Climate-vulnerable nations launch funding compact

ISLAMABAD: A group of countries described as among the most exposed to climate impacts has joined major development lenders in a new effort to secure cheaper and more reliable financing for economies facing mounting climate-related pressures.

The initiative, called the Vulnerability to Viability (V2V) Compact, was launched on Tuesday by the Climate Vulnerable Forum and its V20 finance ministers. It brings together 74 economies along with more than a dozen multilateral financial institutions, including the World Bank and the Vienna-based OPEC Fund.

The framework is intended to help close financing gaps that have widened after successive global crises, while vulnerable countries also contend with more frequent and severe droughts, hurricanes and floods. It also addresses concerns that poorer nations are being charged excessively high borrowing costs because of how sovereign risk is assessed.

Under the compact, participants aim to expand access to affordable and concessional funding, draw in private investment and develop shock-responsive financing tools. These include loan structures with payment suspension clauses designed to help governments keep essential services running during periods of crisis.