Context: As world leaders and finance moguls land in Paris for the Summit for a New Global Financing Pact, it’s time to take concrete steps for sustainable finance and not let this be another international summit without substance.
India, the president of the G20 this year, is co-chairing the steering committee of the summit with France and can be counted on to be that voice of the Global South.
About the summit:
- What: a new deal to be signed among world leaders to ensure fixed funding amount and mechanism for various developmental issues.
- When: on 22-23 June
- Initiative: Taken by the French President, Emmanuel Macron
Aims
- Aim of the Summit is to lay the groundwork for a new financial system suited to the common challenges of the 21st century, such as fighting inequalities and climate change and protecting biodiversity.
- It aims to establish a sufficiently robust international financial architecture to provide greater resources, protect the most vulnerable countries from shocks, help achieve the Sustainable Development Goals (SDGs), restore the long-term trend of poverty reduction, and preserve global public goods such as climate and health.
- Aim to “build a new contract with the North and the South”, in order to facilitate the access of vulnerable countries to the financing they need to address the consequences of ongoing and future crises.
Four main objectives
- Restore fiscal space to countries facing short-term difficulties, especially the most indebted countries.
- Fostering private sector development in low-income countries.
- Encourage investment in “green” infrastructure for the energy transition in emerging and developing countries.
- Mobilize innovative financing for countries vulnerable to climate change.
High level steering committee composition:
It includes France, Barbados, South Africa, Germany, Brazil, China, the United Arab Emirates, the United States, India, Japan, the United Kingdom, Senegal, the European Commission, the United Nations Secretariat, the International Monetary Fund, the World Bank and the OECD.
Challenges in such funding:
1. Demand and Supply gap of funding:
Demand – According to One Planet Lab’s white papers released for the Summit, the scale of investment needed to meet the United Nation’s Sustainable Development Goals, climate COP21 and Biodiversity COP15 objectives set at the global and national levels is to the tune of an additional $4 trillion every year.
Supply – only $204 billions of official development assistance came last year.
2. Regional difference: only 25% of global climate investment goes to South Asia, Latin America, and Africa, which house some of the most vulnerable regions.
3. Not focusing on equal but differentiated responsibility: developed nations despite historically responsible for the emission are not taking responsibility to lead a way and fund more. They demand equal contribution of funds from developing nations like India for being current emitter.
Way forward
- Modernising and standardising existing tax structures, clamping down on illegal cross-border money movement, empowering tax administrations and curbing ineffectual fossil fuel subsidies.
- At international level, taxing the production of fossil fuels, shipping of goods, and transportation of fossil fuels to raise funds.
- Financing novel mechanisms, such as a Global Clean Investment Risk Mitigation Mechanism that pool risks across geographies and lower costs for all. It would help to attract private financing for such needs.
- Transparency and real-time data can bridge the psychological and financial divides.
- Chart a political pathway that creates time-bound deliverables on climate finance from one summit to another.
Conclusion
The summit must outline the maths of finance, the mechanisms of delivery, and establish the momentum for real investment over the next two years. When we approach the 80th anniversary of the UN in 2025, reformed finance for sustainable development should have formed the basis for renewed and meaningful multilateralism.
