Paris finance summit — triumph or disaster?
Elisa Vacherand, Global Finance Practice Leader, WWF, and Alice Ruhweza, Senior Director, Policy Influence and Engagement, WWF, assess outcomes from last week’s Summit for a New Global Financing Pact hosted by President Emmanuel Macron in Paris.
On the eve of the recent Summit for a New Global Financing Pact, a quorum of the world’s most powerful and influential leaders called for a ‘green transition that leaves no one behind.’ Their open letter framed an important opportunity to unlock global finance for nature and climate action — but did the summit deliver?
Promising signs on climate finance
Participation in the summit was impressive, as was collective ambition. More than 40 Heads of State, many from Africa, as well as World Bank and International Monetary Fund (IMF) chiefs, and other senior officials showed up in Paris. Usefully, they all recognised that fighting poverty and saving the planet are two sides of the same coin. As Ajay Banga, World Bank President put it, ‘We don’t have the luxury to pick and choose our crisis.’ They also acknowledged the scale of the challenge and the need to mobilise multiple sources of finance, not least private investment, as well as the need to reform international financial architecture.
Memorable interventions included those from Vanessa Nakate, Ugandan youth climate activist and UNICEF Goodwill Ambassador, who invited a minute’s silence for those suffering the ravages of climate change, and President Ruto of Kenya who called for a ‘global financial architecture of equals’ that ensures vulnerable nations don’t have to choose between ‘the end of the month and the end of the world.’
Among the most important outcomes that could help deliver on these ambitions, were the IMF’s announcement that its target of securing $100 billion in Special Drawing Rights (SDR) for the countries most vulnerable to climate impacts, especially in Africa, had been met; and the news that the long standing promise of $100 billion in annual climate finance agreed in 2009 will finally be realised.
These results are encouraging (although US Congress is yet to approve release of its share of SDRs, around a fifth of the total), and further rechanneling of SDRs, an increase in Multilateral Development Bank (MDB) lending capacity, and greater investment in infrastructure projects in Africa, are still badly needed.
Other significant outcomes included the World Bank announcing debt suspension mechanisms for countries experiencing natural disasters, and a range of deals for individual countries, notably a $6.3 billion debt restructure package for Zambia, and a $2.7 billion Just Energy Transition Partnership (JETP) for Senegal, although this unhelpfully allows gas as a transition fuel. Much less promisingly, calls from the Global South for debt relief in the face of crushing debts, also championed by UN Secretary General Antonio Guterres who entreated summit participants to make it ‘a moment of hope’ and a ‘giant leap’ toward global justice, were effectively ignored.
More positively, the European Commission’s High Level Expert Group, of which WWF is a member, published preliminary recommendations on how to scale-up sustainable finance for Low and Middle Income Countries (LMICs) by developing a new strategic approach to help attract capital, strengthen local capital markets, and address local currency financing risks. The European Commission also announced a Global Green Bond Initiative to support LMICs in their green transition and mobilise private investment. And the Coalition of Finance Ministers for Climate Action took a step in the right direction by highlighting the need for finance ministries to integrate climate into economic strategy and fiscal policy, launching a new climate capacity building programme for finance ministries with the World Bank.
In his summary, President Macron declared that ‘concrete measures’ agreed or advanced at the summit should amount to at least $400 billion in new financing to help countries tackle poverty and the climate crisis, primarily through cheaper loans.
Given the climate-nature-development polycrisis we face, and co-host Barbados Prime Minister Mia Mottley’s call for ‘transformation, not reform’ of the global financial system, is this patchwork of pledges enough?
Could do better, especially on nature and fossil fuels
Despite its promise and progress, the summit fell short in significant areas, all of which must still be addressed.
Nature and biodiversity — without which the world cannot deliver on climate or development goals — featured in some discussions and the summit saw a few announcements. These included the launch of a new international finance facility to protect and fund natural capital that will put forest-rich countries in the driving seat; and the UK and France launched a joint roadmap for scaling private financing of biodiversity credits.
These developments are welcome although the emerging market for biodiversity credits must meet rigorous standards such as those being developed by the World Economic Forum. Similarly, the increasing emphasis being put on debt-for-nature swaps is also positive as long as proceeds support socially and/or environmentally beneficial activities that are measurable, aligned with government conservation priorities, and built in partnership with local stakeholders.
Blended finance too was trumpeted as one of the most effective ways of attracting capital for high impact projects on the ground, and we strongly encourage replicating and scaling initiatives such as the Dutch Fund for Climate and Development (DFCD). But while there was consensus that closing the nature funding gap requires significant private finance, transition to a nature-positive economy also needs robust public sector engagement and a whole-of-government approach.
Nature was otherwise absent from the summit, and while there was tremendous emphasis on alignment with the Paris Climate Agreement, the new Kunming-Montreal Global Biodiversity Framework (GBF), delivery on which is an essential part of achieving climate goals, received barely a mention.
Arguably the summit’s biggest failure was missing the opportunity to make progress on international carbon-related taxation. Pre-summit negotiations had already ruled out taxes on aviation, fossil fuels, and financial transactions, leaving just one new tax on the table, a proposed levy on carbon emissions from shipping but the summit ended without a deal pushing a possible decision to the International Maritime Organisation in July.
The summit also saw little progress on commitments to phase out fossil fuels — critical for credible climate and nature transition plans — with some participants pushing back on the global agenda to stop fossil fuel extraction. A high-level GFANZ session did however highlight Voluntary Carbon Markets as an important source of funding for nature-based solutions, fossil-fuel phase out, and new climate technologies, as well as emphasising the importance of market integrity.
Hard yards ahead
The summit’s roadmap on next steps is a mixed blessing. Its milestones indicate an intention to demonstrate early progress in various fora on debt restructuring and SDRs (by mid-July), and financial instrument responsiveness, proposals for MDB reform, hybrid capital pilot projects, and delivery on the 2030 Agenda (by mid-September), amongst other things. Plans to monitor these and other outcomes regularly should help ensure summit rhetoric and fine words produce action. But again, nature and delivery on the GBF are largely absent.
Developing countries require an estimated $2.4 trillion a year to reduce emissions and deal with climate impacts. And climate, biodiversity, and land degradation goals will be out of reach unless investments in nature-based solutions reach $384 billion a year by 2025, more than double of the current $154 billion a year. The pay off is that transitioning to a nature-positive economy could generate annual business opportunities worth $10 trillion and create 395 million jobs by 2030.
Those leaders who called before the summit for a green transition that leaves no one behind must have the courage of their convictions and develop nature-positive roadmaps, incentivise investment from public and private financial institutions, and drive credible reform of MDBs. The latter must lead by example and set ambitious net zero, nature-positive targets, align portfolios with the Paris Agreement and the GBF, deliver on their COP26 joint nature statement, stop fossil fuel financing, and scale support for nature-based solutions.
The summit sought a transformational breakthrough on finance for climate action. It managed to create momentum and hope in advance of key international meetings later this year, and saw consensus for global action begin to emerge. But forging a genuine global financial pact that realises prosperity for all on a healthy planet requires significant follow through. The hard yards lie ahead, and what is achieved between now and COP28 in Dubai in December will be the real measure of the summit’s success.
