International finance reform is gaining momentum

One of the achievements of the COP27 climate negotiations was the agreement that international financial institutions should undergo comprehensive reform, to be better structured for climate crisis response. Calls for ‘shifting the trillions‘ go back many years:

  • In May 2015, then UNFCCC Executive Secretary Christiana Figueres told finance ministers, central bank governors, CEOs and analysts, gathered for the Climate Finance Day in Paris, that climate finance should not be a niche concern; no money should generate climate damage.

  • In October 2015, Christine Lagarde, then Managing Director of the International Monetary Fund, told leaders gathered in Lima that anything macro-critical is the IMF’s business.

  • In 2018, Resilience Intel released The Path to 100% Climate-Smart Finance, focusing on investment to build macro-critical resilience.

  • By mid 2019, Resilience Intel had tracked at least $5.48 trillion in climate-smart financial activity and commitment across public, private and multilateral finance.

  • By February 2020, Resilience Intel had further tracked overall climate-smart finance commitments at $6.08 trillion (an increase of 71% from the end of 2018).

  • The rapid growth in climate-related bonds accounted for 1/4 of that amount, with the Climate Bonds Initiative finding $1.45 trillion in climate-related and green bond issuances by 2020.

  • At the COP26, the Glasgow Financial Alliance for Net Zero united 450 financial institutions controlling roughly $130 trillion—about 1/3 of all global wealth—in a commitment to science-based pathways to achieving net zero global heating emissions.

Now, the call for transformation is turning into action.

  • The World Bank has been tasked by the U.S. Treasury—its largest shareholder—with developing a comprehensive ‘Evolution Roadmap’ by this month.

  • We see the fairness principles and practical reforms at the core of the Bridgetown Initiative gaining support and going to work.

  • Creating fiscal space for enhanced climate crisis response is a priority for both wealthy and vulnerable nations. Climate-aligned debt relief and reform are becoming active real-world solutions.

  • The climate finance report co-chaired by Vera Songwe and Nick Stern, released during COP27, called for a roadmap to deliver \$1 trillion per year by 2030 to emerging markets and developing countries, while “encompassing transformation of the energy system, respond to the growing vulnerability of developing countries to climate change, and restore the damage to natural capital and biodiversity.”

  • The need for integrated multidimensional assessment of value creation is increasingly well understood, and practical efforts are ongoing to achieve reliable actionable metrics.

  • Non-market approaches under Article 6.8 of the Paris Agreement provide opportunities for bold collaboration to mainstream climate-resilient development.

  • Efforts to create a Co-Investment Platform for Food Systems Transformationare also gaining momentum. Within that wider food system finance transformation, a High Ambition Group of corporate and financial first-movers have set targets covering $108 billion in business activity.

Conscientious reform and evolution of international financial institutions can happen quickly, if policies and incentives are put in place to favor investments that reduce vulnerability and build resilience, without generating new threats to the health of people and nature. Integration and inclusion will be critical for adjusting IFI activities, metrics, and mission implementation to better respond to converging and compounding crises now affecting all regions.

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