Climate change has now become a significant factor affecting the development processes of all countries. In recent times, we have witnessed more frequent extreme weather events such as storms, floods, hurricanes and wildfires. These developments, which were rarely encountered in the past, have become a daily agenda item. Within this context, it is accurate to say that the effects of climate change are currently being felt on a global scale, with the most vulnerable communities in developing countries being the most affected.

Critical sectors essential for development, such as agriculture, water, health and infrastructure, are deeply experiencing the adverse effects of the changing climate. The destructive impacts on food security, water resources, human health and infrastructure integrity increasingly highlight the urgent need for comprehensive action to combat and adapt to climate change. It is essential to outline frameworks that provide strong financial support for investment planning in this context.

Therefore, it would be beneficial to touch upon a few sectors where we can most closely observe the adverse effects of climate change on development processes and provide insights into the latest developments in the context of global development and climate financing.

Managing key sectors

While the risks brought about by climate change may not impact every sector to the same extent or in the same manner, the interconnected nature of economic activities causes its almost ubiquitous influence across nearly all sectors. It is essential to note that the sectors discussed in this article represent only a limited portion of the subject matter.

One of the sectors that immediately comes to mind when discussing climate change is agriculture, which holds vital significance for developing economies and is highly sensitive to the impacts of climate change. Changes in temperature and precipitation patterns, along with extreme weather events, adversely affect crop yields, posing serious threats to food security. This, in turn, can lead to high food prices, malnutrition, hunger and potential future famines. According to World Bank data, it has been projected that climate change will push an additional 132 million people into extreme poverty by 2030, with the primary cause identified as the effects of climate change on the agriculture sector.

The poorest and most vulnerable segments in developing countries are disproportionately affected by food insecurity, lacking access to resources needed to cope with rising food prices. This issue extends beyond the framework of food systems, holding significance in the context of migration patterns and socio-economic changes. The crop failures resulting from drought and weather conditions in East Africa in 2019 led to millions of people migrating, causing hunger and socio-economic disruptions. Consequently, such situations, particularly in developing countries, highlight the fragility we addressed and the challenges experienced in the context of development.

Regarding the impact of climate-induced heat waves on the sector, data from leading reinsurance company Swiss Re reveals that the amount paid by insurance companies for heat-related disasters, such as crop shortages due to drought or damage to properties from uncontrollable fires, has reached $46.4 billion in the past five years. Considering that this amount was $29.4 billion in the preceding five years, it is evident that the insurance sector faces a significant economic threat due to climate-related risks.

Another crucial sector is related to the management of water resources. Climate change increases pressure on global water sources, affecting areas such as agriculture, industry and public health. Droughts, floods and rising sea levels complicate water access and management, particularly impacting developing countries. Droughts and forest fires lead to the depletion of vegetation and tree cover, intensifying soil erosion. Consequently, this reduces the replenishment of groundwater, increasing the risk of water scarcity and food insecurity.

On the demand side, increasing water needs contribute to the escalation of energy-intensive water pumping, transportation and purification. Imbalances or excesses in this demand pose a threat to water security. Droughts in various regions of Africa hinder agricultural production, negatively affecting food security and economic stability. Fair water access and sustainable water management practices are undoubtedly essential for building resilience against climate change.

As the impacts of climate change intensify, addressing cross-border water policies becomes imperative in the foreign policies of countries. Managing water resources becomes increasingly challenging, and the equitable sharing of existing water sources among neighboring countries will become a more sensitive international issue.

Climate change is not just an environmental crisis but also a serious threat to public health. Rising temperatures pose risks such as heatstroke, dehydration and diseases associated with increased temperatures, while changes in rainfall patterns can increase waterborne diseases like cholera and typhoid.

Climate change also contributes to the spread of disease-carrying insects such as mosquitoes and ticks. According to the World Health Organization (WHO), climate change is expected to cause an additional 250,000 deaths per year between 2030 and 2050, with malnutrition, malaria, diarrhea and heat stress being the primary causes. Extreme weather events like heat waves, floods and droughts contribute to increased mortality rates and the spread of diseases.

