Publications

Much of the discussions at COP28 will focus on the 100 billion USD/year target decided at Copenhagen to support climate investments in the Global South, and on the new climate finance goal set to replace it. But, whilst keeping our eyes on the volumes laid on the table, we also need to look more into the impact of every dollar spent. Identifying and building on the value added of every actor in the economy is essential to avoid overlaps and maximise synergies. Three types of actors have a pivotal role to play in the paradigm shift: governments, public financial institutions and private financial institutions.

NewClimate Institute and the Institute for Climate Economics (I4CE) submitted a response to a public consultation on the Glasgow Financial Alliance for Net Zero’s proposed set of voluntary guidance for financing the early retirement of coal-fired power plants in Asia-Pacific. This blog post highlights key points from our submission. Preventing the worst impacts of the climate crisis, particularly for the most vulnerable, requires halting coal-fired power plants (CFPPs) in the pipeline and retiring a substantial portion of the existing global coal fleet before the end of their technical lifetime. While countries have committed to phase out unabated coal in the Glasgow Climate Pact, 350 GW of new capacity is proposed globally with an additional 192 GW under construction.

The reform for a new global financing pact - as it was ambitiously designated by the French President Emmanuel Macron - allows little time for rest, combining several agendas that collectively seek to rethink how the Global South can finance its low-emission development pathways, with support from the Global North. The sequence of international events that starts this week with the Finance in common Summit, the African climate summit, G20 and followed by World Bank Group and International Monetary Fund’s Annual Meetings will be key to see if the multiple resolutions to reshape development finance outlined during the first semester of 2023 were merely wishful thinking or if they can be seen as the first bricks of a new international financial architecture. 

Sustainable development and climate change are two pressing and interconnected issues that countries have committed to address at the international level. The 2030 Agenda for Sustainable Development, with the 17 Sustainable Development Goals (SDGs) including climate action, at its core was adopted by the United Nations (UN) in 2015. The same year, the Paris Agreement was adopted by Parties of the UN Framework Convention on Climate Change. Both instruments have clear global and national targets in the medium- and long-term that are still far from being met.

On 22nd and 23rd of June, the Summit for a new Global Financing Pact, initiated by Emmanuel Macron and Mia Mottley, Prime Minister of Barbados, will take place in Paris. This Summit will be a success for climate if it enables us to spend more on the climate transition, to spend better, and if it influences the ongoing reform of international development financing.

This blog-post is conducted by [i4ce] and IDDRI. The international community recognizes that the global development finance architecture is no longer fit for purpose. The World Bank, the IMF, and other institutions of the broader development finance system are today asked to invest more in global goods (specifically to fight against climate change and to preserve biodiversity, but their internal structure and the paradigms on which they ground their decisions have not changed since they were created with development – poverty and macroeconomic stability notably – as their main mandate. In this context, it should be no surprise that the response of these international institutions remains inadequate in terms of volume, structure and accessibility. 

This is it. In a few days, thousands of people from around the world will be gathering in Washington to look back on the latest achievements and discuss the future of the World Bank and the International Monetary Fund – the two institutions that structure international cooperation for development. But this isn’t just one of a series of biannual get-togethers. These Spring Meetings will be the last for future ex-President of the World Bank David Malpass, who is leaving at what might be a turning point for the institution’s history. The expectations are high: this is the moment where the World Bank’s shareholders will confirm their vision and ambition for the institution by officially including climate in its global mission

After years of waiting, the World Bank finally approved and released its alignment approach with the mitigation and adaptation goals of the Paris Agreement. Presented by the World Bank as “the most comprehensive institutional undertaking ever done by the Bank Group to reconcile development and climate”, this alignment approach is an important step towards the reform of the World Bank currently under discussion. But this approach won’t be sufficient, argue Alice Pauthier and Sarah Bendahou in this blog post. It could be more ambitious.  

