In Sacha, a village in the mountainous Khyber Pakhtunkhwa region of northern Pakistan, the effects of floods in 2022—which left a third of the country underwater and 1,700 people dead—are still being felt. The floodwater took out the Sacha and Mairah bridge, a vital local crossing over the Panjkora river. Without it, villagers must travel 2.5km over mountainous terrain to the nearest crossing. The most deleterious consequence of all, locals say, has been on children’s education.
“We have to pay 2,000 rupees [about £5.40] per child each month for transport,” says Nayyab, a local mother. Because of the cost, she adds, “many of us have stopped sending our children to school after primary, as there is no middle school in the village.”
Pakistan has been ranked as the country eighth-most vulnerable to climate change by the Global Climate Risk Index. It is also the world’s fifth-most populous nation, meaning it is one of the places most exposed to the increase in floods, heatwaves and droughts brought on by rising temperatures.
Across the Global South, climate disasters have hit vulnerable countries. Having been ravaged by civil war for three decades, Somalia has experienced both floods and a drought in recent years. The situation is exacerbating existing rifts, with various groups fighting for resources.
As these nations look for ways to mitigate climate impacts locally, domestic and global finance institutions are finding new ways to help. Climate finance flows reached $1.3 trillion (£973bn) in 2021-22, according to the Climate Policy Initiative, a thinktank. This was almost twice the amount in 2019-20. And yet, the need for climate finance is projected to rise to $9 trillion a year by 2030. Just over half of the current sum comes from the public sector, including governments and development funding initiatives—but the private sector is responsible for a substantial part, providing $625bn of funding in 2021-22.
The effect of this finance, when properly deployed, can be transformational. For villages like Sacha, it means a new bridge that can withstand the next wave of flooding or extreme temperatures. Adam Smith International (ASI), a global advisory company, is working with the provincial government in Khyber Pakhtunkhwa to create a new, standardised bridge code. It will include modular designs that can be used across the province, with blueprints and building materials that can withstand large volumes of water or high levels of heat. The last formalised code was created by British colonialists in the 1930s.
In Somalia, which was hit in 2022 by its worst drought in 40 years and in 2023 by a “once-in-a-century” flood, one challenge is ensuring that the government has a pipeline of projects available to fund. This means it has to be proactive, rather than reactive, in response to the climate crisis.
Droughts and floods induced by climate change “are happening every year, and we respond by providing humanitarian assistance every year,” says Suvojit Chattopadhyay, who heads ASI’s operations in Africa. “But who is taking a long-term systems approach to addressing this? There is no better way than to build human capital and institutional capacity in the country.”
Those working behind the scenes are helping Somalia’s young government—a new internationally backed-administration was established in 2012, following years of conflict—to create internal frameworks that will allow it to put incoming climate finance to good use. Steps include creating government departments able to handle capital inflows, as well as ensuring universities and civil society groups have the resources in place to respond to the damage caused by floods and drought. The Somali government has prioritised accessing climate finance, and established its National Climate Fund after becoming the eighth member of the UK-led Taskforce on Access to Climate Finance. This is an example of the kind of initiative the international community should support —especially key donors like the UK, which can lead the way through its climate finance commitments, seizing the opportunity to drive global impact.
$4.6 trillion will be needed annually by 2030 to achieve global net zero goals
But all of this comes amid aid budgets dwindling globally, as a result of economic constraints and growing right-wing sentiment. In 2020, the UK cut its aid budget from 0.7 per cent to 0.5 per cent of gross national income, and since 2019 its spending on aid fell to £12.8bn in 2022 from a peak of £15.1bn three years prior. In 2023, aid budgets across the 21 countries that make up the OECD’s Development Assistance Committee fell by 7.7 per cent.
Despite these challenges, the UK has pledged £11.6bn of climate aid by 2026 through its International Climate Finance strategy, focusing on adaptation, resilience and sustainable infrastructure. Multilateral development banks have also plugged some of the gaps left by falling budgets, and are seeking to leverage private finance. Between 2018 and 2020, such organisations are thought to have mobilised $33.8bn per year from private investors. Meanwhile, the International Energy Agency suggests $4.6 trillion will be needed annually by 2030 to reach global net zero goals.
In an ideal world, says Nick Parkhill, ASI’s director in Pakistan, more climate finance would be driven directly by the communities that need it most: “You could plug more resources into local groups who could develop more locally driven climate solutions. And that could be bridges, it could be new crops, it could be whatever that local community has as a real climate problem.” For the residents of villages like Sacha, the prospect of adequate climate finance can make the difference between their children getting a proper education, or not.
Opportunities for the private sector are growing in countries in Africa and Asia in step with increasing demand, says Nick Haslam, ASI’s head of climate finance. The energy sector, for instance, attracted 44 per cent of mitigation climate finance in 2021, most of it private. The cost and risks of establishing new sustainable infrastructure are, admittedly, high—but the returns can be attractive. “With the right planning, instruments and guarantees, it’s a good investment opportunity,” he says.
This year’s COP29 summit has been dubbed “the finance COP”, and is being seen as a chance to ensure funding is sufficient. Haslam is optimistic about how climate finance can help countries in the Global South: “It has the potential to be really transformational, and that’s exciting.”
This article was written in association with Adam Smith International (ASI) and featured in the Policy Insight report “Climate: The UK’s new green priorities”
