The world’s 152 developing nations are likely to be those most impacted by climate change – and have economies least able to recover from its dire consequences. Our Road to Glasgow webinar, which took place just before COP26, reflected on this crucial question with an expert panel.
Speakers at the webinar broadly agreed that financial aid by itself can be only part of the global response.
The means by which developed countries can offer practicable support to developing countries when it comes to managing expectations around emissions control and other critical challenges were a key focus of discussion.
The deadly costs of climate change can increasingly be charted, and both developed and developing countries are already in the line of fire. Weather-related events in North America, for example, resulted in the deaths of at least 538 people in 2021, making it the deadliest year for major weather disasters in the US since 2017. Hurricane Ida in October alone caused 115 fatalities and caused at least $65.25 billion in damages.
“This catastrophe occurred in a wealthy, technologically-advanced country that sees the cyclones coming, but is not able to deal with them,” said panellist Dr Saleemul Huq, Professor at Independent University, Bangladesh, and former Director of the International Centre for Climate Change & Development. “We have now entered into a turbulent era of loss and damage from human-induced climate change.”
This new era also has an accelerated timeline that will shake up old methods of research and information dissemination, Dr Huq explained. Speed of response is in part contingent on how fast stakeholders in developed and developing countries can access the latest intelligence.
“The IPCC [Intergovernmental Panel on Climate Change] produces big assessment reports every six or seven years,” Dr Huq said, “but I’d argue that we simply do not have time to wait years for the IPCC’s next report to tell us what to do. We now have to collaborate faster and share key climate change knowledge in real-time.”
“The traditional paradigm of research first/action second is no longer fit for purpose,” he added “We need to do both simultaneously. We also need to collaborate actively in doing joint research that everybody around the world can use, and not just available to a select few.”
For panellist Dr Dabo Guan, Professor in Climate Change Economics and the Low Carbon Transition at University College London, another vital consideration is the developed world’s willingness to understand that consumption-based lifestyles, which have become intrinsic to national and international economics, are already absolutely unsustainable.
“Awareness of this is starting to gain momentum, but not quickly enough,” Dr Guan said, “but there’s also a secondary issue in that the consumption-based lifestyle model is the one many millions of people in China, India and other developing countries aspire to. They are emulating our lifestyles which they think are modern and desirable – the connection between unconstrained consumption and climate change is not recognised.”
The fact that consumption in the developed world is driving carbon emissions in the developing world, must also be recognised and addressed, panellists agreed.
At the same time, developed countries have to recognise the quandary that developing countries also depend on consumerism to help support their respective national economic growth targets, said panellist Prosper Matiashe FIA, Business Development Actuary at Zimbabwean banking group FBC Holdings.
“The citizens of many developing countries now expect better standards of living,” Matiashe pointed out. “How can people in the developed world say to them ‘You mustn’t do this – you’re not allowed to live like we do’? That sounds wrong. So instead, we have to achieve some sort of equity and fairness between developed and developing nations.”
Developed countries also have to rein in the excesses of consumption-based economies, as well as 'greenify' them where possible, the panellists said.
The scarcity of banking, financial services and insurance (BFSI) expertise on the ground in many developing countries is another issue where the developed world can provide assistance.
“The vast majority of poor people living in the poorest countries simply do not have access to the private insurance market,” said Dr Huq, “and so if the insurance sector, actuaries and related companies simply sit back and wait for business opportunities to arise organically, then those unfortunate people will be ignored.”
e called for the BFSI sector to “step up in a spirit of public-private partnership, and bring their skills and knowledge to bear in support of governments and local authorities and communities”. They must come up with ways in which the skills and knowledge of the actuarial world “can be brought to bear to help the reality on the ground”, Dr Huq added.
Panellists also discussed how developed countries and key institutions in developing societies should share knowledge.
For instance, financial institutions in developed countries now customarily have declared operational policies on sustainability and green issues. Matiashe reported how he scanned the banks and banking institutions in Zimbabwe, to find that out of about 20, only three had a policy at board or shareholder level that addresses their policies toward climate change or green finance.
“When you then assess why we have that disparity, I think for most of them it is basically an issue of ‘So where do we start? We are a bank – we do not even know how we can begin to say that we are now funding green projects’,” Matiashe said. “They will also say, ‘If you want to fund green projects as a bank, you should be seen as an expert in the subject. A change agency cannot go and tell a farmer how to do green agriculture when they themselves don’t understand what is involved.”
Matiashe believed that here is an opportunity to establish channels for knowledge exchange where the BFSI sectors in the developed regions could advise their counterparts in Africa and beyond – a suggestion that received rounded agreement from other panellists
“The financial sector in the world’s developed regions could partner with and train financial institutions in developing countries to gain greater knowledge and understanding of green finance,” Matiashe explained. “The next step would be to help them cascade that knowledge and understanding to businesses and industries in their respective countries where it has more direct potential to bring about beneficial changes.”
"For example," said Matiashe, "a European bank or insurer that is already well advanced in the conduct of green financing and insurance for green initiatives could partner with banks and insurance providers in Zimbabwe or South Africa or Bangladesh. Such partnerships would be enormously impactful and provide all parties along the knowledge chain with insight and know-how."
Dr Huq agreed and pointed out that actuary intersects most component businesses within the BFSI sectors: “As I see it, the challenge for the actuarial profession is: how can it bring its collective skills in the professional disciplines of insurance and risk management to help the rest of the world deal with these impacts of climate change? Well, we should bear in mind that there have already been some very good examples of these sort of initiatives.”
Dr Huq continued: “There’s a whole area of index-based insurance that is emerging for droughts in Africa, hurricanes across the Caribbean, and flooding in Bangladesh, for instance. These constitute good lessons for all to learn from and the insurance industry – the reinsurance industry, in particular – has noted this.”
Prosper Matiashe recalled a banking customer who said to him, ‘Look, you want me to take the green route – yet you are charging me the same interest rate whether I’m going to pollute big time, or I am going to be green’. So maybe another way forward, Matiashe suggested, would be to demonstrate that if a business in a developing country is adopting the green policies there’s no extra expense involved – and that actually they maybe get better financing, better structuring of the financing, better insurance mechanisms and so forth.
“The BFSI sector has to be at the forefront of designing that’s financing right,” added Matiashe, “so that there are fewer obstacles to adoption of sustainable practices.”
“Humans are responsible for the intensity and, therefore, the losses and damages associated with climate-change based extreme weather,” added Dr Huq as the webinar progressed toward conclusion, “so, in that sense, actuaries are in a good place to start figuring out what to do. That’s really where I find the role of actuaries with their expertise and knowledge a very valuable resource that we need to be building on and bringing on board and building on – particularly for the less developed countries where actuary is not yet a well-developed science.”
