Finance must be the golden thread for climate diplomacy in 2022

Comment: Here’s how G20 host Indonesia and G7 host Germany can make climate finance flow for effective action next year

Jakarta, Indonesia (Pic: Stefan Magdalinski/Flickr)


Diplomacy never sleeps and diplomats are already steaming ahead to prepare for next year’s world leaders summits. As sherpas begin meeting again after Cop26, G20 host Indonesia and G7 host Germany will both be trying to prove themselves.

To succeed, both summits need to have a golden thread of finance commitments and reform running through them to address climate change. Climate change is the defining issue of this generation of world leaders; finance the most potent fuel for tackling it. 

While Cop26 delivered some good outcomes, it also dropped some balls: a failure to properly tackle loss and damage and a last-minute deal to weaken coal commitments undermined trust.

Next year, Indonesia and Germany will need to mobilise trillions in climate finance to provide all countries with the resources they need to tackle the climate crisis.  Here are four ways to deliver.

  1. Financial support for the loss and damage caused by climate changeThat should start with understanding what’s achievable outside of UN processes and how world leaders summits can fill in the gaps. Germany should use its G7 muscle to bring round the US and France – two countries most reluctant to make meaningful progress on finance mechanisms for loss and damage. 
  2. Build on the potential that glimmered at Cop. We saw commitments to help South Africa finance the transition away from coal. Now, we need more processes, plans and platforms like it. We saw Italian prime minister Mario Draghi call for multilateral development banks – non-commercial banks set up to support development – to play a stronger role in mobilising the trillion for climate needs. Barbados PM Mia Mottley set out a vision for special drawing rights to help countries finance the transition. Leaders should agree to make these reserve assets available to all countries, not just those in IMF programmes, to reflect the fact that climate change impact are largely outside of governments’ control. They should also look at new SDR issuance to address the vast amounts needed for climate transition.
  3. Accelerate climate-friendly infrastructure development, specifically zero carbon and resilient infrastructure in emerging and developing countries. Leaders should channel the $130 trillion promised at Cop26 by the private sector into these assets. Meanwhile, the integrity of private sector commitments must be guaranteed to avoid greenwashing.
  4. Set up a taskforce to pick up the pace of financial action. The leaders of Germany, Indonesia, Italy and the UK should work together on reforms to the global financial architecture such as making the sovereign debt architecture fairer and more functional and changes to debt sustainability assessments that recognise the need for climate action. Countries should work together to align standards, policy, regulation and mobilise finance to close the 1.5C and resilience gaps.

The G20’s efforts won’t come to fruition without the G7’s money and influence. The world’s biggest economies are central to public finance, and major shareholders of development banks. Those most powerful countries need to build an open framework to mobilise money – not exclusive climate clubs that only protect them. 

Recent events in Germany and Indonesia should give both presidencies the motivation and mettle to secure results: cars barrelled down German streets this summer in catastrophic floods that climate change made up to nine times more likely. In Indonesia, the fatal fallout from Cyclone Seroja revealed the country’s huge vulnerability to climate catastrophe.

If Cop27 is a success a year from now, it won’t just be because of what happens in Egypt. It will be because of the G7 and G20 leaders’ engagement and agreement on a new “trillion vision” for long term finance and climate needs. It’s only progress like this that will move us closer to a safer world and show that those most responsible for the climate crisis are finally working together.

Luca Bergamaschi is co-founder of the Italian think tank ECCO, working together with Governments, philanthropy and civil society organisations to accelerate climate action in Italy, Europe and globally. 

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