“Our Very Existence is in Danger”

Photo: Wilar/Shutterstock.com

The Maldives is an outlier – its most northerly island sits 750 km off the southern tip of India. It is also the lowest lying country in the world and the most dispersed: Its 1200 atolls and islands span 90,000 km2 – a little larger than Austria – but form a total land mass of under 300 km2. Like stepping stones scattered in the vast Indian Ocean. 

Due to its remoteness and lack of natural resources, the Maldives relies heavily on commodity imports of staple foods like rice, wheat and sugar as well as medicines and refined fuel products – goods critical to the economy in the wake of the war in Ukraine and the COVID-19 pandemic. Because remoteness adds cost and complexity to any supply chain, especially in times of crisis, in 2022 the OPEC Fund agreed to contribute US$50 million to a trade finance facility to send food, fuel and other key commodities to the Maldives and its population of just over half a million people. 

The OPEC Fund is also the single biggest investor in the Maldives’ water sector, having committed more than US$125 million to date. Speaking at an OPEC Fund panel session at the UN Climate Change Conference COP27 in Egypt, former Maldives Minister of State for Environment, Climate Change and Technology Khadeeja Naseem made an impassioned plea for the international community to meet the Paris 1.5°C climate commitment. She said that shoring up key infrastructure like sea walls and desalination plants are essential for the survival of her island nation – much of which lies barely a meter above sea level. 

The OPEC Fund Quarterly caught up with Ms. Naseem to hear her views on prospects for the future and to get her verdict on the UN Climate Change Conference COP28 in the United Arab Emirates (UAE) and the nascent Loss and Damage Fund, which she personally helped shape. 

OPEC Fund Quarterly: How is climate change impacting the Maldives? 

Khadeeja Naseem: The Maldives is one of the most vulnerable countries in the world when it comes to the worst impacts of climate change. Our islands are basically made up of coral reefs surrounded by marine life. These reefs are not only our first line of defense against the rising tides; they also provide us with food and income because tourism and fisheries are our biggest industries. Everything comes from the ocean for us, so if the reefs die, the Maldives will cease to exist. Because of climate change, the sea is getting hotter and 2023 was one of the hottest years on record. Sea surface temperatures also increased, so we had to deal with a situation similar to 2016 (another warm “El Niño” year) when nearly three-quarters of our reefs were bleached and died off. 

When scientists predicted increased temperatures, which could lead to a tipping point, that was very scary for us. Our islands are already suffering coastal erosion because of increased wave energy; our coral reefs are dying because of the hotter sea temperatures; and there’s flooding like we’ve never seen before. January 2024 saw record levels of flooding especially in the capital, Malé. The weather is becoming increasingly unpredictable. Hard rainfalls are getting more intense and occurring in a shorter period of time, leading to severe impacts – and this in a world that has only surpassed a temperature increase of 1.2°C [above pre-industrial levels]. We can barely cope. 

If we are to limit global warming to 1.5°C, greenhouse gas (GHG) emissions need to peak before 2025 and then fall by over 40 percent by 2030. COP28 in Dubai was really important because of the “Global Stocktake” – to ensure that we’re staying on the agreed path. When we speak about 1.5°C on the Maldives, we’re talking about whether our country remains functional and inhabitable. We’re talking fundamentals. 

OFQ: Is water security another issue for the Maldives? 

KN: Water is a big problem. We have run out of freshwater on every single island in the Maldives and have to resort to providing reverse osmosis – i.e. purifying seawater – in a very energy intensive manner. That’s been one of our top priorities because some islands regularly run out of water in the dry season. We then have to ship water to these islands without the infrastructure – which begs the question: why can’t we do a better job at rainwater harvesting and adopting other more sustainable methods? 

One of the first projects that the Maldives got approved under the Green Climate Fund (GCF) was on the issue of freshwater, of harvesting rainwater and making it available in a more sustainable manner. The project was carried out on 29 islands, with a focus on building up infrastructure. 

OFQ: What are the prospects for the Maldives over the next 10-20 years? 

KN: The Maldives cannot do anything about the temperature control of the world because we’re negligible. In fact Small Island Developing States (SIDS) all together contribute barely 1 percent of all GHG emissions, according to UN data, so it’s really up to the large emitters to course correct and put the world back on track. 

If that doesn’t happen, the projections look very bad for the Maldives in 10- 20 years from now. If we overshoot 1.5°C by 2030, then according to the Intergovernmental Panel on Climate Change (IPCC) there’s a 90 percent chance that all our coral reefs will die off. That will shut down our tourism and our fisheries industries – and put our very existence in question. There’s also going to be more frequent and intense storms and sea swells, so it will be hard to keep many of our atolls inhabitable and almost impossible to have decent livelihoods. 

