Gearing up the reform of the international climate finance architecture
This autumn’s busy negotiation agendas, offer a window of opportunity to move the reform of the international climate finance architecture (IFA) up one level. This acceleration is urgent if we want to keep pace with the dramatic change in scale needed to finance the climate transition. In 2023, developed countries announced that they had – for the first time since 2009 – achieved their USD 100bn/year climate finance target to support climate action in developing countries. Just two years later, this target is already obsolete, with needs for emerging and developing economies (excluding China) estimated at around USD 2.4 trillion per year by 2030.
There are at least three aspects central to the IFA that need to come together for an ambitious reform.
First, settling on an ambitious New Collective Quantified Goal on Climate Finance (NCQG), to replace the USD 100bn/year target. In addition to the quantum, which is rightly receiving a lot of attention, the NCQG should seek to maximise the impact of public finance, consistent with countries’ differentiated contexts and long-term strategies. The reformed financial architecture should ultimately support the alignment of all financial flows with the Paris Agreement objectives, while channelling scarce public resource towards investments that contribute to a deep transformation of the economy. I4CE recently published 2 papers to lay out what ambitious Paris alignment implies for public financial institutions.
Second, the third generation of Nationally Determined Contributions (NDCs), due in 2025, should help the reformed IFA bring tailored and actionable solutions to differentiated country needs. Based on existing practice, I4CE is currently exploring the role of country financing plans in responding to these investment needs.
Third, the G20, through its Sustainable Finance Roadmap, can drive ambition and develop concrete actions to scale up finance towards climate objectives. But we need a better overview of the implementation efforts and progress in each G20 country. I4CE is supporting these efforts by working on the development of an independent, comprehensive and ambitious accountability framework to assess progress in the Roadmap’s implementation.
In the coming months, I4CE will be further developing our work related to these agendas and their associated milestones (World Bank/IMF Annual Assemblies, G20, COP 29).