No sooner has Climate Week concluded, than the World Bank/International Monetary Fund (WB/IMF) Annual Meetings begin. These meetings bring together the economic elite, including central banks, finance and development ministers, private sector executives, and academics. This isn’t just a jamboree: this year they all have a lot of substance to discuss.
The backdrop is the plea from World Bank chief Jim Yong Kim , for more capital to be injected in the bank to help deliver on 21st century challenges. Hot on the heels of the UN Sustainable Development Goals being adopted and two months out from COP21, this gathering is a pivotal moment for decisions on financing the transition to a sustainable future. The outcome resulted in the World Bank pledging to boost its climate change to USD$29 bn.
Meanwhile, the V20, the Finance Ministers from the most vulnerable countries not only called on the donor countries to meet their promises, but seized control of their future. These countries, so often at the forefront of extreme weather events have created a V20 climate risk pooling mechanism to help the recovery of extreme weather events. This is yet another indication that the ‘north-south’ tectonic plates in the talks are shifting, with vulnerable countries not waiting for others, but regaining their agency.
The climate finance discussions roughly divide into three big questions. Firstly, how will developed countries meet their promise to deliver the $100bn per year before 2020? Secondly, what does the finance package for post-2020 look like and who is responsible for what? And finally, as we know climate finance alone will not be enough to keep us on track for 2°C, how can we ensure all financial flows (aid, state funding, business and investors) become more aligned and compatible with a phase out of fossil fuels (a.k.a. ‘shifting the trillions’)?
So where are we after the IMF/WB meetings?
- Progress on the $100bn: new analysis suggests that roughly US$62bn in public and private climate finance was mobilised last year (2014). This is good news and shows real progress is being made. However, there is still more to be done by countries, especially US, Japan, Australia, Italy, Norway and Canada and the MDBs to show how they will meet their contributions to the $100bn.So far only the UK, Sweden, Germany and France have announced their pathways to 2020.
- Edging forward on post-2020 package: we’ve seen little mention so far from finance ministers or Leaders on what the package must entail. The messages from developing countries in the climate talks are not unified in calling for specific elements. But through powers of deduction, we have an idea that some of the major components should be; an explicit articulation of public finance for adaptation; a mechanism to regularly provide commitments on public support from countries and Multilateral Development Banks (MDBs); clear and transparent rules for how the money will be counted; and simplifying access to finance for developing countries, through donor harmonisation. These elements are key for delivering high quality climate action on the ground.
- Gathering momentum to shift the trillions: Paris will be an important moment for reversing the burden of proof on high-carbon investments – something that Mark Carney alluded to in his recent speeches on the need for investors to consider the risks of climate impacts and policies in their decision making. After Paris, fossil fuels will no longer look like a safer, cheaper and less risky bet. The G20 summit next month will be an essential venue to continue to socialise this, preparing the ground for stress-testing all public and private investments on their compatability with 2°C.
In short: the outcomes of the IMF/World Bank meetings have spurred the economic elite along on their journey to get to grips with the implications of combining poverty alleviation and maintaining climate stability.