Opening his “Summit for a New Global Financial Pact” late last week in Paris, French president Emmanuel Macron told delegates the world needed a “public finance shock” to tackle the ever more urgent and interlinked goals of combating climate change and global poverty, and protecting nature. In emerging market and developing countries excluding China, more than $2tn in investments each year is estimated to be needed to tackle climate change and its impacts by 2030; current investments are running at about $500bn. Mobilising such sums will entail huge efforts from multilateral development banks, governments, and the private sector. But as well as being more ambitious in raising finance, global actors must be cleverer about how they do it.
Raising finance will not be straightforward. Total government debt currently equates to about $86tn. Around 60 per cent of low-income countries are in debt distress, or at high risk of it. Many feel they should not be paying for the damage caused by historic emissions from industrialised economies. Competition to attract green investment is meanwhile heating up, and the private sector is put off by the higher cost of capital in developing countries.
Shifting from “billions to trillions” needs innovation. It means leveraging multilateral development banks better, de-risking private sector investments, being more creative about debt reduction, and building new revenue streams.