raised to EUR 8 billion for supporting mitigation and adaptation actions in developing countries, with additional resources needed for addressing loss and damage.

Sven Harmeling, CARE