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The summit for a new global financing deal, held in Paris last week, marked a major milestone in global efforts to address the intertwined crises of climate change, biodiversity and inequality. The 40 participating countries agreed to press ahead with financial system reform and meet the goal of $100,000 million in climate finance this year, a pledge developed countries made in 2009 and which has since been implemented even more at this summit that is never quite succeeded.
This event made it clear that the global financial architecture is outdated, dysfunctional and unfair, as stated by the United Nations Secretary-General Antonio Gutiérrez, leading to a change in the tenor of the global discussion on fundamental debt-related issues. development, climate change impacts and vulnerability; significant advances that would have been unthinkable just a few years ago.
The transition to a fairer and more resilient world requires huge changes in the financial architecture that offer long-term solutions. This summit shows us that the world is indeed changing. Today there is recognition of the enormous responsibility that the global institutional framework bears in order to achieve the goals we have set ourselves, namely eradicating poverty, tackling the effects of climate change and reducing greenhouse gas emissions. Challenges that are inextricably linked.
Miguel Díaz-Canel and António Guterres during the June 22 summit. Alejandro AZCUY (EFE / Presidency of Cuba)
One of the key points of the summit was addressing the crushing debt burden of many developing countries and recognizing the importance of debt restructuring to promote economic stability and promote sustainable development. It also recognized the burden – in many cases recurring – of dealing with disasters caused or aggravated by climate change in developing countries. Both the World Bank and other financial institutions will begin to include catastrophe management clauses; which require better debt repayment terms agreed in the loans. These commitments mark a shift in North-South relations and will give nations a breathing space, allowing them to reallocate resources to critical sectors such as healthcare, education, better management of natural resources, and infrastructure projects.
In this regard, The Nature Conservancy (TNC) has promoted innovative solutions, including debt-for-nature swaps, and consolidated several cases of blue bonds that allow countries to refinance their debt on more favorable terms and use the proceeds to protect the environment biodiversity provide climate adaptation. In Latin America, Belize is the first country to implement this Blue bonds to protect oceans, around $550 million in domestic trade debt restructuring. The country will invest $180 million to protect its ecosystems, meeting its commitment to protect 30% of its marine territory, develop fisheries governance frameworks and regulate coastal blue carbon projects.
Mia Mottley, Prime Minister of Barbados, June 22 at the Summit for a New Global Financing Pact. LUDOVIC MARIN (AP)
Similarly, Barbados, a country that has spearheaded these efforts to reform the global financial framework, completed a $150 million debt swap in 2022 with the support of TNC that will facilitate the expansion of the country’s marine protected areas from virtually nothing about 30% and will improve the management of all marine waters under its jurisdiction. This project is expected to free up approximately US$50 million over the next 15 years to support environmental and sustainable development efforts in Barbados, making both the country and its people’s livelihoods more resilient to climate change.
Also worth noting is the need to include nature-based solutions in the reform of the financial system. The Summit supported the development of ‘national packages’ for forests and nature through the Forest and Climate Leaders’ Partnership (FCLP); and the ratification of financing for the Amazon Fund in Brazil. In addition, a process to examine the development of biodiversity credit markets is promoted, the possible development of which must be managed with great transparency and judgement.
For this reason, we welcome international efforts and commitments for fiscal reform that recognizes the magnitude of the impact of global warming and the importance of significantly increased investment in nature for a sustainable and fairer future. As world leaders accept these commitments, there is hope that they will translate into concrete action, knowing that the profound changes that are urgently needed cannot wait. We have reached 2030 and we must accelerate sweeping change that promotes equity and the long-term well-being of people around the world, which requires proper stewardship of our natural resources. Financial sector reform is a fundamental element of this chess game.
* Paula Caballero is The Nature Conservancy’s Regional Executive for Latin America.