Why is climate finance such an important issue, and how does it affect the world's most climate-vulnerable countries? The Pacific island nation of Fiji, for example, is on the frontline of climate change-related impacts such as coral bleaching, sea level rise and extreme weather events. Cyclone Winston and then the Covid 19 pandemic dealt severe blows to Fiji’s attempts to meet these climate challenges, while also negatively impacting the country’s tourism-dependent economy. In this WRI podcast, we hear about challenges, possible and novel solutions, and the central role that climate finance plays in Fiji’s case.

 

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“Regardless of the geographic region they're in, vulnerable countries face a lot of the same structural problems. These countries already carry a fair amount of debt, have limited government resources and are extremely exposed to climate events every year. And those climate events add hundreds of millions of dollars of shock to the government revenues. And their economies are very dependent on stable climates.”

Caitlin Smith, WRI Sustainable Finance Center

 

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“Small island developing states are at the forefront of the effects of climate change. We have seen Fiji facing cyclones year in year out. Since Cyclone Winston in 2016, about 13 or 14 cyclones have struck Fiji and the Pacific. There is a fall in fiscal resources and GDP when the effects of climate change such as tropical cyclones, floods, sea level rise, coastal erosion, ocean acidification, extreme rainfall start to happen in Fiji. For instance, Tropical Cyclone Winston in 2016 ripped off around one third of the GDP of Fiji in just 36 hours.”

Prashant Chandra, Local Climate Finance Advisor

 

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“Our climate funding has significantly suffered due to COVID-19. And the results were dramatic budget cuts to critical projects to adapt the agriculture sector and protect our marine ecosystem and decarbonize our economy.”

Prelish Lal, Ministry of Economics, Fiji

 

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“We're looking at the kind of new and emerging concepts such as parametric insurance, green and blue bonds, coral reef insurance, various sort of emerging financial concepts that require more sort of homegrown localization to understand if they will be useful, and how we can use them if they are indeed applicable to the context.”

Dan Lund, Drua Incubator, CCICD

 

Transcript:

Nicholas Walton 0:06: Hello and welcome to WRI’s big ideas into action podcast. And in this episode we’re off to the Pacific, to hear about the climate finance challenges facing one island nation:

Prelish Lal: Floods, sea level rises, coastal erosion, ocean acidification, small island developing states are at the forefront of climate change.

Nicholas Walton: And how Covid has made those challenges even harder to meet:

Caitlin Smith: Businesses closed, a lot of workers were laid off. They didn’t eat, everything just kind of crumbled. They really just went into survival mode.

Nicholas Walton 0:40: This is the Big Ideas Into Action podcast from the World Resources Institute, with me, Nicholas Walton. This episode we’re in Fiji.

Caitlin Smith 0.52: The fish market, it's on docks, all of the fish is laid out on tarps on the ground, most of the fish are still alive, like the crabs are bundled and their claws are moving. And there’s a very very, very overwhelming smell of ocean. And then you have fishermen kind of on the boat throwing fish up to their business partners on the docks to lay it out. It feels very scrappy, and real.

Nicholas Walton: This is Caitlin Smith of the World Resources Institute.

Caitlin Smith 1:22: I work as an advisor to the Climate Change division in the Ministry of Economy. And we work on  kind of understanding how he uses climate finance, how it can better use the finance it does get, and then how it can get access to more finance. We started in Fiji in February of 2019. Being able to work within the Climate Change division, on a day to day basis really changes my understanding of how complicated it is for countries who are facing really, really, really severe climate risks to secure the support that they need, how they need it.

Nicholas Walton 2:01: To get an idea why this support, these millions of dollars in financial assistance from abroad, is necessary, take a look at one of the most beautiful – and fragile – parts of Fiji. Here’s Caitlin again…

Caitlin Smith 2:16: Taveuni is known as the Garden Island, it's the third largest island in Fiji. It's mainly known for its diving, it's really close to the rainbow reef, which is always ranked as one of the top dive spots in the world. The bay is normally just flooded with vibrant green and pink corals that support fish, stingrays, sharks, everything that people love to see underwater. And that Bay has experienced a lot of kinds of climate impacts, you have had a lot of coral bleaching events, the diving and the snorkelling is not as good as it once was. Cyclone Winston came through six years ago, it effectively was like a tornado along the bottom of the ocean. And it just ripped out a lot of the corals that once made that area really, really, really rich and abundant.

Nicholas Walton 3:09: Cyclone Winston was the most damaging extreme weather event to hit Fiji in recent years. And as Prashant Chandra, who works as a consultant for WRI in Fiji says, that Cyclone and other impacts of climate change are devastating the country’s economy. 

