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Thematic Bonds and How to Deliver More Sustainable Finance in Developing Economies
Jun 2024
Working Paper
Sustainability-themed bonds are growing in popularity including among development practitioners who view them as promising instruments in the delivery of more especially climate finance in developing economies. This UNDP Development Futures Working Paper provides an overview of the thematic bonds market and a discussion of issuer incentives as well as some of the main challenges related to additionality and credibility. To improve the potential of thematic bonds as a tool for sustainable and equitable development the paper proposes five features that any official sector-supported model should prioritize. These features aim to deliver substantially lower funding costs for ‘green activities’ and improve market access as well as the credibility of bonds which include strengthening issuer commitments to ambitious targets and incentives to implement climate-friendly policies. Finally it is important to recognize the limitations of donor-supported models. High debt burdens in many countries limit the use of debt instruments and these will compete for limited official sector funds with other potentially fairer means of delivering climate finance.
Multilevel Governance for Climate Change Mitigation and Adaptation
Aug 2024
Working Paper
Climate change is the defining issue of our time and we are at a critical moment. It intensifies heatwaves droughts flooding wildfires and famines while threatening to submerge low-lying countries and cities and drive more species to extinction. It also threatens food supply and food security. The Climate Change 2023 Synthesis Report of the IPCC1 highlights the unequal contributions to global greenhouse gas emissions driven by unsustainable energy and land use as well as consumption patterns. Human-caused climate change is already impacting weather extremes globally leading to widespread adverse impacts especially affecting vulnerable communities. Tackling climate change demands a paradigm shift in mitigation and adaptation measures policy coherence institutional arrangements and coordination across national regional and local levels. Multilevel governance including commonly used strategies to operationalize the principle of subsidiarity is foundational to the global effort to combat climate change recognizing that effective action requires collaboration and coordination across various levels of government as well as with non-state actors. The principle of equity needs to be applied to the design of existing multilevel governance arrangements for addressing climate change particularly when costs and benefits are often highly concentrated. It emphasizes the importance of considering equity in decision-making processes and the allocation of resources to address climate change effectively and fairly.
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