Talking Money: Climate Finance and Migration

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CHAPTERS 

[00:02:30]: Understanding the $100 billion climate finance goal 

[00:04:57]: Mitigation and adaptation: priorities and trade-offs 

[00:07:29]: Constraints on mobility for climate-affected communities 

[00:08:49]: How development banks invest in resilience and adaptation 

[00:12:07]: Financing mechanisms: loans, grants, and responsibility 

[00:15:33]: Case study: climate-related urban migration in Mongolia 

[00:18:13]: Role of financial institutions in future climate responses 

[00:20:41]: Assessing recent trends in climate finance 

TRANSCRIPT

[00:00:03.21] 

Welcome back to Changing Climate, Changing Migration. This is a podcast from the Migration Policy Institute that looks at how climate change is impacting human migration around the world. I'm Julian Hattem, your host and the editor of MPI's online journal, the Migration Information Source, which has published a special series of articles about climate and migration to complement this podcast. Those articles are online at migrationpolicy.org/climate. Whenever we talk about migration, we need to acknowledge that there are a lot of characters involved. There are the migrants themselves, of course, but there are also the communities and households they leave in their places of origin and those that they meet in their destinations. There are countries and governments that oversee, manage, and either facilitate or impose restrictions on their movement. And there are also a range of agencies, nonprofits, and other groups that carry out broader national, regional, and global priorities. And today I want to focus on this last group, the development agencies, as well as the banks and financial institutions who help set the tone for what happens on the ground. These groups can have a pretty big impact on migrants experiences, including in some cases, making it easier for people to stay where they are and not become migrants in the first place.

[00:01:26.05] 

These groups are active in development work and in some cases are trying to mitigate the negative effects of climate change. But how does this overlap with work on migration, and are they taking all of these elements into consideration? To help answer this question, I am very excited to be able to talk with Timo Schmidt. Timo does research with MPI's sister organization, MPI Europe, based in Brussels, and he has recently been working on a project examining this very issue for the European Investment Bank. Timo, thank you so much for coming on.

[00:01:55.16] 

Thanks so much for having me, Julian.

[00:01:58.09] 

So let's start with the basics. Responding to climate change is pretty expensive. I'm not a numbers guy, but I think it's fair to say that this is going to cost a lot of money to recover, protect, and adapt to some of the changes in the environment and climate that are happening around the world. Money, especially foreign aid and assistance money, is often pretty limited. So what role do development banks and financial institutions play in translating these global priorities about responding to climate change into practice?

[00:02:29.24] 

Thanks. Yeah, this is actually a great question to start with, and you're absolutely right that this is expensive. I think maybe to start off, it helps to have a bit of the context on, you know, where do these numbers come from and also what is the policy context around that to better understand the role of development banks and finance institutions? Because one way of really incorporating climate change also into migration policy is through climate finance. And we often sort of think about the policies and the governance in the area of climate change, but really the funding which you obviously need to implement those policies, that is a bit of a blind spot still. So take for example the Paris agreement where in 2015 a goal was set to by 2020 reach US$100 billion annually in climate finance. Now, this target hasn't really been met and actually after 2017 we've also seen a bit of a decrease in growth in climate contributions. So it is quite challenging to actually get up to the kind of promises that are being made in terms of what level of funding should be there. And also we see this in similar other international governance frameworks.

[00:03:47.09] 

The Global Compact for Migration has an entire set paragraph dedicated to disaster displacement, which of course provides a good link between climate change and new mobility. And still we see that to actually implement these sort of policies or the kind of frameworks around them, the funding is still limited. So there is a multi partner trust fund for the GCM, so which was launched and it has only reached halfway its target. So it is indeed quite a complex and difficult sort of area for investment. Now, to actually answer your question now for the role of the development banks and financial institutions, I mean, they have quite a financial weight actually in all of this. So if you look at their contributions to climate finance, just in 2019, that was actually, let me look at the number, yeah, it was 61.6 billion. So that is quite a bit. And large share of that. Also 70% go into the low and middle income countries. So that is kind of why we also need to look at them as important actors in this conversation.

[00:04:56.18] 

And so what is the connection to migration? We talk about climate finance and know that there are a range of development groups on the ground, you know, working on people's economic and physical security. Sometimes, as you mentioned, this overlaps or is particularly focused on the impacts of climate change and mitigating or adapting to those changes. But is there much overlap with what's happening on managing migration or is there more room to a little bit more precisely focus on the intersection of some of these issues?

