IMF Chief Shocks Paris with Urgent Climate Warning: Neglecting Finance is a Global Catastrophe in the Making!

Hail from Paris, where a shortage of sniffer dogs, press passes and discussion time lent a manic quality to a two-day climate and development summit hosted by French President Emmanuel Macron.

One of the goals of the summit is to reform the international financial architecture to ensure it meets 21st century development and climate goals.

And the gathering of some 40 world leaders — plus hundreds more from government, business and civil society — has piled pressure on the World Bank and IMF to take climate change more seriously into their lending decisions.

On the eve of the summit, the World Bank said yes offer “pause clauses” to freeze repayments for debt-distressed countries when they are hit by climatic disasters. The UK, France and the US have since promised to introduce similar provisions to their bilateral loans or export credit financing.

And yesterday we learned that developed countries may have finally met their goal of making $100 billion of IMF resources available to fight climate change and poverty.

At least that’s according to Kristalina Georgieva, managing director of the IMF. The US has not officially confirmed that it will unfreeze its large chunk of reserve assets known as special drawing rights, which have been stuck in partisan limbo.

In the wake of this apparent good news, Georgieva yesterday warned leaders not to “throw the baby out with the bathwater” in their rush to reform the international financial architecture, or to “discredit” the significance of the 34 billion dollars that African countries have been told to expect funds from this pot.

Read on for more from the summit and for Patrick’s story on the funding debate for Ukraine. And check out the Financial Times report on the Church of England captivating decision to drop energy majors from its £10.3bn endowment fund and £3.2bn pension scheme after concluding they were not on track to meet the Paris Agreement targets. (Kenza Bryan)

The “skeptical environment” of the Paris summit produces climate agreements and promises

The first day of Emmanuel Macron’s Paris summit yielded a pair of big victories for two African nations. Zambia yesterday reached an agreement with China and other major creditors on the sidelines of the summit to restructure billions of dollars of debt, raising hopes for other debt-struggling countries such as Ghana and Ethiopia.

And Senegal will receive 2.5 billion euros ($2.7 billion) to spend on increasing the proportion of clean fuels in its energy mix, in an agreement signed by France, Germany, Canada and the EU.

Despite these developments, a powerful figure “at the skeptical end” of the attendees was Mark Malloch-Brown, president of Open Society Foundations, a major private funder of human rights activism that is increasingly focusing on climate.

“This is not a place where decisions are made: it is not a G20 or a G7, let alone a general assembly of the United Nations,” he told me yesterday over a late afternoon coffee. Those who attended either “already cared deeply,” or were friends of the French president, who “called his chips” to summon the good and the great.

Talking to Malloch-Brown was a reminder of the role philanthropists play behind the scenes in unlocking capital that governments don’t have or can’t be seen giving. The foundation helped fund the summit and the Bridgetown Initiative, a campaign for the IMF and World Bank to offer developing countries better lending terms.

But this role — plus a nasty streak of anti-Semitism against founder George Soros — has made him the public target of conspiracy theories and climate denial.

“A more paternalistic age has been replaced by a more skeptical and politically prickly environment,” Malloch-Brown told me, drawing comparisons to the Covid-19 conspiracy theories that emerged when philanthropist Bill Gates helped fund the development of the Vaccine.

On the plus side, the summit managed to “boost the political momentum,” he said. In a climate speech characterized by “a level of anger and almost panic, a sense that the solutions are not enough for the task,” he managed to combine the World Bank’s “quantitative language” with the more “qualitative,” more “ anecdotal” activist language.

He’s right about the mixing of worlds and tone. Immediately following Macron’s keynote address, which urged “the private sector, sovereign wealth funds, philanthropic organizations and big asset managers” to get on board, Ugandan climate activist Vanessa Nakate led a minute’s silence to honor the lives already lost to extreme weather and rising temperatures.

Life expectancy has fallen in the wake of the global pandemic, the emerging market debt crisis and rising temperatures, according to data from the United Nations Development Program which was cited several times yesterday as evidence that inequality is a problem just as urgent to solve as the climate crisis.

Flanked on stage by the leaders of Chad, Sri Lanka and Rwanda, Tunisian President Kaïs Saïed was visibly angry during a discussion on special drawing rights with the IMF, moderated by Spanish Deputy Prime Minister Nadia Calviño.

Saïed referred to the disproportionate impact of COVID-19 and other diseases on the developing world. “We’ve always paid the cost,” she said, blaming “looting” by banks in the global north for the high borrowing costs faced by heavily indebted countries like Tunisia.

Kenyan President William Ruto issued a frustrated note in one of the day’s final sessions, in which he asked why countries had failed to agree on a global tax on fossil fuels. “We are going backwards,” he warned.

Later today, we expect leaders to present a formal climate and development to-do list and at least one progress tracking tool. They could also agree to a statement of support for an international tax on shipping-related carbon emissions, which is due to be discussed at the International Maritime Organization next month. (Kenza Bryan)

Investments in Ukraine cannot wait until the end of the war, says the head of the DFC

While much of this week’s Ukraine recovery conference in London focused on long-term reconstruction (particularly of the green variety, as we detailed on Monday), a crucial part of US financial support to Ukraine is focused on helping the country’s economy now, while the war is still going on.

Among the attendees was Scott Nathan, chief executive officer of the US International Development Finance Corporation. Nathan told me his crucial message was that Ukraine needed development support now. “It can’t wait until the end of hostilities,” he said.

“Our goal is to keep the private sector buoyant and growing,” he said, to “keep people employed and pay taxes” to the Ukrainian government.

On Wednesday, the DFC announced new political risk insurance offers for Ukraine. This type of insurance may be necessary for businesses operating in hot spots from Ukraine to Strait of Taiwan.

Nathan signed a $25 million DFC equity investment for Horizon Capital, a private equity firm focused on Ukrainian businesses. Nathan has made three trips to the country since the war began.

It’s easy to forget that the Ukrainian gathering in London has been held for years and was initially a “reform” conference aimed at fighting corruption in the country. Nathan stressed that paying taxes remained a crucial part of supporting the founding of Ukraine’s government and economy. Maintaining solid foundations, however tested by Russia’s attacks, could facilitate the country’s eventual recovery. (Patrick Temple West)

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