Countdown to Paris: Will leaders rise to the urgent climate challenge?

This week all eyes will be on Paris, as French President Emmanuel Macron hosts his pivotal Summit for a New Global Financial Pact, an urgent gathering for the world’s nations to shake up the global financial system and drastically increase funding for developing and climate-vulnerable countries. 

Already, thanks to Macron’s leadership and that of Prime Minister Mia Mottley of Barbados, some heavy hitters are set to attend, including U.S. Secretary of the Treasury Janet Yellen, World Bank President Ajay Banga, President Luiz Inácio Lula da Silva of Brazil, German Chancellor Olaf Scholz and Chinese Premier Li Qiang.

To truly live up to its name, this summit must produce more than mere photo ops for political glad-handing and self-imposed congratulations. The event is a make-or-break moment — both for Macron’s legacy and for millions of lives around the world. Its outcome will determine if he becomes a transformative force for change, or just another Western leader making aspirational promises amid crumbling credibility.

The summit arrives at a crucial juncture. The impacts of climate change are increasingly evident, particularly in the poorest and smallest countries that have contributed least to the problem. These nations face the dual challenge of having insufficient funds to invest in infrastructure for clean energy, and limited resilience against natural disasters which, when they arrive, can knock entire percentage points off their GDP. Compounding these developmental hurdles is the unfortunate reality that many of these countries are burdened by high-interest debt repayments, which often surpass their budget allocations toward essential needs like education, healthcare and basic infrastructure, let alone climate action.

We know no summit can achieve everything. But we want to see President Macron and attending leaders deliver the following, at a minimum.

Fulfill the promises they’ve already made

Wealthy nations need to fulfill their climate finance commitments to developing countries. Currently, there is an outstanding $16.7 billion that needs to be delivered annually out of the $100 billion promised by rich countries in 2009 and declared in the Paris Agreement.

The United States, in particular, plays a significant role in meeting this goal. Without U.S. leadership and a clear roadmap on how they will pay their fair share of climate funding, any claims that the $100 billion target has been met will be laughable. The success of this summit depends on Yellen, the U.S. Treasury secretary, announcing concrete plans to fulfill the United States’s climate obligations.

Another country that can make a significant impact is the United Kingdom. Eyes are on Prime Minister Rishi Sunak, who recently opted out of attending the Paris Summit, in hopes that the UK will be one of the first to reallocate more of their Special Drawing Rights via the Africa Development Bank and other multi-development banks. These reserve assets, predominantly allocated to wealthier nations, should not just be pledged but be urgently redirected to benefit low-income and climate-vulnerable countries. Despite numerous promises and pledges to date, so far only Rwanda has actually received any SDRs from the International Monetary Fund’s Resilience and Sustainability Trust.

It is critical that all commitments not just be empty overtures. President Macron must require countries to be transparent and accountable, and present clear plans with time-bound deliverables.

Reform the World Bank

Global financial institutions and their policies are outdated and in dire need of a capital increase. The World Bank, for example, was established before the world’s first general-purpose computer had even been built.

The World Bank is under immense pressure to better respond to global challenges such as climate change, pandemics and conflicts, while also staying true to its anti-poverty mandate. While the Bank has significantly increased its climate portfolio in recent years, a recent study showed that hundreds of its “climate” projects appear to have little to do with climate change mitigation or adaptation.

To its credit, the World Bank has launched a new reform drive. For instance, the Bank’s equity to loan ratio was adjusted from 20 percent to 19 percent in March, enabling an additional $4-5 billion in annual leverage to help address both climate change and extreme poverty.

Building on this momentum is crucial, and next week’s summit presents new President Ajay Banga with an opportunity to show he’s serious about reform. One such measure he can drive is the offer of “natural disaster and pandemic clauses” in loans to developing countries. These clauses would provide temporary relief from repayments in the event of devastating hurricanes, floods or pandemics, for example, allowing them to allocate funds towards recovery instead of servicing debts. Although it does not directly tackle the pressing issue of existing debt, which requires an urgent solution from the G20 countries, such clauses will aid countries in their recovery from ever more frequent natural disasters. In turn, as well as driving further reform, World Bank shareholders should commit to a capital increase.

Transition to a low-carbon future

Reducing the world’s emissions by half by 2030 is crucial to mitigating the severe consequences of climate change on humanity. The private sector holds significant responsibility here, with 10,000 publicly listed businesses alone accounting for 40 percent of global emissions. Reducing carbon emissions not only benefits people and the planet, it also makes good business sense. Many investors and business leaders continue to make this argument.

The Paris summit is also an opportunity to accelerate the pace of action among industries moving too slowly. A case in point is the shipping industry, which accounts for over a tenth of transport CO2 emissions. Here, Macron is looking to form a coalition of willing countries to implement a levy on the industry. The funds generated can be used in part to decarbonize the sector, but must also be redirected toward vulnerable countries. Agreement on this latter point is critical.

In addition to reducing their emissions, businesses should also explore transformative investments in emerging economies and countries facing the worst impacts of climate change and support their transition to a low-carbon economy. After all, funding the clean energy transition in developing nations requires trillions of dollars, a responsibility that cannot be shouldered by governments alone. The Bridgetown Initiative outlines a number of solutions to help scale up private sector financing that next week’s summit should endorse.

An emerging concept gaining traction among businesses is the establishment of a “corporate buyers club,” to commit to procure high-quality carbon credits from reputable sources in low-income countries. Given there are currently no real guardrails on carbon markets, best practice would be credits that are aligned with the Voluntary Carbon Markets Integrity Initiative (VCMIi), in order for corporations to address their residual emissions. Provided businesses have committed to the Race to Zero and have set science based targets in addition to sourcing credits of high integrity, this approach has the potential to facilitate substantial wealth transfer to developing nations. 

There are a number of reasons for Macron and public- and private-sector leaders gathering for this week’s summit to act that are in the world’s collective interest — not least, investing in a green transition for poorer countries has economic benefits for G7 nations. To view this as a choice between helping poorer countries develop and boosting their own economies is a false dichotomy; these goals are intertwined. By investing in long-term climate resilience projects in developing nations we improve lives, create jobs, enhance energy and food security, and promote stable prosperity in the world.

The clock is ticking. It’s crucial we take action now to avoid a potential humanitarian crisis — without it, experts anticipate there could be 1.2 billion climate refugees by 2050. By addressing climate challenges and promoting sustainable development, we can protect human life, strengthen economies and build a brighter and more equitable future for all.

Michael Sheldrick is co-founder and chief policy, impact and government relations officer at Global Citizen.