A new Australian study has revealed that the ability of low- and middle-income countries to respond and adapt to climate change is being severely hindered by a lack of funding.
Researchers from the University of Melbourne's Sustainable Finance Hub discovered that current methods for measuring emissions linked to government lending are unintentionally steering private climate investments away from the nations that need them the most.
The study highlighted that the existing standards and frameworks used to evaluate the emissions and climate-risk profiles of sovereign debt portfolios disadvantage lower-income countries. This is primarily because these countries often have lower GDPs and a greater dependence on emissions-intensive industries such as agriculture, resulting in poorer performance in emissions intensity metrics compared to high-income economies.
Arjuna Dibley, the lead author of the study and head of the Sustainable Finance Hub, emphasized in a media release, \"If well-meaning sustainable finance metrics make it harder again, this endangers our global response to climate change, which will have powerful negative effects for us all, including the private investors making these decisions.\"
The research indicates that many of these countries are already burdened with unsustainable debts, and the current emissions intensity metric could further discourage investors from providing much-needed climate finance to these vulnerable regions.
The study calls on investors to collaborate with researchers to develop new metrics for assessing sovereign debt portfolios. These new metrics should take into account nations' historical emissions performance and future trajectories. Additionally, it urges financial institutions, regulators, and researchers to evaluate the impact of current metrics on access to climate finance.
Reference(s):
Lack of funding limits climate efforts in lower-income nations, study
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