SOAS Research Online

Abstract

In recent years, private and public financial institutions have increasingly focused on addressing the implications of the climate crisis. However, existing efforts to align the financial system with climate change suffer from a significant limitation: they exacerbate global climate injustice. In this paper, I identify several climate finance injustice channels and explain how these can be addressed via the development of a ‘climate just financial system’. I define the latter as a system whereby climate justice criteria are incorporated into the policies governing public and private financial institutions, and the financing of private and public climate spending is in line with the principle of common but differentiated responsibilities and respective capabilities. A climate just financial system has three key elements: (i) differentiated climate responsibilities for global North and global South financial institutions, with the latter primarily focusing on climate adaptation and the former prioritising climate mitigation; (ii) climate justice stabilising mechanisms that establish a permanent commitment by global North countries to provide climate financing support to global South countries without making the latter more financially vulnerable; and (iii) the incorporation of climate justice criteria in the design and use of climate mitigation tools by global North financial institutions. Creating a climate just financial system requires significant transformations in multilateral financial mechanisms, public banking, central banking, financial regulation and private financial institutions. Although these transformations would face political and technical challenges, they can potentially be overcome if climate justice gets centre stage in the climate policy agenda.