The Global Community Is Failing: It’s Time for the Global South To Act on Green Industrialization

As Todd Moss founder and head of The Energy for Growth Hub recently highlighted in his compelling analysis of development and fossil fuels, we're trapped in false binaries that hinder progress on both climate and development. But there's an even more fundamental problem: our international financial institutions are simply not fit for purpose to support the green industrialization revolution the Global South urgently needs.

The scale of this failure is staggering. While multilateral development banks (MDBs) collectively provide about $50-60 billion annually in climate finance, the actual investment needed for green industrialization in developing economies is estimated in the trillions. This isn't just a funding gap – it's a chasm that threatens both global development and climate goals.

Take South Africa's just energy transition. The much-celebrated $8.5 billion Just Energy Transition Partnership barely scratches the surface of what's needed for true industrial transformation. South Africa requires not just energy transition funding, but comprehensive support for developing new industrial capabilities in electric vehicles, green hydrogen, and renewable manufacturing. Yet our current financial architecture offers no coherent framework for funding such ambitious industrial transformation.

The same story repeats across the Global South. Brazil's bioeconomy potential remains underfunded. Indonesia's attempts to move up the green value chain in battery manufacturing face persistent financing barriers. Senegal's dual ambitions for immediate industrialization and green hydrogen development lack adequate financial backing. These aren't isolated cases – they represent systematic failure of our international financial system.

Three fundamental reforms are urgently needed:

First, we must dramatically expand the lending capacity of multilateral development banks. The G20's Capital Adequacy Framework review suggested MDBs could unlock hundreds of billions in additional lending through balance sheet optimization. This isn't enough. We need a major capital increase coupled with fundamental reform of how risk is assessed. The current AAA rating obsession is a colonial-era relic that constrains development impact.

Second, we must transform how these institutions approach industrial policy. The lingering Washington Consensus skepticism toward state-led industrial development must end. MDBs need dedicated facilities for supporting green industrial policies, technology transfer, and domestic capability building. This means new financial instruments designed specifically for industrial transformation, not just project-based lending.

Third, we need a complete overhaul of how climate finance is structured. The current system, split between adaptation and mitigation, fails to recognize that green industrialization serves both purposes. We need integrated financing mechanisms that support comprehensive industrial transformation while building climate resilience.

The urgency cannot be overstated. Every year of delay in reforming these institutions means more missed opportunities for green industrialization. When Indonesia has to choose between immediate development needs and green transformation because financing isn't available for both, we all lose. When Senegal can't access adequate funding to develop both its gas resources and green hydrogen capabilities, we perpetuate false choices between development and climate action.

Critics will argue that such fundamental reform is too difficult or too expensive. But consider the cost of inaction. The Global South needs to industrialize – this isn't optional. Without adequate support for green industrialization, countries will be forced to either sacrifice development goals or lock in high-carbon pathways. Neither outcome is acceptable.

Moreover, supporting green industrialization in the Global South isn't charity – it's essential for global climate action and economic prosperity. These investments would accelerate technological learning, reduce costs of green technologies globally, and create new markets for clean technologies.

The political momentum for reform exists. The Bridgetown Initiative, the Paris Summit for a New Global Financial Pact, and various G20 discussions have all highlighted the need for financial system transformation. What's missing is the political will to move from discussion to action.

As Moss argues, we need to move beyond binary thinking about development and climate. But this shift in thinking must be accompanied by fundamental reform of our financial institutions. The current system, designed for a different era, simply cannot deliver the scale and type of financing needed for green industrialization.

The choice is clear: either we transform our international financial institutions to support green industrialization, or we accept failure on both development and climate goals.