Humanity is currently confronted with multiple and overlapping challenges.
The worldwide rise in poverty, the first in over twenty years, the ever-increasing number of climate-related disasters, and the historic debt crisis, which are primarily affecting the most fragile countries, deserve a response from the international community commensurate with what is at stake.
Tackling the dual challenges of climate change and poverty requires mobilizing the necessary financing and structurally reforming the international financial architecture. This is the stated ambition of the Summit for a New Global Financing Pact, to be held in Paris on June 22 and 23, 2023, a Summit that 64% of French people consider necessary to address the economic difficulties of the poorest countries.
Putting the Sustainable Development Goals back on track, whose progress has been brought to a screeching halt by the current polycrisis, would require unprecedented international cooperation. However, years of unfulfilled promises on the fight against poverty and climate change by the world’s richest countries have only served to further fracture a world in tension.
The Summit for a New Global Financing Pact must not evade the many burning issues, and it must be ambitious. It will certainly be one step among many to come.
In order to better grasp the many issues at stake, Focus 2030 has decided to provide as comprehensive an overview as possible of the challenges and solutions surrounding the Summit.
Discover our open source data, maps, interviews with key players, a summary of the solutions foreseen in the negotiations, as well as civil society’s campaigns and expectations.
|Disclaimer: this special report is produced by Focus 2030, an independent association. For official information on the Summit for a New Global Financial Pact, please refer to the dedicated website.|
Eight years after the adoption of the Sustainable Development Goals by United Nations Member States, progress towards the 2030 Agenda has been undermined by the current polycrisis.
The fallout from the Covid-19 pandemic, the war in Ukraine and the proliferation of climate-change-related disasters have severely hampered the achievement of each of the 17 Sustainable Development Goals.
Without liquidity, the most vulnerable countries are bearing the full weight of the current crises.
The record contraction of their fiscal space is wiping out their ability to meet the essential needs of their populations and successfully complete their climate transition, as the following facts and figures illustrate.
Direct and indirect consequences of the overlapping health, economic and social crises have undermined the considerable progress made in the fight against poverty since the 1990s.
Key figures: According to the latest data, 9.3% of the world’s population lives on less than $2.15 a day in 2020. Between 2019 and 2020, an additional 70 million people have fallen below the extreme poverty line (source: World Bank).
While the recent crises have had a negative impact on the livelihoods of millions of people, the overall living conditions of individuals have also been affected. The Human Development Index (HDI), calculated by the United Nations Development Programme (UNDP), reflects these trends by aggregating indicators of poverty, life expectancy and education levels of populations by country and region.
Key figures: The Covid-19 pandemic has had a negative impact on the human development index in 90% of the world’s countries. 244 million children and young people worldwide do not go to school, and 400 million people have no access to basic health services. At the current rate, it will take 132 years to achieve gender equality worldwide.
While the Intergovernmental Panel on Climate Change (IPCC) has been sounding the alarm about the immediate need to adopt public policies aimed at reducing carbon emissions, progress is currently too slow to meet the ambition of the Paris Agreement: to limit global warming to 1.5 degrees above pre-industrial levels. As a result, the countries least responsible for greenhouse gas emissions are the most affected by the consequences of climate change.
Key figures:97% of people affected by the consequences of extreme weather events live in developing countries (source:Loss and Damage Collaboration)
Developing countries’ debt levels are a growing cause for concern. Many of these countries are now facing debt levels that restrict their ability to finance essential public policies, including those that would contribute to achieving the Sustainable Development Goals. Between 2019 and 2021, in 62 developing countries, debt repayments exceeded health spending, and in 21 countries, they exceeded spending towards education. Some of these countries are also among those most vulnerable to the consequences of climate change, and their financial situation is now all the more unsustainable.
Key figures: 9 countries have defaulted on their debt since 2020, compared with 13 over the previous 20 years (source: FitchRatings). More than half of the world’s extreme poor live in the 52 most indebted countries (source: UNDP).
3,900 billion dollars a year until 2030 are needed by low- and middle-income countries to meet their climate-related losses and damages, adaptation and mitigation measures, as well as their health, education and social protection needs, according to Oxfam.
Many countries, researchers, NGOs and activists have proposed solutions to mobilize additional funding to meet the needs of people and the planet. These solutions include unfulfilled promises, structural reforms and the creation of innovative sources of financing.
Official Development Assistance (ODA) is the historic instrument for mobilizing funds for development. In 1970, industrialized countries pledged to redistribute 0.7% of their gross national income to developing countries each year. 53 years later, only 5 countries are meeting this commitment. Well-targeted development aid could mobilize additional funds to finance public policies that meet the essential needs of populations, particularly in the fields of health, education, the fight against hunger and gender equality.
Key figures: $1,000 billion is the additional amount that industrialized countries could have mobilized between 2018 and 2022 if they had honored their commitment to allocate 0.7% of their wealth to developing countries.
Back in 2009, at COP15 in Copenhagen, industrialized countries pledged $100 billion a year for climate action in developing countries from 2020 onwards. This commitment aims to support vulnerable countries in their efforts to mitigate climate change and adapt to its current consequences, while reinforcing solidarity between industrialized and developing countries. However, although the commitment made in 2020 has not been met, it could be met from 2023 onwards if sufficient political will is shown.
Key figures: By 2020, $16 billion would have been needed to meet the $100 billion target. Only 35% of this funding was specifically earmarked for adaptation to climate change, despite this being a priority for developing countries. This is out of step with the objectives of the Paris Agreement, which called for an equitable distribution of 50% for adaptation and 50% for mitigation (source: OECD).
Special Drawing Rights (SDRs) are international reserve assets, distributed on an exceptional basis by the International Monetary Fund (IMF) during major global economic crises. When SDRs are allocated, the vast majority are received by the richest countries, even though they could represent an additional source of financing to support comparatively more fragile economies, particularly the most indebted.
In view of this, the G20 countries pledged in 2021 to reallocate the equivalent of $100 billion in SDRs to developing countries, a promise they have yet to honor.
Key figures: 24 billion dollars short of the commitment to reallocate $100 billion in SDRs to developing countries (source: ONE).
The international financial institutions created to mobilize funds to promote global development, known as multilateral development banks (MDBs), are currently under-utilized: with combined assets of over $1,800 billion, the main ones have the potential to mobilize hundreds - if not thousands - of billions in new loans by using their resources more efficiently. What’s more, they give priority to lending to middle-income countries, leaving out the heavily indebted low-income countries.
The MDBs are also criticized for their lending times (465 days on average for the World Bank) and their inability to finance the energy transition sufficiently: a reform of their operations is now underway to unlock more financing for developing countries.
Innovative financing for development are financial mechanisms generally based on globalized economic sectors, designed to correct the negative effects of globalization by mobilizing funds to support development projects. Although they can mobilize substantial sums of money, none of them has yet been applied on an international scale.
Find out what experts in development and climate finance have to say about their expectations of the Summit for a New Global Financing Pact, interviewed by Focus 2030.
As part of the Development Engagement Lab research project run by UCL and Birmingham University, Focus 2030 surveyed a sample of 2,000 people representative of the French population between May 19th and 25th, 2023.