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A Proposal to Make Migration Work for Adaptation: Classifying Remittances as Climate Finance

Climate finance is falling short of meeting the adaptation needs of those most vulnerable to climate change. What little is provided increasingly comes from existing, and already overstretched, development budgets. Development leaders emphasise their desire to mobilise more private climate finance, but struggle to do so— especially for underfunded adaptation. This is the first challenge.

Remittances are already an important and effective source of income for households in climate-vulnerable countries. Many Global North countries rely on migrant labour to fill (often seasonal) labour shortages. However, they make little effort to maximise the potentially very large effects of this labour migration by targeting it towards those who would most benefit. This is the second challenge.

In a new paper, we set out a proposal that addresses both challenges: incentivise the reorientation of migration opportunities towards communities highly vulnerable to climate change by counting a portion of their remittance flows as mobilised private climate finance.

How it might work and what it might deliver

In essence, remittances are a form of cash transfer. We found (and summarise in the paper) many examples of cash transfer and cash for work programmes that seek to support climate adaptation and are at least partially counted as climate finance. Our proposal is to treat a portion of remittance flows, where (and only where) these have arisen as a result of deliberately targeting labour migration programmes at more climate-vulnerable communities, as privately mobilised climate finance. 

This would not necessarily generate additional remittance flows in total. But it would incentivise the selection of migrants from poorer, more climate-vulnerable communities, where remittances’ development impacts can be greater.

Could the proposed migration programme mobilise private climate finance at a rate competitive with other forms of mobilisation? Is it, in other words, a good use of money? We illustrate our proposal with some worked examples based on seasonal labour migration governance by the Australian and UK governments, and find encouraging results.

In 2022, every dollar of public adaptation finance mobilised just 12 cents of private adaptation finance (a leverage ratio of 1:0.12). We show that in the early years of Australia’s Seasonal Worker Programme, every public dollar spent mobilised US$1.83 in remittances (a leverage ratio of 1:1.83). Projections for a targeted version of the UK’s Seasonal Worker Visa scheme find similar results across a range of scenarios, with leverage ratios of between 1:1.4 and 1:10.2. If the entirety of the UK’s Seasonal Worker Visa scheme was targeted towards climate-vulnerable populations, between US$97 million and US$543 million of private climate finance could be mobilised per year. This would equate to between 2.8 and 15.5 percent of all private climate finance mobilised for adaptation in 2022.

For the climate-vulnerable households benefiting from targeted access to international migration, these new sources of funding could be transformative. International migration has a greater and more immediate effect than any alternative development intervention. Remittances can allow households to maintain consumption during shocks, pay off debt, diversify income streams, fund healthcare, reconstruct or reinforce dwellings in the face of shocks, or fund ex-ante adaptation.

For countries of destination, the opportunity to mobilise private climate finance could have positive effects on their approach to low-skill labour migration more generally. With the incentive to boost remittances, they could newly prioritise reducing migrants’ costs, decreasing remittance sending costs, and eliminating exploitation.

Some possible challenges

There are, of course, a number of challenges and questions to be considered.

Is such finance genuinely additional or will it just displace existing climate finance flows?

We believe the risk of displacement is very low. That’s because the volumes of aid money that might be needed are small, and because mobilised private climate finance is not generally counted within individual donor climate finance commitments or credited to them individually. Rather, it is a component of the current $100 billion climate finance goal (which embraces finance from a wide variety of sources, instruments and channels) that is separate from “public finance.” It is therefore not substitutable with commitments of bilateral or multilateral public climate finance.

Mobilised private climate finance is also the component that has fallen most short of original expectations. Moreover, while negotiations of the New Collective Quantified Goal that will replace the $100 billion target (met two years late in 2022) are ongoing, it is expected that the scale of the new goal will be significantly larger. While public finance will remain the centrepiece, more private finance will need to be mobilised. So there are already incentives to do more to mobilise additional private finance. This proposal, by virtue of its relatively high leverage ratios, can contribute to delivering these increased flows.

Does this proposal “make migrants pay” for climate finance?

No. The proposal should be seen as a way of supporting adaptation by redistributing access to labour migration opportunities towards those most vulnerable to climate shocks. As noted, this proposal would not displace bilateral commitments. Instead, this proposal can direct new and additional financing to the most local level, supporting affected communities directly. This financing, furthermore, would not be delivered as a loan— unlike the majority of current climate finance, much of which is non-concessional. The non-implementation of this proposal would not lead to increased public finance, but to continued funding of adaptation needs by the poorest populations in the most vulnerable countries. In a resource-constrained landscape, there is a moral duty to consider this proposal for implementation.

Are there risks of this being gamed?

There may be. In particular, countries seeking a shortcut to credit for climate activities may be tempted to reclassify existing remittances as climate finance. That’s why our proposal stresses the importance of careful selection of migrants on the basis of vulnerability to climate shocks— and of auditing selection procedures and rigorously evaluating programmes. This is part of a wider debate on improving the consistency and transparency of climate finance counting and reporting. Progress is being made, and we believe this challenge can be overcome.

Can the proposal be made to work operationally?

Yes, and in fact similar programmes have been run before. Implementation will require a greater presence in the country of origin; a much more rigorous selection process than migration policy normally requires in low-skill areas; careful auditing of processes; and new partnerships with a range of actors (such as remittance service providers, country of origin governments, and local recruitment actors). None of these challenges seem insuperable.

Is the incentive of climate finance mobilisation likely to be sufficient to change selection behaviour in countries of destination?

At this stage, we do not know. There will inevitably be some additional costs and inconvenience to countries of destination in designing or reorienting labour migration programmes to more climate vulnerable communities. Whether benefits, in terms of the political kudos from supporting a collective contribution to a larger climate finance goal, and from improving the coherence and domestic and international policy, are worth those costs remains to be seen. But if countries do not at least consider this proposal, questions can be asked regarding their commitment to mobilising adaptation finance.

Conclusion

Climate adaptation needs are underfunded and growing. Labour migration can bring crucial finance directly to climate-vulnerable households. Labour migration programmes targeted to climate-vulnerable populations can support adaptation and offer value for money. We believe that they are worth exploring.

We hope this new paper will generate and inform a serious discussion both about how additional climate finance can be mobilised, and how the adaptation needs of the most climate vulnerable can best be supported. In our paper, we set out in detail how the proposed programme can be conceptualised and implemented. The next step: pilots.

Disclaimer

CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.


Image credit for social media/web: UN Women/Staton Winter