Debt is stifling the ability of African nations to respond to climate change
The writer is a Ugandan climate justice activist and author of ‘A Bigger Picture’.
As business and government leaders travel to Davos for the World Economic Forum next week, climate will be high on the agenda. Its recent survey of world leaders ranked failure in this area as the top global risk for the next decade. Among the CEOs gathered at the alpine resort will be BlackRock’s Larry Fink, who has worked hard in recent years to signal his company’s support for climate-aligned investments.
Although the world’s largest fund manager announced last week that it would vote against more shareholder climate resolutions this year, the group insists its stance has not changed. He says his latest announcement focuses on proposals he considers micromanagement or harmful to shareholders’ financial interests.
But behind Fink’s cautious positioning lies the story of BlackRock and Zambia, and how debt is preventing low-income countries from protecting themselves against the worst effects of climate change.
Most of the climate finance that the world’s richest countries have provided to countries in the South comes in the form of loans that accumulate more debt. Half of low-income countries’ external debt payments go to banks, hedge funds and asset managers who have also benefited from large-scale fossil fuel financing. They have profited from it while contributing to the climate crisis. They now prevent the most climate-vulnerable countries from limiting the damage they suffer.
BlackRock is the largest owner of Zambian and low-income country bonds. Zambia’s borrowing costs are far higher than those faced by rich countries. In September 2020, in the midst of a pandemic, she requested the suspension of payments. BlackRock and other lending companies refused. With nearly $13 billion owed, Zambia began to default later that year.
Zambia’s debt repayment schedule was four times what it had hoped to spend to protect its people from extreme weather caused by the climate crisis. This means less money to spend on improving irrigation systems to deal with severe droughts, early warning systems for flash floods, and sensor technology to predict drought and flooding.
According to the “polluter pays” principle, the countries and companies that have generated the most historical emissions should pay the costs of the climate crisis, depending on the extent of the damage they have caused. But while Africa is responsible for less than 4% of global emissions, the global North, responsible for the vast majority of historical emissions, refuses to pay.
Last month, climatologists from the Intergovernmental Panel on Climate Change warned that the world cannot afford new fossil fuel infrastructure and that we must rapidly phase out our current use of fossil fuels if we are to achieve our temperature goals. BlackRock has invested $85 billion in coal companies, including $24 billion in companies planning to expand their coal operations.
The G20 approved a “common framework” at the end of 2020, which should have allowed countries with unsustainable debts to restructure them – but 18 months later, no debt has been restructured. The IMF is calling on all creditors to help increasingly indebted countries, but the institution has done little to bring bondholders to the table.
Debts like this only exacerbate the injustice of the climate crisis. If countries like Zambia cannot afford to invest in adapting to extreme weather conditions, the suffering their people are already experiencing will increase dramatically.
Political leaders and CEOs in Davos cannot address climate change without talking about debt. If BlackRock and other bondholders really want to show themselves as climate leaders, they should write off debt. Only debt justice can restore trust and enable the world to address the climate emergency.