Insurance Fund

G-7 launches insurance fund for climate impacts

SHARM EL-SHEIKH, Egypt – The Group of Seven leading economies on Monday launched a new insurance system to provide quick financial aid when nations are hit by the devastating effects of climate change.

The so-called Global Shield is backed by the V20, an alliance of climate-vulnerable nations chaired by Ghana, and the G-7 chaired by Germany. The scheme is designed to kick in with aid in the event of climate-related disasters in vulnerable countries. But critics argue it does not cover slower effects of climate change, such as rising seas or the slow loss of arable land, nor does it account for historical damage.

Under the newly launched shield, countries will receive more than $200 million dollars in funding, mostly from Germany. Initial recipients include Bangladesh, Costa Rica, Fiji, Ghana, Pakistan, the Philippines and Senegal. In the past 20 years, nations in the V20 group are estimated to have lost $525 billion in GDP due to climate change-related events, according to a report released by the group.

Ghana’s finance minister and U20 chairman, Ken Ofori-Atta, called it “a groundbreaking effort” that will help protect communities when lives and livelihoods are lost.

Civil society groups and aid agencies have also warned that the insurance scheme should not be used to distract from the much wider effort to get big polluters to pay for the loss and damage they have caused with their greenhouse gases. Vulnerable countries have long called for compensation for climate-related damages, with estimates of financial damages far exceeding the amounts available through the Global Shield.

“We need a solution on the scale of the losses, and that means going beyond subsidized insurance,” said Rachel Simon of the environmental group Climate Action Network Europe.

She said new funds should also be created within the oversight of the UN climate talks, not on the sidelines, to ensure proper international oversight. Simon added that the loss and damage financing should be in the form of grants, as opposed to debt that drives poor and developing nations into debt distress.

Speaking for the G-7, German Development Minister Svenja Schulze said the shield was not a ploy to avoid more comprehensive funding for vulnerable nations, which remains a key issue in the ongoing negotiations.

“Those most affected need action now,” Schulze said. “This is not some kind of tactic to avoid a loss and damage financing facility during the negotiation.”

Negotiators on Monday released the first draft of a landmark agreement on the issue of loss and damage.

The draft contained two options reflecting the divide between rich and poor nations. Vulnerable countries suggest that such a fund should be operational no later than November 2024, while wealthier countries say that funding should come from a wide range of initiatives.

Like this article? Get access to all our great content with a month-to-month subscription. Start your subscription here.

Related Posts