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Local Voices, Global Choices: Directing Climate Finance Towards Inclusivity

The Oxford Sustainable Finance Student Society (OSFSS) recently had the honor of welcoming Dr. Abrar Chaudhury, a Senior Research Fellow at the Saïd Business School, as a guest speaker. Abrar provided an enlightening perspective on climate finance, drawing from his unique journey. Originally destined for a career in accounting – a field deeply rooted in his family – Abrar's ambitions shifted as he sought to broaden his perspective, leading to an MBA at Oxford. His trajectory took an even sharper turn following the catastrophic floods in Pakistan in 2010, which motivated his study to understand the complex interplay between climate events and their socioeconomic consequences.

Abrar's quest spanned multiple disciplines, bridging the gap between the Saïd Business School and the School of Geography and the Environment, where he identified a significant gap in climate change strategy. Driven by this gap, he began pursuing a PhD to merge his expertise in accounting with the urgent task of adapting to the impacts of climate change. His research has led him to explore the African savannahs and the peaks of Nepal, with each setting offering distinct perspectives on executing climate solutions.

Green Climate Fund and Local Capacity Building

In his research, he initially focused on policy implementation – how do we translate goals into action plans? Yet, what emerged from his interactions with policymakers and communities was a realization: the policies are there, but the funds are not. Over the past few years, Abrar's focus has therefore shifted towards monitoring the increasing yet still insufficient flow of climate finance. He pointed out the Green Climate Fund (GCF) as the formal mechanism for channeling funds from industrialized to emerging economies, under the Paris Agreement's goals. Despite a commitment of 100 billion dollars a year, only a fraction, 10 billion, has been realized through the GCF. However, Abrar underscored the innovation made by the GCF. For the first time, developing countries have a voice with equal representation on the fund's board – a contrast to the dynamics of traditional institutions like the World Bank or the IMF. Additionally, the GCF champions a bottom-up approach, allowing countries to lead projects that resonate with their specific climate challenges.

Yet, the GCF system is not without its flaws. Abrar pointed out that of the 200 projects financed, only a handful were led by local entities, with the majority managed by global organizations like the World Bank and the UNDP. He explained that the main driver behind these numbers is the capability gap, with local entities having to create projects that can compete with those proposed by more established international bodies. In other words, the GCF expects local entities in need of funds to demonstrate a robust climate rationale and economic model to access funds. This gap represents a cyclical challenge: without capacity, there's no project; without a project, there's no experience or funding.

The challenges extend into project development, particularly in adaptation measures. Abrar described the difficulty in creating metrics for adaptation projects. Unlike mitigation efforts, which have clear metrics like CO2 reduction, adaptation's success is harder to quantify – it is about ensuring that when a flood hits, the community remains resilient. Abrar highlighted that there are lots of opportunities in metric development in adaptation projects. This field calls for new climate finance professionals who can navigate its complexity and establish innovative strategies to measure success. Abrar's vision is one where experts work closely with countries to empower them, to build their internal capabilities, and to ultimately take ownership of their climate resilience strategies.

As the talk concluded, Abrar emphasized the urgency and the scale of the challenge. The Green Climate Fund is raising the bar for proposals, requiring more consolidated and impact-driven projects. The demand is massive, the supply far less so. This disparity is where Abrar sees the greatest opportunity for impact – helping nations develop the capacity to propose, implement, and sustain climate action projects.

Harnessing Private Sector Engagement in Climate Finance

Abrar's address moved on to a pressing question: how can we escalate funding from $10 billion to the targeted $100 billion for climate initiatives? The reality is that public finance and government contributions are insufficient, as nations grapple with domestic concerns, leading to a reluctance in financial commitments to climate change.

Abrar argued that to scale up investments, we need to engage the private sector. The reluctance of private enterprises to invest in adaptation, he suggested, is based on perceived lack of profitability and insufficient data to justify investments in community resilience to climate phenomena like floods. Yet, there is an untapped potential here. Abrar shared with us that he envisions a scenario where public finance can serve as a catalyst to unlock private capital. By assuming initial risk, public funds can encourage private investments by providing guarantees and reducing perceived risks. This approach could change climate financing by leveraging small amounts of public funds to attract larger private investments.

In this change, the role of business schools and the OSFSS, according to Abrar, is pivotal. He emphasized that they could facilitate constructive dialogues with businesses. He suggested a shift in narrative, urging businesses to view engagement not just as a moral imperative, but as a necessity for survival. Disruptions in supply chains due to climate events like floods in Pakistan directly affect businesses, tying their fate to the communities they are part of. It is within these conversations that opportunities for innovation and partnership can emerge.

In conclusion, Abrar's talk provided an overview of the complexities and opportunities within climate finance. The GCF, while a step forward, showcases the gaps between financial commitments and actions, highlighting the urgent need for empowering local entities in emerging economies. Developing relevant skills and metrics for climate adaptation is critical for ensuring the success and sustainability of climate projects. Moreover, engaging the private sector through risk mitigation strategies is essential for scaling up investments in climate action. Abrar's insights call for a collaborative effort, where educational institutions, local capacities, and the private sector play pivotal roles in fostering a resilient and sustainable future.

Yunus Isik, VP (Academics), Chief Editor

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