Private finance needed to mitigate health impacts of climate change

To attract much-needed funding, African and Latin American countries need a blend of public and private capital to improve fragile and ill-financed healthcare systems. Dr Kaouthar Lbiati reports.

Climate change manifests as extreme weather, such as rising temperatures and shifting precipitation patterns, and causes glacier melting, soil erosion, ocean acidification and rising sea levels. It damages infrastructure, disrupts supply chains, drives competition for water resources, spikes the price of commodities and erodes GDP, leading to political unrest and mass migration.

Africa is particularly vulnerable to climate change, even though it contributes little to it. Rising air and water temperatures, and changes in precipitation patterns and humidity, create environmental conditions conducive to the survival and transmission of vector-borne diseases (those spread by living organisms, such as insects, between humans or from animals to humans).

Rising air and water temperatures also fuel the growth of water- and food-borne pathogens, as flooding, storms and hurricanes can disrupt sewage and wastewater disposal systems.

Achieving health security

Climate-resilient health systems are those capable of anticipating, responding to, coping with, recovering from and adapting to climate-related shocks and stress. They bring about sustained improvements in population health, despite an unstable climate.

Investing in solutions that predict, prepare and position resources where they are most needed is critical. Accurate forecasting requires collaboration between academia, policymakers, economists, scientists and financiers.

Anticipating and responding to infectious-disease outbreaks while safeguarding improvements in the management of endemic diseases such as TB, HIV, malaria, dengue, zika and ebola should be the number-one priority for African and Latin American countries.

In the past, they were significantly affected by these diseases. Now they need to adapt to climate change within fragile and ill-financed healthcare systems.

Screening for vector-borne and waterborne diseases in wastewater by using advanced new genetic sequencing is crucial to reinforce surveillance systems. Unfortunately, most developing countries do not have access to such methods, either due to their prohibitive cost, a lack of appropriate infrastructure, or both.

Moreover, it is anticipated that climate change will cause massive displacements of populations in the south and global expansion of pathogens through migration. Diseases may spread either through migrants, or because of disruption in ecosystems.

Fortunately, neglected tropical diseases resurfaced recently in the research and development portfolio of two pharmaceutical companies: Takeda and Bayer. They are, respectively, testing technologies against dengue and river blindness.

More research and development is needed to mitigate other health impacts of climate change, such as digestive and immune diseases and nutritional, metabolic, neurodevelopmental and mental health. There is also an urgent need to build resilience within the supply chain, especially for anti-infective drugs, vaccines and other essential medicines, to ensure a fair level of preparedness for future outbreaks, mitigate some of the most serious national security risks, and prevent drug shortages during climate shocks.

Mobilising funds

Far more funds have been channelled to cutting greenhouse gas emissions as climate change mitigation initiatives became macro drivers of geopolitical dynamics among world powers. This inspired a clean-tech race and net-zero focused industrial policy.

Funding for the health-related impacts of climate change has long lagged behind and did not receive the appropriate attention until COP29, held in Baku, Azerbaijan, at the end of 2024. Here, the biggest discussion centred on global climate finance, specifically how much (in trillions of dollars) is needed to help developing countries address climate change and adapt to changing conditions.

Notably, there were strong calls from many developing countries to exclude non-concessional loans, provided at or near market rates, as many of the poorest countries are spending more on servicing debt than they receive in climate finance.

In recent years, multilateral development banks such as the World Bank have focused on linking finance to climate adaptation and mitigation. However, spreading climate mitigation policies equally across the developing and developed countries would not help lower-income countries address climate change, especially those without access to private markets.

Major climate funds – such as the Green Climate Fund (GCF), the Adaptation Fund and the Global Environment Facility (GEF) – constitute a minor share (about 9%) of the total public adaptation finance. It is also worth noting that only 66% of the funds allocated to adaptation between 2017 and 2021 were successfully disbursed to their recipient countries.

This pattern underscores that there is limited climate-policy knowledge among decision-makers, and bureaucratic delays in fund approval and disbursement. Therefore, building capacity in climate policy and finance on the policymakers’ side and addressing barriers related to capital misallocation and disbursement are necessary to enable capital flows.

Policymakers are required to bridge the gap between financiers and industrials. They need to engage in an open dialogue with communities to identify the most bankable projects and create a repository of detailed data on the impact of these projects to accelerate private capital flows.

According to Convergence, a global network for blended finance (which is the use of public sources of capital to attract private investment), since 2010, such flows came close to $180 billion in aggregate (as of 2022). Annual capital flows averaged approximately $9 billion since 2015.

This is quite low, considering the capital developing countries need to meet the United Nations’ Sustainable Development Goals. To solve this capital shortage while delivering a return on investment to funders, it is necessary to scale up private finance to complement public- and grant-based instruments, as well as bilateral and multilateral partnerships.

Blended finance deals

Reforming the multilateral financial architecture is also necessary to unlock climate finance. Multilateral development banks and development finance institutions are well positioned to augment the share of private capital mobilised in blended-finance transactions.

As financial intermediaries, they can lead blended finance deals that could fund bankable industrial projects at scale, and reinforce de-risking and risk-sharing mechanisms throughout the value chain of medicinal products (from development to regulatory approval, and from manufacturing and procurement to distribution).

Blended finance can accelerate product development and technology transfer to countries where research and development is relatively immature, despite the presence of good manufacturing capabilities, or where manufacturing infrastructure is underutilised.

Bringing multiple smaller companies together to make a sizable investment opportunity and fund small local drug manufacturing could thus scale up production. This could encourage regulators to offer incentives to companies that invest in research and development into neglected tropical diseases and anti-microbial resistance. The nearshoring of vaccines and antibiotics has the advantage of ensuring affordability, access and local availability.

Among the other benefits of blended finance is the direct positive impact on the procurement, supply and cost of medicines, with an expected reduction of up to 60%. Blended finance could also control volatility on the demand side and remove the uncertainty and perception of high risk associated with developing markets.

Technical due diligence

Funders are invited to act as insurers or guarantors to manufacturers for a predetermined volume of medicinal products produced during a period of typically two to six years.

However, blended finance does not come without downsides, mostly related to the technical due diligence aspects and transaction costs associated with deal structuring for projects and exchange rates.

Overall, the established connection between climate change and health should foster more significant climate action. Climate finance can help developing countries build more sustainable and climate-resilient health systems in the broader context of the global climate transition, economic development and governance.

Since the benefits of blended finance outweigh its downsides, private creditors should step in and scale up their contribution. Multilateral development banks and development finance institutions are urged to act as financial intermediaries to lead health-related climate blended finance deals to fruition in developing economies.

Dr Kaouthar Lbiati is a biopharma business leader and board director, columnist and public speaker. She sits on the board of directors at Hepion Pharmaceuticals and Theralase Technologies.