Urgent Need for a Global Finance Pact to Address the Climate Crisis

Climate change ministers from Australia, Canada, and New Zealand emphasize the need for a global finance pact to tackle the climate crisis effectively. They highlight the significance of international cooperation, similar to the Bretton Woods system established after World War II, to build a robust global financial architecture that supports ambitious climate action and helps limit global warming to 1.5 degrees Celsius.

The ministers draw inspiration from Pacific and Caribbean Island nations that have shown leadership in driving climate ambition and advocating for predictable climate finance flows. They stress the importance of reforming multilateral development banks to align their portfolios with the Paris Agreement, increase the provision of concessional finance, and improve accessibility to climate finance, particularly for vulnerable nations. The ministers urge collective efforts to make climate change a central consideration in the balance sheets of these institutions and call for closer collaboration in international financial reform efforts.

In the face of the climate crisis, it is evident that no single government can effectively address the challenges alone. The magnitude of the task at hand requires a global response, similar to the momentous undertaking during the establishment of the international financial system at Bretton Woods. As climate change ministers, we recognize the urgent need to create a global financial architecture that not only addresses the existential threat of climate change but also supports nations' development ambitions, alleviates poverty, and maintains stability in the global financial system. Pacific and Caribbean Island nations have demonstrated exemplary leadership in driving global climate ambition and advocating for sufficient and predictable climate finance. The call by the Prime Minister of the Cook Islands and chair of the Pacific Islands Forum, Mark Brown, for transformation in multilateral development funds and institutions reflects the necessary shift we must undertake. We draw inspiration from Barbados' Prime Minister, Mia Mottley, who tirelessly advocates for international financial architecture reform to assist climate-vulnerable nations, particularly small island states facing multiple challenges due to climate change.

The burden of growing debt is increasingly hindering the ability of developing countries to address the devastating impacts of climate change. Therefore, we acknowledge the imperative of increased support for adaptation and climate response in the developing world. Moreover, we emphasize the importance of engaging developing countries directly in reform efforts to ensure that climate and development goals are pursued concurrently. Multilateral development banks play a crucial role in leading reform efforts. While initial reforms, such as the recent announcement to unlock $50 billion in lending capacity over the next decade by the World Bank, are commendable, more needs to be done. Climate finance from these institutions remains inconsistent and inaccessible to those nations that need it the most, particularly in the Pacific and small island states worldwide. This must change, as inaccessible climate finance holds little value.

To address this, multilateral development banks must align their portfolios with the Paris Agreement and scale up the provision of concessional finance. This requires integrating climate risk considerations and impacts across their activities, as well as leveraging private sector investment. Streamlining access, eligibility, and delivery of projects and programs is also crucial. The ongoing summit for a new global financing pact offers an opportunity to focus on advancing climate and nature-positive reforms in global financial architecture. Additionally, the World Bank and IMF annual meetings in Marrakech provide a chance to solidify the evolution of the World Bank and ensure meaningful action. We extend our support to the United Arab Emirates as the COP28 president and express our joint ambition to collaborate closely in making multilateral development bank reform a key agenda item during their presidency. Addressing the climate crisis requires collective efforts from all international financial institutions. We must be "all in" to combat the greatest threat of this century and create a sustainable future for all.