Debt suffocates African nations’ ability to respond to climate change
The writer is a climate justice activist from Uganda and author of ‘A Bigger Picture’
As corporate leaders and government officials fly into Davos for the World Economic Forum next week, climate will be one of the issues near the top of the agenda. Its recent survey of global leaders ranked failure in this area as the top global risk for the next decade. Among the chief executives assembling 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 investing.
Although the world’s largest money manager announced last week that it would vote against more shareholder climate resolutions this year, the group insists that its position has not changed. It says that its latest announcement focuses on proposals it regards as micromanagement or damaging to the financial interests of shareholders.
But behind Fink’s careful positioning is the story of BlackRock and Zambia, and how debt is preventing lower-income countries from protecting themselves against the worst effects of climate change.
Most of the climate finance the world’s richest countries have provided to the global south is in the form of loans that pile on more debt. Half of external debt payments by lower income countries are to banks, hedge funds and asset managers that have also profited from funding fossil fuels on a massive scale. They have profited while contributing to the climate crisis. They are now preventing the most climate-vulnerable countries from limiting the damage they suffer.
BlackRock is the largest owner of Zambian and lower-income country bonds. Zambia’s borrowing costs are far higher than those faced by wealthy countries. In September 2020, in the middle of the pandemic, it asked to suspend payments. BlackRock and other corporate lenders refused. With almost $13bn owed, Zambia began defaulting on repayments later that year.
Zambia’s debt repayment schedule amounted to four times what it had hoped to spend on protecting its people from the extreme weather being driven by the climate crisis. That means less money to spend improving irrigation systems to cope with intense droughts, on early warning systems for flash floods and for sensor technology to predict drought and floods.
According to the principle of “polluter pays”, countries and corporations that have generated the most historic emissions should pay the costs of the climate crisis, in line with the amount of harm they have caused. But while Africa is responsible for less than 4 per cent of global emissions, the global north — responsible for the vast majority of historic emissions — refuses to pay.
Last month, climate scientists 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 existing use of fossil fuels if we are to meet our temperature goals. BlackRock has invested $85bn in coal companies, $24bn of which is in companies planning to expand their coal business.
The G20 approved a “Common Framework” in late 2020, which should have enabled countries with unsustainable debts to restructure them — but 18 months later, no debts have been restructured. The IMF calls on all creditors to help increasingly debt-distressed countries, but the institution has done little to bring bondholders to the table.
Debts like these are only exacerbating the injustice of the climate crisis. If countries such as Zambia can’t afford to invest in adapting to extreme weather, the suffering that their population is already experiencing will increase dramatically.
Political leaders and chief executives at Davos cannot address climate change without talking about debt. If BlackRock and other bond owners really want to show themselves as climate leaders, they should cancel the debts. Only debt justice can rebuild trust and allow the world to confront the climate emergency.