The only way we can withstand the climate impacts is by building up our infrastructure, including sea walls and desalination plants. That will reduce the long-term losses and damages, which force us to borrow and rebuild each time and which put us in a perpetual cycle of borrowing, using funds that would otherwise go into social welfare, education, health services and all the important things that make a society stable and functional. We constantly have to divert funds into emergency relief, so we go further and further back in terms of our resilience. 

We’re also rapidly transitioning to an economy fueled by sunshine because the COVID-19 pandemic really demonstrated our vulnerability to imports. Right now we spend about 10 percent of our GDP on importing oil – so it’s not only an environmental need but also an economic case in terms of resilience. We’re trying to ensure our energy security by transitioning more to renewable energy. 

For mitigation there’s always the business case, always a case for profit and a reason why the private sector would get involved. But for adaptation measures there’s always the argument that there’s no financial incentive for people to invest in an expensive sea wall for millions of dollars because it is not something that will make money in the long term. But actually there is a business case for working with the best designs and the best data, because when done cheaply you end up having to pay again later. We’ve had instances of maladaptation, for instance putting a harbor in the wrong area of the island or using a design that further exacerbates erosion on the islands, because a quick intervention was required but not enough resources were available to gather the right data and incorporate the best designs suited for the islands. 

OFQ: Do SIDS collaborate and share learning – or rather compete for climate financing? 

KN: There’s lots of knowledge to be exchanged. SIDS have long been active and sophisticated agents in the international climate response, having repeatedly advocated for increased support – especially for adaptation. The problem is that many SIDS like the Maldives don’t have the requisite fiduciary standards, all the checks and balances, in our institutions and organizations. So if we want to access finance directly, which would save us time and money, we need to have stronger governance and better fiduciary standards. 

In this regard, we’ve forged a close relationship with Antigua and Barbuda, which was able to pass the accreditation process and get themselves approved by the GCF. They came to the Maldives and helped our team that’s working on the accreditation, which had to set up a monitoring and evaluation unit, while reinforcing our audits. We’ve also been working with other countries in the vast AIMS region covering the Atlantic, Indian Ocean and South China Sea to help each secure accreditation and to access climate finance. 

Although there are big differences between SIDS in terms of economic development, connectivity to the rest of the world and economic activities, there are often common experiences and lessons to be learned. It would be useful to establish stronger advocacy to make funding applications easier because they are often cumbersome, costly and time-consuming. Sometimes a proposal can take four or five years to prepare. By the time the project is ready to roll out, you may have entered a new political phase of island councils with new stakeholders, priorities and realities on the ground. 

I think it’s also good for countries to band together and to make these demands towards international institutions. This was something that was discussed a lot in our Transitional Committee on Loss and Damage to facilitate access to funding. Of course, there must be checks and balances, but it is possible. 

Recipient countries sometimes have to procure extra funds and time to gather data and demonstrate evidence that a project location’s environmental degradation happened because of climate change. This rationale is important in justifying projects, but countries like the Maldives do not have research institutions and historic data available so it is sometimes very challenging to even begin to make a project document, hindering accessibility. 

OFQ: How is the Loss and Damage Fund evolving? How can MDBs like the OPEC Fund help? 

KN: We’ve seen tremendous progress on the Loss and Damage Fund. In just over a year it went from being a possibility to a reality – and that is not normal in such large international settings! The Transitional Committee worked very hard with the World Bank and others to reach an agreement on costing governance sources and other big issues, which was not easy. 

Coming out of COP28 we had a strong mandate to deliver on the recommendations crafted by the Transitional Committee, so I’m optimistic about delivering the funding arrangements in 2024 for several reasons. First, I think parties passed the recommendations on the first day for a reason. That was very political and there was a reason why it had to be done. It showed the confidence that they have in the soundness of those recommendations and this was affirmed by the financial support pledge for the fund’s initial capitalization, including the US$100 million from the UAE which under the convention is technically still a developing country. That was a tremendous display of leadership from the presidency. 

Second, I think the agreement reached with the World Bank is historic. What we saw in the Transitional Committee was a genuine desire by the World Bank to listen to the concerns of developing countries and raise those issues with management. 

The agreement we reached with the World Bank on hosting the Fund includes novel provisions like direct access, programmatic support and the ability to go to capital markets. These conditions in one fund hosted by the World Bank is unprecedented. 

Third, I’m confident because the World Bank has high aspirations for the success of this initiative. The agreement we reached is based on the principle of “trust but verify”. That is something we fought very hard for and the fact that the World Bank agreed shows that they’re serious about meeting these conditions. It also means that those on the board and the technical side have a lot of work to do to meet the World Bank’s conditions in order to accept money and begin lending. So it’s a two-way street and the development banks have a huge role to play in the success not only of the Fund but also the funding arrangements. 

