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Emergency debt relief and $100bn disaster fund for climate-vulnerable nations headline Paris Summit

Emergency debt relief and $100bn disaster fund for climate-vulnerable nations headline Paris Summit

Mahesh Roy

Investor Strategies Programme Director

The Summit for a New Global Financing Pact in Paris saw milestones for climate disasters, debt relief, and talk of a new shipping tax – though not without criticism. IIGCC also joined a series of roundtables discussing how best to increase finance flows for climate goals.

Held on June 22 and 23, more than 40 world leaders joined discussions co-chaired by France’s President Emmanuel Macron and Barbados Prime Minister, Mia Mottley, just days before civil unrest shocked the host nation.

Private capital loomed large in conversations with dialogue particularly focused on streamlining flows to climate solutions across vulnerable low-income countries. Country ownership of transition plans was also a key focus, along with ensuring that climate action and poverty alleviation are not mutually exclusive.

Alongside the summit, IIGCC’s Investor Practices Programme Director, Mahesh Roy, joined two OECD roundtables focusing on the evolution of the development bank business model and how best to catalyse investment for climate, energy, and development.

Monetary milestones

A key headline was the International Monetary Fund’s (IMF) announcement that it has reached USD $100 billion in special drawing rights (SDRs), donated from developed nations’ share. This reserve currency is available to climate-vulnerable countries and released in emergencies by the IMF.

The World Bank also announced that developing nations hit by climate disasters will be able to suspend debt repayments through the increased use of disaster risk “pause clauses” in its lending rights. However, this will only apply to new loans.

France and the US promised to introduce similar clauses, with the UK doing the same on its export credit finance to 12 African and Caribbean countries, including on existing loans. Experts note a growing appetite for these pledges to be adopted by more institutions over time.

President Macron also reiterated French support for a global tax on shipping ahead of discussions at the UN International Maritime Organization in London in July. US Treasury Secretary, Janet Yellen, indicated that the Biden administration would consider the proposition, though many countries remain reluctant to share taxation rights.

Other deals included a G7 “mega green energy deal” with Senegal to develop its renewable energy sector, worth USD $2.74 billion, while Zambia restructured USD $6.3 billion of national debt.

Though significant, critics described achievements at the summit as tweaks rather than a transformation, with some leaders calling out perceived hypocrisy.

Prime Minister Mottley of Barbados pointed out that the EU’s constitutional Maastricht Treaty sets a debt-to-GDP ratio limit of 60%, whereas “almost every country in Europe is now facing ratios of over 90%.”

Bridging the gap

In a series of side events, OECD high-level roundtables focused on the finance gap between current and required investment to achieve climate and development goals, and the evolution of the development bank business model.

Industry groups, diplomats and philanthropists joined public and private financial institutions under Chatham House rules to share their views on how to improve the impact of multilateral development banks (MDBs).

Reflecting on the conversations, IIGCC’s Mahesh Roy noted the role that IIGCC could play in communicating the needs of our members and supporting the dialogue between those operating in emerging markets and those who wish to bridge the gap. Aligning investments in emerging markets is a priority focus area for many investors.

“We will look to have webinars, surgeries and roundtables to talk about these topics in the second half of this year,” Mahesh said: “This will inform IIGCC’s thinking on how we can help more funds flow to these markets.

“Our sovereign bond and country pathways working group is laying the foundations for better integration of these issues into the net zero investment framework.”

If you’d like to take part in our working groups and be the first to see insights and analysis, why not speak to our investor relations manager today to find out more about becoming a part of IIGCC.