After the sudden resignation of David Malpass, the World Bank’s Trump-appointed President, mid-February, Washington surprised the world again last Thursday, with the nomination of Ajay Banga, long-time Mastercard CEO, as his potential successor. Not only was the timing very rapid, but the controversial profile of the nominee also generated some sense of puzzlement. His limited […]

This report co-written with NewClimate provides practical guidance for international financial institutions to support financial institutions’ alignment with the Paris Agreement goals, and to more broadly contribute to transforming local financial systems. This guidance is developed around three pillars: a harmonised alignment assessment; the alignment of financial intermediaries; and the alignment of financial systems at the national level.

2022 ended up on a consensus that the global financial architecture is no longer “fit for purpose”. In other words, the financial ecosystem created post-war to support international development - at the centre of which are the IMF and the World Bank who were joined later by other international public financial institutions - wasn’t designed to address the multiplicity of challenges the world is facing today, foremost among which climate change. Time is running, and the good news is that 2023 is set up to be a busy year with key events setting the milestones for a reform of the international financial architecture, including a Paris Summit in June. The year will close at COP 28, where we will officially take stock of current achievements.

2023 will be busy with many events organised to address different parts of the financial architecture reform, including a Paris Summit in June. Alice Pauthier from [i4ce] tells you more about this agenda and identifies two conditions for a successful reform process. First, it has to be led by countries’ financing needs… wheras we are still lacking a granular analysis of countries’ investment needs for a sustainable development. Second, it has to be guided by the objective of maximising the impact of public finance. What we should count is the impact of public finance on the transition and not only volumes.

As COP27 draws to a close, let us remember the obvious: implementing the Paris Agreement will require financial flows from developed to developing countries. However, these flows are not just the much discussed $100 billion a year promised by the nations of the North to their counterparts in the South - a promise that has not been kept to date. And they are not just about budgetary flows either. More fundamentally, the architecture of development financing - or at least its climate component - needs to be reviewed in depth. It is therefore primarily the mission and modus operandi of the multilateral banks, and more broadly of the public development banks, that must be reviewed.

This year again, expectations for the COP are high regarding developed countries’ commitments towards the funding of action against climate change and its impacts. The question of loss and damage, which pertains to questions of climate justice and of who should pay for the significant impacts of climate change endured by the poorest countries, has just been added to the official COP agenda. And climate finance will again be a hot topic: the pledge made back in 2009 by rich nations to channel US$100bn every year by 2020 to help less wealthy nations mitigate the rise in temperatures and adapt to climate change is still falling short of targets.

Over the past couple of years, the growing net zero commitments across financial institutions strengthened the focus on their portfolios’ greenhouse gas emissions. Yet, this focus does not guarantee emissions are truly reduced in the real economy. For that to happen, there is a pressing need for decarbonisation approaches focused on impact generation, with the appropriate indicators. According to Sarah Bendahou, Public development banks are in a unique position to adopt such approaches and indicators, paving the way for private financial institutions.

This I4CE report focuses on the role of countries’ Long-Term Strategies (LTSs) in the Paris alignment approaches of Development Finance Institutions (DFIs). It explores the possible roles of both the LTS development process and the resulting LTS document in providing insights on the Paris alignment of investments within investment decision-making processes. The findings are relevant for a broader range of financial institutions.

The restructuring of the economy towards a low-carbon system will lead to develop activities that are aligned with the needs of a net zero economy, to restructure others in order to make them compatible with these needs and to stop harmful activities. The financial sector needs to anticipate these dynamics to address strategic risks and […]

COP26 in Glasgow did not disappoint in terms of the volume of announcements from the financial sector. But what is behind the hype? While buried in an avalanche of ‘pretty words’, there was notable progress by financial institutions. They now look at the ‘alignment’ not just of what – but also of who – is financed.

In this study, I4CE reviews the characteristics and areas of intervention of public financial institutions, which make them essential actors for adaptation. The study also reviews all of the Public Financial Institutions' business lines to determine their levers for action.

Expectations ahead of COP 26 in Glasgow regarding the contributions of the finance sector are high. Anuschka Hilke from [i4ce] explains that our expectations, however, may not currently be high enough. An impactful contribution to achieving climate goals will require the financial community to go beyond reducing their exposure to climate-related risks.