A key provision in the agreement mandates the establishment of a “Loss and Damage Dialogue”, including the primary agencies responsible for loss and damage related activities. There are humanitarian agencies, development banks, public and private financial institution and others. So it’s not just limited to the World Bank; there’s a there’s a role for everyone to play here. As the largest provider of multilateral climate finance, it’s imperative that the World Bank takes a leading role in that dialogue while regional development banks work alongside to craft solutions and amplify impacts. 

All this involves new need-based money and new coordination. So for the development banks this means leveraging, frontloading and maximizing balance sheets much more than in the past. We also need new infusions of capital from public and private sources, so governments and public finance must step up and give these institutions the capacity to fulfil their mandates, including fixing the regulatory environments. 

If countries like the Maldives are heavily in debt and can’t keep on taking on more debt, but at the same time it’s clear that they’re not going to get a whole grant for big essential infrastructure projects, what can be done? You can help countries like the Maldives access more money at better rates; you can help with guarantees that have little impact on debt, but which allow us to continue on our development paths; and you can help with our new adaptation needs linked to biodiversity, health, food security, water and infrastructure – five elements highlighted by the IPCC that need to be protected for human well-being. 

Development agencies need to ensure that the most vulnerable countries get access to concessional finance, noting the fact that many developing countries are already in debt and that increasing debt is unsustainable. This is something that needs to be dealt with in the broader international financial system, so there needs to be some leniency or reforms because the status quo is simply not sustainable. 

Developing countries have fought for grants from the Loss and Damage Fund, but we all need to accept that it cannot do everything. It cannot address things like debt and climate migration – all the complexities that come with noneconomic losses and damages. We also need to mobilize the private sector, the philanthropists and the sovereign wealth funds if we hope to address the scale of the impacts on the horizon of 1.5°C and beyond. We have to get all hands on deck – to turn the billions into the trillions that are needed to address loss and damage. 

We have to keep the ambition and political momentum high, which is why I proposed this high-level dialogue to the Transitional Committee. This is going to be something that the UN Secretary General will co-convene with the Loss and Damage Fund with the main actors and funders, which would be the key UN institutions like the United Nations Office for the Coordination of Humanitarian Affairs (OCHA), the International Organization for Migration (IOM), the multilateral development banks and so on. 

That is important because we need to find ways to address the policies, change the protocols and ensure that work being done in these organizations aligns with the realities of 1.5°C and beyond. Also there is a reason to coordinate better so you don’t double count – for instance, if you already have a program for insurance or early warnings, then you claim that’s your contribution to the Loss and Damage Fund. We don’t want existing funds to be diverted or repackaged. 

The whole reason why loss and damage has moved fast is because of political pressure, including at the level of the UN Secretary-General. The recent Climate Ambition Summit was the first time all these international financial institutions, their heads and VPs came to New York and discussed what they were going to do about loss and damage. These are the same institutions that have never uttered the words loss and damage before, so everyone was wondering why should they be involved in a UNFCCC process? Well, because the UNFCCC – as the UN entity tasked with supporting the global response to climate change – is important as a multilateral space and the only multilateral space that the world has to solve this crisis. It cannot do it alone because time is running out. The impacts are really big. We saw what happened in Pakistan, where upwards of US$30 billion of funds were wiped out by one disaster, which completely submerged a third of the country. 

We cannot only rely on replenishments. We have to think big because loss and damage can only be addressed through a mosaic of solutions. That mosaic has many pieces and the UNFCCC will play a central role, but together with the new Fund there is also a big role for the development banks and international financial institutions to play. So let’s keep our ambitions really high. 

Khadeeja Naseem 

Climate change policy expert from the Maldives and presently a Senior Advisor on Loss and Damage and Climate Negotiations to the International Peace Institute. Previously she was Minister of State for Environment, Climate Change and Technology in the Maldives and oversaw the policies and work related to climate change and energy. She also has extensive experience in climate finance and disaster risk management. 

The OPEC Fund & the Maldives 

To date, the OPEC Fund has approved 29 loans in the public and private sector for US$256.1 million in the Maldives. The OPEC Fund has also provided US$208.5 in trade finance for seven transactions and six national grants worth US$2.8 million. 

Example: A US$50 million project signed in 2015 and currently under implementation will raise health standards and living conditions of approximately 124,000 people in 49 selected islands. The goals will be achieved through the construction of extensive water supply systems and distribution networks, the development of a regional waste management system in the upper north region of the Maldives and the construction of 21 fully equipped waste management centers.