The Summit for a New Global Financing Pact, which took place in Paris from 22 to 23 June 2023, had the stated aim of establishing “a new agreement between the countries of the North and the South to tackle climate change and the global crisis”.

This objective is crucial as developing nations will need $1-trillion annually in public and private funds by 2030 to transition to sustainable economies. However, this comes at a time when the Global South is facing a looming debt crisis, with 62 countries nearing debt distress.

These same developing countries are being pushed to take on additional debt for climate transitions, highlighting the unfairness of the global financial system that limits their fiscal space and imposes exorbitant capital costs.

The summit was strikingly empty. It did not offer meaningful climate finance solutions, nor did it spur reform of the international financial architecture. While bypassing the United Nations in an exclusive forum that undermines existing, democratic, multilateral attempts to reform the international financial architecture, the summit was framed as a rare opportunity to address the challenge of financing both development and climate goals.

The most significant announcements came from the World Bank and the International Monetary Fund (IMF). The World Bank expressed its intention to introduce a natural-disaster clause for future debt, allowing for the suspension of interest payments. However, it remains unclear which countries will benefit from this clause based on their economic stage.

The summit also revealed that several countries had committed to redistributing their recent allocation of the IMF Special Drawing Rights (SDRs), a convertible currency worth $100-billion. However, this redistribution is not a new promise and was arguably needed most three years ago during the pandemic.

The programmes involved in this process are plagued with problems, including limited access for middle-income countries, stringent conditionality undermining sovereignty, and the requirement for countries to have existing IMF programmes.

At the summit, UN Secretary-General António Guterres described the international financial architecture as being “outdated, dysfunctional and unjust”, and yet only piecemeal initiatives were announced that are unlikely to shift the status quo.

The EU unveiled a call to action on “Paris Aligned Carbon Markets”. A new €2.5-billion Just Energy Transition Partnership deal was announced for Senegal, while some groups called for a tax on shipping emissions.

In summary, the summit fell short of its stated goal for three reasons:

1. Over-reliance on the private sector continues

Global North leaders mainly failed to present substantial proposals, opting for incremental reforms that are likely to fail and exacerbate inequality. The Global North seeks to socialise the risks of climate finance flows, shifting the burden onto developing countries while allowing investors to reap the gains.

This approach channels private capital from the Global North to the Global South, places all the risks on the shoulders of developing nations, and channels profits back.

The profit-seeking incentives of the private sector have contributed to the climate crisis, and it would be naïve to expect a change in behaviour without governments paying them to invest in adaptation and addressing loss and damage. The World Bank’s approach of allowing the private sector to drive the transition has failed to achieve its intended goal of turning “billions to trillions”.

Market-based solutions have proven ineffective and divert attention from a human-rights-based approach. Barbados’ Prime Minister Mia Mottley passionately called for a response to the climate crisis that prioritises people over profit, but little indicates that neo-colonial patterns of value creation and distribution will be rectified to promote human rights and development through concessional and grant-based public finance.

2. We need integrity, not new, empty pacts

The world does not require a “new” global financial pact to “build a new contract between the countries of the North and South”. What the world truly needs is for the Global North to honour its commitments.

Now, more than ever, humanity needs integrity and follow-through on existing financing agreements. Despite a few announcements made at the summit to highlight long-awaited targets, most of these efforts have come too little and too late.

The long-overdue commitment of $100-billion in climate finance, agreed upon in 2009 at COP15 in Copenhagen with the aim of limiting warming to below 1.5°C, was supposedly met this year.

However, in reality, it was not. The target set in 2009 was an annual commitment, pledging to disburse $100-billion every year. A single-year target achieved 14 years later is nothing worth celebrating. Research by Oxfam International reveals that the G7 countries alone owe the Global South $13.3-trillion in unpaid aid and funding for climate action.

A similar situation has unfolded regarding Official Development Assistance (ODA) commitments, established by the UN General Assembly in 1970, which called for allocating 0.7% of Gross National Income. These commitments have still not been fulfilled.

Despite this stark reality, the summit proposed an ambition to “go beyond ODA”. According to Oxfam’s estimates, low- and middle-income countries are owed $6.5-trillion in undelivered aid from 1970 to 2021.

3. Multilateralism is at stake

Equally troubling is the lack of integrity in commitments claimed by Global North countries. A recent report indicates that “hundreds” of World Bank projects “seem to have little connection to climate change mitigation or adaptation”.

A Reuters report similarly exposed instances where wealthy Global North countries, purportedly providing climate finance, were actually funding new coal plants, airport expansions, supporting films, and assisting retailers in opening chocolate and gelato stores in the Global South.

It goes without saying that green projects must genuinely promote environmental sustainability and development. Failure to deliver on publicly stated green and developmental commitments has the potential to erode trust in multilateralism at a time when the world is becoming increasingly divided.

The transition to sustainable economies and societies represents a global public good. Regrettably, the failure to finance this vital global public good mirrors the failure to adequately fund another global public good observed during the pandemic, as evidenced by vaccine nationalism. There is no clearer statement of willing, enthusiastic self-destruction than in the approach to climate financing currently championed by the Global North.

One potential silver lining of the Summit is its timing, taking place between COP26 and COP27, providing another opportunity for world leaders to maintain momentum on the climate finance agenda.

However, multilateralism will not be strengthened if democratic forums like the UN are not prioritised, if existing commitments are not met with integrity, and if a pig-headed dependence on the private sector ensues.

If countries of the global North are unwilling to meet their commitments and untangle the imperialist impulses of the last century, the repercussions of a divided, globe-destroying global system rests in their hands. DM