After negotiating a historic deal to compensate countries ravaged by rising temperatures, Chilean Environment Minister Maisa Rojas says the financial sector has a central role to play in the climate crisis. A biodiversity bond is under study.
By Tom Azzopardi
Maisa Rojas was on the street in Santiago last year when she took an unexpected call from Sameh Shoukry, Egypt’s minister of foreign affairs. Shoukry asked Rojas, Chile’s minister for the environment, to work with Jennifer Morgan, a former head of Greenpeace International and now Germany’s special envoy on climate change, to handle key talks at the United Nations Climate Change Conference late last year in the Egyptian resort town of Sharem el-Sheikh.
The two women would lead negotiations at the COP27, as that event is known, on creating a new fund to compensate countries that have suffered irreversible damages from rising global temperatures.
Rojas has the credentials for such a challenge. She is well versed in the politics and science of climate change. As an atmospheric physicist, she has helped author the increasingly gloomy temperature readings in the UN’s Intergovernmental Panel on Climate Change’s annual assessment reports.
But she was nonetheless surprised by Shoukry’s request – and the results.
“When Egypt asked Chile and Germany to co-facilitate these discussions, it was not clear that the issue was even going to be on the agenda,” Rojas remembers in an interview with LatinFinance. “I must confess I never expected that we would achieve the result we finally did.”
The challenge was formidable. Money has always been central to the negotiations to reduce greenhouse gas emissions and mitigate the impacts of climate change, she says. But this historic demand for compensation from poorer countries – especially the small island nations that face getting rubbed out by rising sea levels – has long been resisted by the world’s industrialized nations, who fear that they’ll have to bear the brunt of the cost.
Rojas and Morgan pressed ahead with the negotiations regardless. They had a head start. The G77 group of developing countries plus China had already agreed on the need for damage and loss, meaning that 2022 offered a historic opportunity to reach a deal. If they could. While developing countries wanted a deal as quickly as possible – and with the details worked out in the future, industrialized nations wanted to kick it further down the road yet again.
This made it hard to come to a consensus. But by carefully sounding out opinions of hundreds of countries with widely varying interests, Morgan and Rojas sculpted a text that almost everyone could support. A breakthrough came when the European Union finally announced that it would back the creation of a fund. The other industrialized nations quickly got into line and a deal was reached in time to be included in the COP27’s final statement.
The tricky details of who should pay, how much and to whom still must be worked out, but the Egypt agreement sets a clear deadline of one year for a deal to be completed, meaning that it will be tied up at the COP28 meeting in Dubai at the end of this year. Once signed, the deal promises to pave the way for billions of dollars to flow to those countries most affected by climate change.
While this historic achievement is more than cause for celebration, Rojas laments that it reflects the world’s failure to stem emissions of greenhouse gases.
“We have failed as an international community to tackle the causes of climate change and now we will have to pay more for the consequences,” she said.
Chileans are all too aware of the impacts of rising temperatures. A sharp decline in rainfall over the last decade has strained water supplies and turned forests and farmlands into kindling that the smallest spark can ignite into infernos.
In February, Rojas was forced to cut her summer holidays short to help coordinate a battle against huge wildfires that ripped through the Central Valley, a lush region hemmed in between the Andes and a coastal mountain range. The fires killed two dozen people, left more than a thousand homeless and scorched more than 400,000 hectares in the country’s agricultural heartland.
Making Chile more resilient to fires and other impacts of global heating will not be easy. Better land management and housing policies are needed, especially in the border areas between urban and rural areas where many fires start. The huge plantations of eucalyptus and pine trees that carpet much of central Chile should be spaced out more so that fires cannot rip through them so quickly.
Another challenge is to contend with the collapse in biodiversity from climate change, says Rojas, highlighting last December’s landmark deal for a global commitment to protect 30% of the world’s surface by 2030.
All this will take money.
“We need to change how the whole world works, how we move, how we eat, how we build, and that includes the financial sector,” says Rojas.
“We need to change how the whole world works, how we move, how we eat, how we build, and that includes the financial sector.”
– Maisa Rojas
Chile has been making progress on this front. It’s been a pioneer in South America in promoting sustainable finance. In 2019, the country issued the region’s first sovereign green bond, which it followed up last year with the first sustainability-linked bond.
The proceeds of the bond sales have been channelled into climate change programs, such as the first concentrated solar energy plant in Latin America.
Biodiversity deserves similar financial innovations, Rojas says.
More fiscally fragile nations, including Barbados and Belize, have experimented with debt-for-nature swaps, persuading lenders to wipe out loans in exchange from promises to protect ecosystems.
With a relatively low debt-to-GDP ratio, Chile is not looking for debt forgiveness. But the country could study a biodiversity bond to finance expansion of its national parks system, said Rojas.
A first step in this direction, she says, would be the creation of a Natural Capital Committee, which would bring together the central bank with the ministries of the environment, finance and science to debate ways to measure, protect and appraise the country’s ecosystems.
It also takes the right attitude. Instead of being a victim of climate change, Chile wants to be part of the answer, Rojas says.
With the world’s largest lithium reserves and a huge potential for wind and solar power, the South American country has the potential to become a major supplier of clean energies.
Wrinkles still must be ironed out, of course. Chile President Gabriel Boric, for example, wants to increase state control over the lithium industry, and that could delay investment in this mineral for feeding the electrification push in the world. And it is not clear how lithium can be extracted without wrecking unique Andean ecosystems. But as Boric told the United Nations’ General Assembly last September, “Chile needs the world, and the world needs Chile.” LF