The Global Financial New Deal Summit could be seen as another international gathering alongside the regular Parties’ Climate Change Conferences (COPs) and meetings of the G7 and G20, the world’s twenty-seven most advanced economies.
But French President Emmanuel Macron insisted at the closing press conference that the summit was a defining moment. “These two days have allowed us to create a new consensus for the planet. “We have concluded with a document detailing a shared policy vision that will structure the path towards profound reform of international financial architecture and governance,” he said.
“This summit aims to strengthen unity among members of the international community, taking into account our response to the twin challenges we face: the fight against inequalities and climate change,” added Macron.
According to the final declaration, developed countries have now achieved their goal of transferring US$100 billion of their Special Drawing Rights (SDRs) to developing countries by 2021. SDRs provide access to International Monetary Fund (IMF) international currency reserves, which can be exchanged for currency.
Summit participants indicated that the 2015 target of providing 100 billion SDRs by 2020 to support climate action in developing countries is likely to be met this year. They have also pledged to provide $200 billion in additional lending capacity over the next decade. And they agreed to Zambia’s $6.3 billion debt restructuring. Participants also set up a new biodiversity fund.
The Paris meeting could be a turning point
Olivier Damette, professor of economics at the University of Lorraine and research associate at the Paris Chair in Climate Economics, agrees that the meeting could mark a turning point.
“The world is facing a multitude of crises. Poverty and national debt have skyrocketed in recent years, also due to the COVID-19 pandemic. More and more developing countries are on the brink of insolvency, climate change is increasingly showing its effects, and there is a loss of confidence in national and international institutions,” he told DW.
“For the first time, leaders are coming together to talk about all of these different challenges at the same time. At previous summits, the issues were treated separately,” Damette added. He stressed that today’s financial institutions are no longer prepared for such a situation.
“Established after the 1944 Bretton Woods Agreement, the World Bank and IMF are based in the United States, are led by the US and the G7, and largely follow a top-down approach.” they are not prepared to face the new challenges, he said.
Paris Summit: Finance and Sustainability
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New financing system for developing countries
Claire Eschalier, project manager at the French capital-based think tank Institute for Climate Economics, thinks a more bottom-up approach makes more sense. “Most of the funding has historically been dedicated to specific projects, while there should be a more systemic input to make a bigger impact,” he told DW, adding that this is the so-called Society for a Just Energy Transition ( STEJ) is a first step in the right direction. Through this program, the richest nations are guiding fossil-fuel dependent countries on their clean energy journey while addressing the social consequences of the transition.
Wind Capital’s Isabelle Albert, based in Paris, agrees that the summit produced some tangible results.
“It is positive that the SDR transfer target has now been reached and the participants have agreed to set up a biodiversity fund, as ecosystems such as the Amazon rainforest are vital to maintaining our climate,” he told DW.
“This could help restore some confidence, although developing countries are still waiting for other pledges from richer nations to materialize, such as the amounts pledged at COP15 in 2009,” he added.
However, the expert believes that it is still too early to assess the outcome of the meeting. “This is a first step in the right direction, but summits like this one should show the way: history, the coming months and years will tell if we can achieve a just transition,” Albert said.
“Hopefully today’s agreement will help ensure that COP28 in Dubai later this year is a success after the poor results of COP27 in Egypt last year,” he added. At COP27, nations failed to commit to the actions needed to limit global warming to 1.5 degrees Celsius by 2030.
(cp/ers)