[00:05:27.17] 

Yeah, I mean, so maybe before we go into this, would be good to just break down what climate mitigation and climate adaptation actually means, because those are two terms that are really key in this conversation around climate finance and they're important to distinguish when we talk about migration, which I'll also get to in a second. So climate mitigation strategies really look at more the long term solutions to tackling climate change. So trying to tackle the causes of climate change, whereas adaptation is more concerned with, you know, it's very closely related to the concept of resilience, to adjusting to the impacts of climate change, so trying to increase adaptive capacities in the longer term. Actually, I sometimes think of it, or there's a good example of how to think of it, sort of like a ship that has a leak, you know, a hole and is sinking. And one way to address this would be by just taking a bucket and pouring water out. That would be the adaptation part. The other one is to actually seal the hole and to address the underlying cause, which is the mitigation part. Now when we...

[00:06:28.13] 

That's a great analogy. I love that.

[00:06:30.01] 

Yeah, exactly. And I mean, it's kind of, you know, the problem is, unfortunately we live in a world where the ship is already kind of sinking, so, so we also need to adapt. So you would kind of ideally hope that we could just concern ourselves with the mitigation part, but it's not the case. And that is actually what brings us to migration. Because here climate adaptation is much more closely linked to human mobility. This is really about minimizing the adverse drivers that force people to leave the regions of origin. But on the other hand, also, and you mentioned this, it's also about providing assistance to those who actually cannot leave, those who remain trapped in climate affected areas. Because, you know, some, some communities or some populations don't have the resources to actually move and get out of harm's way. And we're talking about quite a, you know, I don't want to overstate this, this issue because there's also a whole kind of conversation to be had around how we communicate about this. But just looking in the past a little bit, when we look at internal displacement, the ratio of those being displaced in the context of these weather related disasters and those in the context of conflict is 3 to 1.

[00:07:43.01] 

So there is certainly kind of a group or segment of the population where there is an obvious need to invest in their resilience.

[00:07:52.16] 

And so what does that investment look like when these institutions invest in resilience, as you say? I guess what does that mean for those communities? I mean, what shape does it take? I know you've looked in a little bit into this. I mean, what, what approaches are institutions taking to manage this issue?

[00:08:09.00] 

Yeah, exactly. So we've done a bit of a mapping, talking to a lot of the multilateral development banks and development financial institutions over the course of the past few months to get a bit of a sense of yeah, as you said, like what kinds of investments they're actually doing. And I mean, I don't want to go into too much depth, but here I think it would be worth just pointing out like a few of the approaches that you could think of when you think of what is climate finance in the context of human mobility. And one which we have based on this mapping scene come up quite a lot is about infrastructure. So making infrastructure more resilient and rebuilding settlements after sudden disasters. This actually makes up almost a quarter of total MDB climate financing. So it's quite a lot. And again, this is a bit about, you know, making communities more resilient, which would be also in the context of then decreasing displacement risks or as I said earlier, following a disaster, rebuilding infrastructure. Of course there's a whole kind of conversation to be had around how to evidence that and what is the sort of impact chain.

[00:09:20.19] 

But yeah, maybe first we can, I'll just briefly mention a few other examples. So another one which is a bit more perhaps direct and immediate in terms of its targeting would be climate risk financing. So here the idea is that you have insurances that trigger a payout when a disaster or you know, an event that kind of falls under that category occurs. And it's something that these development banks have engaged in a bit more recently. And you know, it's still, there's relatively little evidence of what works and what doesn't. So yeah, not, not that much progress on here, but still it's one of those strategies. And a third one really important to mention is responding to, to the challenges from climate related movements. So this would be about alleviating pressures following an influx, for example, which, which oftentimes would occur in the context of rural to urban migration, since a lot of the climate displacement that we see or climate related displacement I should say is after all internal. And a fourth approach, which you probably know is there's this whole policy talk around leaving no one behind. So both at EU level, also international level and here it's really about ensuring that communities at risk, including migrants, are not left behind as part of the green transition.

[00:10:51.21] 

So how can they also benefit from, you know, these new sectors? Could they be part of, you know, could they be employed in some of these sectors or can, you know, some of that clean and affordable energy, could they have access to that? So it's a bit more the conversation around leaving no one behind there, which obviously also relates to the SDGs, the Sustainable Development Goals. And then finally an important one, but not well based on our mapping, certainly not one there where there is right now huge amount of interest is to then leverage migration also as a means to adapt. So seeing migration as an adaptive strategy actually. But that's still a last resort because even governments themselves are quite reluctant to move entirely communities out of harm's way since, you know, for cultural reasons, logistical reasons, all kinds of reasons. So there might still be room for these development banks in the future to help in terms of technical assistance, but not to the extent as you know, these infrastructure investments. So that's just kind of a mapping based on our mapping of the sort of approaches that you see on the ground.

