Financial Power Pact for climate action

The Green Development Pact, placed high on the list of deliverables by India’s G20 presidency, is an effort to make possible for countries, particularly developing ones, to address issues like climate action, developmental deficit and a just transition. Critical to this endeavour is the predictable availability of finance. India’s conception of the pact, with its focus on finance, goes beyond ensuring accessible flows to developing countries. It also deals with measures to get the global economy back on track, making digital public infrastructure accessible, easing trade and investment, and reforming multilateral development banks (MDBs).

If the conversation in Paris at the Summit for a New Global Financial Pact last month served to reiterate that climate action cannot be at the cost of development, then the G20 Leaders’ Summit in New Delhi in September should provide a blueprint for making this possible. The proposed pact seeks to align the climate and development agenda in the context of addressing critical energy security challenges. The focus of reforming the international financial architecture, particularly MDBs, is crucial to ensure large sections of the developing world can move ahead with their climate and development agenda while building and growing their economies. As much as 60% of low-income countries and 30% of middle-income countries are debt-distressed.

Enabling countries to take action to bridge developmental gaps and reduce climate risk will require creating more financial space. This is evermore challenging given the global economic outlook. The pact must address issues such as risk, cost of capital and difficulties in accessing capital. It should smoothen the path that leads to climate and development action.