Prashant Chandra 3:26: Small island developing states are at the forefront of the effects of climate change. We have seen Fiji facing cyclones year in year out. I think from since Cyclone Winston in 2016, about 13 or 14 cyclones have struck Fiji and the Pacific since now. And this has hugely contributed towards the fiscal implications as well. I mean there is a downfall in fiscal resources and GDP, when the effects of climate change such as tropical cyclones, floods, sea level rise, coastal erosion, ocean acidification, extreme rainfall, these things start to happen in Fiji. For instance, TC Winston in 2016 I think it ripped off around 1/3 of the GDP of Fiji in just around 36 hours.

Caitlin Smith 4:20: You can hear it a lot in the stories people tell. When I was last there, a lot of people were talking about this huge drought that was hitting the western half of the country, which is where a lot of the produce comes from. And so what it means is then is subsistence farmers, who are typically able to kind of just let the land cultivate and nourish the crops, lost their crops, they weren't able to get the same abundance and the same supply. I've heard a lot of the same thing with the fish. And that is more of a mix of flooding and storm surges and cyclones and stuff like that. The coral reefs are not as vibrant and not as healthy as they used to be, and with that means just a smaller supply of fish, a smaller supply of prawns, a smaller supply of crabs. And so it's kind of like shaking the foundations of a lot of communities that have long relied on the land to provide their livelihoods.

Nicholas Walton 5:16: Climate finance plays a critical role in helping a country like Fiji meet the challenge of climate change. It needs money so that its communities can adapt to these challenges. Money is also needed to help Fiji play its part in mitigating climate change by reducing emissions and shifting to a low carbon economy, and it’s passed laws to help the government coordinate its response to the crisis. Prelish Lal works for Fiji’s Ministry of Finance. He says that before the Covid pandemic, the country was making progress. It funded 60% of its climate action itself, and relied upon the international community only for the remaining 40%.

Prelish Lal 5:54: Domestically, in the three years prior to the pandemic, we used to have what is known as the environmental and climate adaptation Levy, which helped Fiji to generate domestic public financing. The environment and climate adaptation Levy was a surcharge on tourists activities, luxury vehicles, yachts and high income earners. It had generated almost 270 million Fijian dollars, specifically for environmental and climate related projects, and helped the government supplement a lot of its key funding. It supported projects to climate proof our roads, secure a clean source of water for communities, and coastal sea walls to protect our vulnerable communities from cyclone and storm surges. We've also tried to incentivize the private sector investment in this space. Our Climate Change Act requires companies and state owned entities to disclose their climate risks, so private investors can ensure that investment climate inform.

Nicholas Walton 6:57: These steps that Prelish Lal describes are part of a framework that Fiji has been putting in place to ensure that it can meet the climate challenge, from coordination through to spending priorities, risk management and investment. Fiji has also been looking to innovative solutions, including one that is named after a local canoe. Here’s Dan Lund of the Drua Incubator.

Dan Lund 7:19: The drua is basically a traditional sailing canoe in Fiji and it's sort of a symbol of kind of strength and resilience and ability to kind of work with the environment and an example of indigenous technology and innovation. So the Drua Incubator is a sub unit within the Ministry of Economy dedicated to really developing products rather than financial products rather than rather than projects. So we're looking at the kind of new and emerging concepts such as parametric insurance, green and blue bonds, FDG bonds, coral reef insurance, various sort of emerging financial concepts that require more sort of homegrown localization to understand: A. will they be useful; and then B. how can we use them if they are indeed applicable to the context?

Nicholas Walton 8:03: One of the products that Dan mentioned is parametric insurance. Here’s how that particular product works in the Fijian context:

Dan Lund 8:11: This product is really aimed at vulnerable farming communities who stand to lose a lot, if they're hit by a disaster event, they lose their crop or they could lose infrastructure or their homes. And would struggle to be able to recover financially from that in the near term. This is the difference between being able to get by and really struggling. So, last year, we piloted this with over 1300 community members in different parts of Fiji in areas that have different risk profiles. And the parametric insurance has been designed to be triggered when a certain wind speed is met. So irrespective of whether damage is actually incurred after that wind speed gets to a certain threshold, then a payout is made directly to that policyholder and the funding is sent via mobile phone.

Nicholas Walton 8:57: You’re listening to WRI’s Big Ideas Into Action podcast, in this episode focusing on the climate finance challenge faced by Fiji.

So far we’ve heard about the beauty and fragility of Fiji’s natural landscapes, and the threats posed to its economy and communities from the impacts of climate change – complex and expensive challenges such as tropical storms, rising sea levels and the loss of coral reefs. We’ve also seen how it’s been making progress in dealing with this challenge – raising money, getting organised, looking for innovative financial instruments to help its people deal with the crisis. But however much progress was being made before, one thing has made the challenge even harder.

Caitlin Smith 9:39: COVID to me really highlighted that, you just kind of at the whims or the mercy of the rest of the world, right.