[00:12:03.23] 

That's great and that's super comprehensive. I really appreciate that. So I guess what's in it for the banks and these financial institutions? What is their goal? How do they profit from this? From this climate financing?

[00:12:16.08] 

Yeah, that's a tricky conversation, to be honest, because. No, I mean, so on the one hand, of course, it's sort of within their mandate, right? They're development banks. It's what they do. It's about driving economic and social progress and there is an obvious need to, as I said, to increase resilience for effective communities. So it's just a, partly a matter of principle. But there's also, you know, this question around which I mean we're talking about development banks and part of that definition is banks. So sometimes we also are they're looking also at how there's sort of an investable case for them. Right. And this is really where it gets tricky because on the, on the one hand we know that thanks to a number of initiatives also now by, you know, non-multilateral development bank actors, that investing in the resilience of vulnerable populations, it works. I mean, it can work. So these are not just vulnerable populations, but they're also resilient and resourceful. So investing makes sense from a sort of business point of view.

[00:13:24.02] 

Right.

[00:13:24.24] 

But then the broader question I think you have to ask is, I mean when we talk about climate change, we usually talk about the loss and damage associated with that. So is there really a justified case for development banks to provide loans that countries and communities have to pay back, considering that with that loss and damage, the more better logic perhaps would be one of compensation. So providing grants rather than loans, if we say it in financial terms. So on the one hand, just to kind of make that clear there, you know, it's within the mandate. It's also, there's also some sort of, you know, business case around it if you like. But we have to be very careful around what actually can be provided with or through loans and what probably needs to be grant money.

[00:14:15.17] 

That's interesting. And so I guess when it works, when these strategies work, what are the, some of the positive outcomes that can happen? I mean, what are the success stories? I think that, that we have seen either that have happened in the past or that are currently ongoing.

[00:14:30.16] 

Yeah. And so about, I think a success story in and of itself is actually that banks are having a conversation on this. So the fact that we have, you know, had the opportunity to work with the European Investment bank over the past been nine months on some of these questions, I think is just also a sign of progress on this end. And in fact just yesterday we had a presentation with the MDB platform on economic migration forced displacement where we raised some of these issues and quite a dynamic conversation around it. So I think just the fact that there is a dialog is already progress. But I suppose you're also looking at some of those success stories in terms of investments being made actually. And I think out here maybe point to some also of the funds that have emerged in recent years. So there's the Green Climate Fund for example, and there's some quite, you know, projects within, within this funding stream that have also taken into account migration and human mobility as a dimension. I remember in our one project, for instance in Mongolia looked a bit at like the, the climate change effects that have driven people from more rural areas in Mongolia into its capital and how that increase social pressure on housing, for example, and on public facilities.

[00:15:48.11] 

And this financing was used also with, you know, co financing under this grant was used to then build green affordable housing and alleviate some of that, you know, the pressures on the social infrastructure experienced. So you know, that would just be one of the examples how this could work. And obviously there needs to be a whole kind of impact chain and a monitoring concept beneath that to make sure that you actually reach these intended communities. And I mean if you want to talk about challenges, just to kind of already say that that is a huge challenge.

[00:16:23.14] 

Of course it is like making sure that the money goes where it's supposed to go.

[00:16:28.10] 

Exactly. Yeah, yeah.

[00:16:31.17] 

Go ahead.

[00:16:32.16] 

No, I was just saying, I mean with, with some of these concepts like if you invest in infrastructure, it always depends a bit on what kind of infrastructure as well. Right. If you build a bridge following disaster, you're pretty unlikely to find a direct link to migration or human mobility. If you have say climate insurance and you're directly targeting some of those vulnerable communities where, you know, these are communities that are a exposed to disaster risks, they are vulnerable. So then we're already talking about a bit more of a direct link. But, you know, it's not as simple as that. There are obviously other kind of challenges and environmental challenges around that as well.

[00:17:14.06] 

Yeah. One thing I'm really interested in is that we know the impacts of climate change are only, only going to get more extreme in coming years. And so as you look at what works or what some of the challenges are, I guess, what advice might you have or what should these institutions be doing now to account for how things are going to change in 10 years, 20 years, 30 years, when it seems the impacts of global climate change are going to be more pronounced and more severely impacting more people? So I guess what should these institutions be doing now to prepare for that future? And are they doing it? Are they prepared for what is yet to come?

