Revitalizing Development and Climate Finance for the 21st Century

In two weeks, the world will come together in Paris with the opportunity to reimagine the development finance system. This moment is long-overdue, since even before the start of the Covid-19 pandemic, vulnerable people in low-income countries have been falling behind due to the effects of climate change and insufficient support for development. The economic and health effects of Covid-19 and climate change have made that much worse over the last few years.

Unfortunately, the world has not used some of its most powerful tools to prevent the damage let alone restart progress. For nearly 3 years, I and many others have called for unlocking the potential of international development finance institutions to invest more in countries and communities that are falling behind. Until now, only a few of these reforms have become a reality. Yet, in two weeks, French President Emmanuel Macron will host world leaders in Paris to identify ways to redesign the global financial architecture to meet the challenges of the 21st century.

These institutions were established amid a long-ago crisis. In 1944, representatives of countries came together in Bretton Woods, New Hampshire, to develop a new system that could prevent the scarcity, poverty, and instability that contributed to the start of World War II. They agreed to create a World Bank, an International Monetary Fund, and more, to support human development and prevent crises. For decades, the system helped support the growth that enabled Europe’s recovery, Asia’s rise and billions to rise out of poverty.

Yet in recent years, that system has struggled and fallen short. In addition to facing challenges never imagined in 1944, these institutions have also been held back by their own layers and layers of obsolete rules and procedures. Despite good intentions and good work, they are falling short. They are simply no longer fit for purpose.

In response, The Rockefeller Foundation and a broad and diverse coalition have focused on building a global financial architecture that can mobilize substantially more, and better quality, financing and dramatically reduce debt distress. And we have collectively hosted and facilitated many conversations aimed at refining the key reform proposals, further expanding this broad coalition, and accelerating the pace of reforms.

For example, yesterday, the Foundation hosted a group of senior leaders – including the French Ambassador to the United States, a senior French foreign ministry official, an African World Bank official, a Barbados alternate executive director, and a senior U.S. Treasury official – with advocates and NGOs to plan for the upcoming summit.

The question is, can the world finally meet the moment?

Thankfully we are not starting from scratch. Stakeholders have already begun crafting solutions to these issues, including proposed reforms to multilateral development banks (MDBs) developed by the G20 Expert Panel tasked with an Independent Review of Multilateral Development Banks’ Capital Adequacy Frameworks. The World Bank and its shareholders have developed a roadmap to guide evolutions of its mission, operations, and resources, including options to enhance the Bank’s financial capacity and model.

Few have been more articulate or innovative about this agenda than Barbados Prime Minister Mia Mottley, who has argued for greater support for nations on the front lines of climate change and development. The Rockefeller Foundation was proud to join Prime Minister Mottley, Deputy Secretary-General Amina Mohammed, Open Society Foundations President Mark Malloch-Brown, and other partners in developing what is now known as the Bridgetown Initiative, an agenda of reforms designed to increase the quantity and quality of finance available from MDBs and address debt burdens.

As a result of this work, world leaders can take the decisions in Paris to implement solutions that meet the original purpose of these institutions — to promote human well-being and global prosperity, security, and stability — in the 21st century. There are a few areas where we can embrace large-scale change, including:

• developing a debt sustainability architecture that allows for longer-term investment in climate change resilience and economic development;
• funding global public goods for just energy transitions, pandemic response and prevention, fragility, and more;
• reforming, or creating, instruments and tools to mobilize large-scale private sector investment; and
• incorporating natural disaster debt suspension clauses into MDB, bilateral, and commercial debt instruments.

Reforms of any kind are never easy. But these organizations and systems exist to take on hard challenges. We do not need to recreate these institutions; we just need to reinvigorate them with significant new capabilities, resources, and energy. With the arrival of the new World Bank President Ajay Banga, we are excited about new possibilities at that institution and more broadly.

In Paris and in months ahead, I believe the world can finally turn ideas into actions. Together, we can reestablish a covenant between rich and low-income countries, and their people. They should not have to wait. Because climate change will not wait. The next pandemic will not wait either.??