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Climate-vulnerable Countries Need Resilience

Think tank E3G and Mistra Geopolitics have urged financial institutions to map resilience-building pathways to tackle the economic fragility of debt-burdened and climate-vulnerable countries. The new report – ‘Breaking the cycle of risk: Addressing resilience and debt for a new global financial architecture’ – explored the relationship between climate, debt and resilience, and the impact of geopolitics. As international financial architecture is reformed to better support the climate transition, it is just as important to address the debt and resilience crisis for more climate-vulnerable countries, the report noted. “In the run-up to COP29’s focus on reforming financial systems […] we must not forget that countries burdened by both economic and climate vulnerability need transition finance that will not push them further into debt as they seek to build more resilience and adapt to the impacts of the changing climate,” said Ronan Palmer, Chief Economist at E3G. However, the availability of financial aid to these countries remains inadequate, the report mentioned, with climate vulnerability leading to higher interest rates which in turn make debt harder to pay off. In addition, the report has considered the ongoing challenge of investing in resilience, financing investment in resilience, debt as a constraint on resilience, and the geopolitics surrounding investing in resilience. “It is crucial to acknowledge the dual challenges of climate and debt risks,” said Dileimy Orozco, Senior Policy Advisor, Global Macro and Resilience at E3G. “Many economies will remain highly vulnerable to climate impacts without investing in resilience and responsibly taking on strategic debt. These countries need a robust safety net and a new contract with International Financial Institutions, including multilateral development banks (MDBs), the IMF [International Monetary Fund], and the private sector to ensure they thrive and have access to finance, particularly in the hardest times.” 

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