[00:17:53.10] 

Yeah, think of that ship. I mean. Yeah, exactly. On the one hand, you know, what we've seen in terms of climate finance by these institutions is that a lot of it actually still goes to mitigation rather than adaptation. 70% in fact. And as I said earlier, of course it's important, but if we're talking about reaching vulnerable communities, so those already, you know, they're trying to, you know, take the buckets and get the water out, you need adaptation financing as well, climate adaptation financing. So, and this is something they've been trying and there's progress towards balancing that out a bit, but it's still not nearly where it should be, probably. So that would be one thing. Another would be to also don't operate in silos. I mean, I can't emphasize that enough, but a lot of it also boils down to facilitating knowledge exchange. Just having done this mapping now, we know some banks are just so much better at doing that sort of analysis. You need to even understand in the first place where investment needs and other banks, you know, are really good with like technical assistance and, you know, having funding available.

[00:18:57.23] 

So it's also about trying to engage in partnerships and seize upon these sort of comparative advantages. And then, yeah, I mean, I mentioned it earlier and I certainly don't have a silver magic, silver bullet to it, but investing in monitoring mechanisms is key to also build the evidence base. Like what is the benchmark for success when investing in these sort of priorities projects. How do you evidence this? I mean, there's some progress being made, of course, by these development actors, these banks, but it still remains a bit of a challenge. And I think I would say here also that the policy guidelines that are available at the moment don't necessarily, you know, always help or always get it right either. They do also remain relatively disconnected. So say we have a lot of policies on climate change, a lot of policies on migration, but what is the link and how do we evidence that? Which is still a challenge. So, yeah, also trying to pursue that a bit and. Yeah, what else? I mean, it's also a bit about like, you know, anchoring this institutionally, I would say, actually going around. And this is what the EAB has done as well now, or what we've done together with the EAB, is to get a few people around the table within banks and have a conversation about this topic.

[00:20:23.13] 

So obviously this was already on the radar long before, but it just actually helps to, you know, drive that progress a bit to anchor it also institutionally. So, yeah, those would be a few, I think, points or pointers.

[00:20:38.14] 

But you sound more optimistic than pessimistic. I mean, it seems like things are moving in the right direction, but there are still steps to be made. Is that a fair characterization?

[00:20:46.02] 

Yeah, I think I attended a lecture by Madeleine Albright once and she said she's an optimist who worries a lot. And that really stuck with me and I'm just gonna appropriate that here and use it as well. So, yes, I am in a way optimistic because the past few months working on that project have shown me that there's, you know, the kind of progress that we made within a few months is great. And there's a conversation going on and I feel it's actually almost there, like the. The right questions are being asked and that's always a good sign of the right questions are being asked. And there's already coordination platforms in place, but, you know, it's coming back again to the sinking ship. I hope I'm not milking that analogy too much, but, you know, it's sort of the quite like I'm optimistic that things are happening. It's more the question when. Because there's only so much time and time is really against you in this conversation. So, yeah, I'm relatively optimistic. I think you could say that. And yeah, I suppose time will tell if that was a fair judgment.

[00:21:55.10] 

That sounds like a great point, I guess, to leave things here. But I really enjoyed this conversation and this is certainly an issue that I, and I hope others will be keeping our eyes on going forward. Timo Schmidt is a research assistant at MPI Europe who focuses on asylum policy, development, migration forecasting, and the link between climate change and human mobility. As he mentioned, over the past few months he has been working on a project looking at the linkages between climate finance and mobility and the role of international financial institutions. He also made a documentary series about a bike ride through Europe in the wake of the 2015-2016 Refugee and Migration crisis, which I encourage all of our listeners to check out, that is online at refugeeroads.com. And Timo, where can people find you online if they want to keep in touch or keep tabs on what you're doing?

[00:22:45.09] 

Thanks so much first of all for having me. It was really a pleasure. And yeah, in terms of keeping in touch, always on my or yeah the link on our website MPI Europe so migrationpolicy.org and on Twitter. And now obviously I have forgotten my Twitter handle. I think it is @Timo_A_Schmidt. So yeah, I'll leave you with that.

[00:23:12.03] 

Okay, well, awesome. Thank you so much for coming on Timo. I really appreciate this. This has been a lot of fun.

[00:23:16.09] 

Thanks so much.

[00:23:23.18] 

Migration is a complex process involving a wide array of people and institutions, and there are a lot of factors that determine how easy or difficult it is for an individual to migrate or whether they move at all. The decisions made by funders, banks and financial institutions are going to be crucial to determine if people migrate in the face of climate change and what that migration looks like. I hope you enjoyed my discussion with Timo. For more about all the ways that climate affects migration, listen to every episode of Changing Climate, Changing Migration. Subscribe through the podcast service of your choice or listen online at migrationpolicy.org/podcasts. You should also read our selection of articles at migrationpolicy.org/climate. Kenia Guerrero produced this episode and Lisa Dixon and Michelle Mittelstadt helped bring it to life. The music you're hearing is a song called Touch by Patrick Patrikios. My name is Julian Hattem. Thank you for listening.