Incidents like the 2021 heat wave in India and Pakistan highlight the severe consequences of climate-induced temperature increases. Urgent actions are required to protect public health, implement adaptation measures and establish effective disease monitoring systems. Additionally, temperature increases pose a threat to outdoor workers, leading to death, injury, illness and decreased productivity. A study in Canada's British Columbia revealed a 180% increase in workplace injuries requiring compensation during the 2021 heat wave compared to the previous three-year average. Consequently, climate change is likely to prompt regulatory changes in economic activities and the labor market, impacting public health and regulatory frameworks in the future.

Climate change is increasing the frequency and intensity of extreme weather events such as floods, landslides and rising sea levels, affecting infrastructure like transportation and communication networks. This situation can damage roads, bridges and essential infrastructure, hindering access to transportation and basic services. For example, Cyclone Idai in 2019 severely damaged infrastructure in Mozambique, Zimbabwe and Malawi, leaving millions without access to basic services such as water and sanitation. Considering that these countries already have limited access to resources in the existing development financing architecture, the estimated financial damage from such disasters, amounting to billions of dollars, can be highly detrimental to their development financing context.

Events like these highlight the vulnerability and fragility faced by developing countries. The financial impacts of these disasters result in losses amounting to billions of dollars. Investing in climate-resilient infrastructure, disaster preparedness and early warning systems is crucial for ensuring sustainable development and protecting communities from the impacts of climate change.

Expectations for system

The challenges faced by developing countries in the face of climate change are further exacerbated when considering the shortcomings of the current financial architecture. Developing countries already encounter difficulties accessing grants and concessional loans within the existing financing framework. Additionally, due to institutional capacity limitations, they face challenges in generating and implementing fundable projects. Moreover, the globally increasing interest rates do not contribute to this situation; instead, they drag these countries with high debt levels into a seemingly inescapable spiral in the coming period.

A notable response to these issues is the Bridgetown Initiative, launched by Barbados Prime Minister Mia Mottley at the 2022 United Nations Climate Change Conference (COP27). This initiative calls for a reform of the global financial system to better address climate and development crises. Key proposals include establishing a new loss and damage fund to aid countries disproportionately affected by climate change, incorporating a natural disaster clause in credit agreements for temporary debt payment suspension during climate disasters and providing more grants and concessional financing to facilitate investments in climate-resilient infrastructure and adaptation measures in developing countries.

Following this initiative, the New Global Financial Pact Summit held in June in Paris can be considered a significant milestone in the fight against climate change. The summit presented an opportunity to sustain the momentum of the Bridgetown Initiative.

With representatives from over 100 countries, the summit emphasized the urgency of effectively mobilizing financial resources. It also provided an opportunity to address the connections between climate change, development and financial systems.

One notable outcome of the summit is the commitment to increase resources to assist developing countries in adapting to climate change. This is a positive declaration of intent considering the inadequacy of current funding levels. The summit also discussed the need to make the global financial system more responsive to the climate crisis. This includes providing more grants and concessional financing to developing countries and creating new mechanisms to address climate change-induced loss and damage.

The New Global Financial Pact Summit and the Bridgetown Initiative signify significant progress in developing the global financial architecture. However, it is clear that more needs to be done.

The world's wealthiest countries must fulfill their commitments, enhance these commitments and ensure the provision of the needed financing for developing countries. This will help these countries increase their climate resilience and stay on the path of sustainable development. Efforts must be significantly increased to allocate sufficient resources for developing countries to adapt to the impacts of climate change. Beyond all this, especially at a time when geopolitical developments lead to hesitancy in allocating funds for climate finance, developed countries must take a leading role and demonstrate their support for developing countries in the fight against climate change.

Climate change is a global crisis that requires immediate intervention, reshaping the development process worldwide. The recent New Global Financial Pact Summit demonstrates global awareness of the need for financial support. However, geopolitical tensions should not cast a shadow on efforts to restructure climate finance. If we do not address climate change today, its impacts will be as profound for future generations as wars. Urgent, collaborative and resolute action is the shared responsibility of all countries to ensure a sustainable future and a resilient world.

*Professor based in Türkiye

**Expert at Türkiye’s Ministry of Treasury and Finance