Paris summit gains billions in global finance for countries hurt by climate change

Antonio Guterres attacks 'obsolete, dysfunctional and unfair' world financial infrastructure that perpetuates and worsens global inequality

French President Emmanuel Macron at the opening session of the New Global Financial Pact Summit in Paris. AP

French President Emmanuel Macron called for a new global financial order that helps states avoid a choice between alleviating poverty and responding to climate change at a major summit designed to bridge north vs south divisions.

Flanked by world leaders including UN Secretary General Antonio Guterres, Saudi Arabia's Crown Prince Mohammed bin Salman and Egyptian President Abdel Fattah El Sisi, Mr Macron said a shake-up of the World Bank, International Monetary Fund and multilateral lenders should be the outcome of the two-day meeting in Paris.

Kristalina Georgieva, the head of the IMF, announced that rich countries met a target of reallocating $100 billion of funds from the institution to battle climate change and poverty in developing countries. The move has closed a 40 per cent funding gap.

The World Bank announced its own package, including a pause in debt repayments to the lender if a country is stuck by a crisis, such as devastating floods stemming from climate change.

The test for the meeting outlined by Mr Macron was how to resolve a shortage of lending to dozens of countries that were currently facing dire choices.

“No decision maker or country should ever have to choose between reducing the problem of poverty and protecting our planet,” he said. “We have to be able to face both challenges at once.”

He said a New Global Financing Pact should respect the sovereignty of every nation as the world agreed to invest much more by reorganising financial structures.

He welcomed comments by leaders of the World Bank and IMF to use more of their capital to boost borrowing on markets by developing countries.

“There's a lot of money in the world,” he said. “I think we can make our system work much better if this cash was used to serve progress for the planet.”

Mr Macron said the provision of rich country guarantees would offset the risks of lending to the very poorest and mobilising capital would be possible with more innovative international agreements.

While there is a broad global representation at the meeting, only one other G7 leader, German Chancellor Olaf Scholz, has attended.

To launch the summit, Mr Macron joined US President Joe Biden and European Commission President Ursula von der Leyen to set out the goals for the meeting, which has up to 50 heads of government gathered at the former base of the French stock exchange.

“We want our system to better meet the needs of development and fight against vulnerabilities, now increased by climate risks and which risk weakening the capacities of countries to reduce poverty and achieve inclusive economic growth,” the trio wrote in an editorial published in Le Monde.

“Disasters caused by climate change will increase in intensity and frequency, and will disproportionately affect the world's poorest and most vulnerable people.

"These issues know no borders, and pose an existential risk to our societies and our economies.”

Egypt's President Abdel Fattah El Sisi meets France's Foreign Minister Catherine Colonna at the New Global Financial Pact Summit in Paris. Reuters

Mr El Sisi said the Covid-19 pandemic and Ukraine war changed the circumstances for debtors who were eager to make climate investments but could not.

“Green growth is not an alternative to sustainable development,” he said.

“We will have to finance development in the context of a new multilateral agenda. It’s very important today to say we have a plan to deal with our debt.”

Niger President Mohamed Bazoum told the meeting that it was a chance to set up reforms before the Cop28 climate summit in the UAE and the G20 talks in New Delhi this year, where a “more robust and fair” architecture can be agreed on.

Speaking from the perspective of change in Niger and the wider Sahel region, Mr Bazoum said droughts shaped his world.

“The Sahel is a synonym for drought but also for violence,” he said.

“The migrant crisis and security crisis are fed by the climate crisis and food crisis.”

Mia Mottley, Prime Minister of Barbados, spoke of the moral imperative of saving the planet and “make it liveable”.

“It is important that we move to action,” she said. “Privately, I call this the how dare you summit. How dare you upset the order?

“We speak not only for the need for money but for the transformation of the global financial infrastructure.”

Ms Mottley, founder of the Bridgetown Initiative, which pushes for a just energy transition, said countries needed disaster clauses in global debt arrangements if they needed to pause repayments.

World Bank reform “at scale” is now on the agenda, she added.

Mr Guterres said the majority of the 50 countries most vulnerable to climate were in an intolerable debt situation. He attacked the “obsolete, dysfunctional and unfair” world financial infrastructure that perpetuates and worsens global inequality.

From left, Kenyan President William Ruto, IMF chief Kristalina Georgieva, French President Emmanuel Macron, US philanthropist Melinda French Gates and World Bank president Ajay Banga in Paris. EPA

The US, EU and other leading shareholders in the institutions have accepted the need for a series of reforms to the IMF and World Bank since late last year.

These include proposals to reform the governance of lenders to ensure a greater role for major emerging markets and developing economies.

This would be accompanied by an expanded mission to integrate climate change financing into the lending models.

The shifting of $100 billion in IMF special drawing rights from rich countries to vulnerable economies in Paris is described by many as game-changing.

SDRs are foreign exchange reserve assets awarded to countries based on how much they contribute to the IMF.

Lending these foreign exchange reserve assets to the IMF would allow it to lend more to developing economies.

The World Bank's primary objective is to promote long-term economic development and poverty reduction, while the IMF looks to promote global macroeconomic and financial stability by providing financial and technical assistance and policy advice.

Some developing countries have voiced concerns that these reforms could lead regional lenders to prioritise climate change over poverty alleviation.

Meanwhile, Cop28 President-designate Dr Sultan Al Jaber, also UAE Minister of Industry and Advanced Technology, met Brazil's President Luiz Inacio Lula da Silva in Paris to discuss preparations for the climate summit in Dubai this year, and Brazil's nomination to host Cop30.

The pair agreed to a joint effort to deliver a comprehensive response to tackle the interconnected issues of deforestation, biodiversity loss and climate change.