Nicholas Walton: In 2020, as the Covid 19 pandemic swept around the world, the economies of countries like Fiji that are heavily dependent on tourism suffered even more than most.

Caitlin Smith 9:55: Fiji relies on international tourism for 40% of its revenues, and Fiji shut its borders to international tourists for two years, because they didn't have the medical infrastructure to handle a huge outbreak. And the result was a lot of people who just didn't work for two years. Businesses closed. A lot of workers were laid off, they didn't eat, they just had everything kind of crumbled. I think they issued a lot of debt, they cut a lot of services, they really just went into survival mode.

Nicholas Walton 10:28: That was Caitlin Smith again, highlighting how Covid crippled the economies of many vulnerable countries while also forcing them further into debt to survive. Here’s Prelish Lal.

Prelish Lal 10:38: Our climate funding has significantly suffered due to COVID-19. And the results were dramatic budget cuts to critical project to adapt in the agriculture sector and protect our marine ecosystem and decarbonize our economy. With the global impact on COVID-19 a lot of resources globally is now becoming to be reorganised to more healthcare sector and more economic development. In doing so, inevitability our Climate Action funding has been impacted.        

Nicholas Walton 11:11: The financial hit from Covid that Fiji suffered was not just at home. The economies of richer countries also suffered, and while they might be better able to cope with this impact, it also means that they have less money available to help out countries like Fiji. But there are some bits of good news, including a pledge that the United States has made for Pacific island countries, and a rising level of international awareness of how serious and urgent the climate change situation is. But, says Caitlin, the finance question is not just about the money on the table.

Caitlin Smith 11:42: There's a quantity and a quality dynamic to climate finance, right. So I think the quantity being that the supply of available finance is sufficient to meet country's needs. And then the quality being that the money that does come in actually goes to the kind of most critical priorities for adaptation or mitigation, is actually going to change conditions on the ground. And I think what we're seeing right now kind of post COVID is the quantity is still not enough, but it's come a long way. But the quality is where I think a lot of attention needs to be given because the quality is not quite there.

Nicholas Walton 12:24: Caitlin’s emphasis on the quality as well as the quantity of climate finance is telling. WRI’s work on the ground in Fiji is about bringing expertise and capacity to the country’s government, so that it spends money in the right places and in the right ways. After all, every country is different and the way that they each experience the challenges of climate change also varies.

Caitlin Smith 12:45: The structural complexity of navigating climate finance and securing and directing climate finance in these climate vulnerable countries, that's universal. A lot of kinds of climate vulnerable countries. So thinking of the SIDS, the least developed countries, regardless of the geographic region they're in, face a lot of the same structural problems right. These countries already carry a fair amount of debt from trying to develop within the kind of modern system. They have limited government resources. They are extremely exposed to climate events every year. And those climate events add hundreds of millions of dollars of shock to the government revenues. And their economies are very dependent on stable climates.

Nicholas Walton 13:35: Getting climate finance right is a critical part of the global response to the climate change challenge. Many of the countries that will be hardest hit are also often the poorest. Those countries – like Fiji – need money to help their communities and economies adapt and make them more resilient, and also play their part in mitigating climate change by reducing emissions. That’s why the $100 billion target for climate finance is so critical. And because so many vulnerable countries took on even more debt during Covid, it’s important that the finance isn’t just in the form of loans that long-term put even more pressure on these countries. And it’s not just about money – it’s about helping Fiji and others use the money and resources in the most effective and relevant ways.

Caitlin Smith 14:18: You know, when we were in Taveuni we went to this village that's getting inundated with high tides, because sea levels are rising and the coast is eroding. And we went on a site visit to try to help figure it out. You can use mangroves, boulders and grass to build a seawall to kind of protect the village. And the chief told me that that village has been there for more than 500 years. And you know, they want to stay there. And there's just this kind of justice to me that comes with recognising that these villages don't generate emissions. They don't ask for much. There's a commitment to kind of being connected to the land and their community. And climate finance is really all about making sure that those communities are remembered, right, are brought along in solving this problem that they had nothing to do with. And I think it's easy to forget that sometimes it's easy to get lost in financial instruments or it's about debt policy or all these other things. But, no, the whole purpose of it is to ensure that the communities and the people are really able and treated as part of that solution.

Nicholas Walton 15:30: Caitlin Smith of WRI, ending this special deep dive on Fiji and the issue of climate finance. If you want to investigate further, you can find more at wri.org/finance, and the twitter feed is @wrifinance. If you’re on the website, have a look at the back catalogue of podcasts which cover solutions to climate challenges across the globe – from Rwanda to brazil and from Jamaica to Cameroon. You can also subscribe wherever you get your podcasts. That’s all from me, Nicholas Walton. Good bye for now.