10 July 2023
Dear G20 Finance Ministers:
We are writing to request your urgent leadership. The majority of people in the world today face concurrent crises: of poverty, indebtedness, climate change, environmental breakdown and increasing pandemic threats. A step change is needed. At the forthcoming G20 Finance Ministers' meeting, we ask you to commit to expanding and improving the international financial architecture to unlock international financing to help meet the Sustainable Development Goals and tackle the climate emergency. Climate and development finance promises must be kept, integrated, and built upon, together. People and the planet must come first.
Make global decision-making structures fit for purpose through low- and middle-income countries, particularly African, representation at all international levels, including G7 and G20, with a permanent seat for the AU at the G20 as a first step in this direction.
$100B climate finance: The G7 has declared that it would work with other donors to fully meet the goal in 2023, three years late. However, there is no way to verify whether the target will actually be met. For this, all donors and countries providing international climate finance must commit to report their full data set for 2021 and 2022 and also give an overview of prospective pledges for 2023, 2024 and 2025 to the OECD before the end of the summer. The OECD must then publish a climate finance report, with data broken donor by donor country, by COP28. In addition, G20 members should continue to increase climate finance, in particular in the form of grants and for adaptation (towards the goal of 50% of total climate flows), and refrain from backtracking from past commitments. The UK should commit to meeting its target of doubling climate finance to £11.6bn by 2025/6 and tripling adaptation financing. Furthermore long standing ODA quality and quantity promises must be kept. In our time of ‘polycrises’, climate pledges must be additional to funding for core lifesaving health, humanitarian and anti-poverty goals.
Fossil fuel phase out: Collective action is needed to put an end to fossil fuels. Fossil fuel subsidies must be reinvested in clean, just, and sustainable energy systems, and green recoveries. The G20 must commit to concrete plans and set an ambitious timeline to phase out fossil fuel subsidies by 2025 or sooner, while providing targeted support to the poorest and most vulnerable. Fossil fuel taxes: By COP28, more progress needs to be made to ensure polluters pay and raise additional resources to fight and adapt to climate change in the poorest and most vulnerable countries. The G20 should support a maritime transport levy and also make progress on taxing fossil fuels. It should show full support to the Africa Climate Summit and the new tax task force announced at the Summit for a New Financing Pact in Paris last month.
SPECIAL DRAWING RIGHTS (SDRS)
SDR pledges: While IMF MD Kristalina Georgieva declared victory on this past promise at the Paris summit, the reality is that most of the $100B hasn’t yet been reallocated and only a small amount has actually been transferred to countries in need. All countries should deliver as quickly as possible on their pledges, including through the AfDB and other MDBs. The G20 should task the IMF to publish a tracker showing all pledges, delivery of pledges and actual reallocation to countries in need and should call on the IMF to fast-track disbursements, including by lifting access limits to allow funds to flow to the poorest countries. At the same time the G20 should set up an independent expert commission to develop more options to make best use of existing and future issuance of SDRs by both the IMF and MDBs, in the fight against climate change, for pandemic prevention and preparedness, and to address extreme poverty.
Resilience and Stability Trust: The IMF’s Resilience and Sustainability Trust (RST) is one of the key global financing instruments created in the aftermath of COVID-19 to address climate change and pandemic preparedness. Proactive steps should be taken now to ensure eligible governments understand how to take advantage of this new source of financing through clear recommendations and toolkits to relevant ministries, to help increase applications for this funding, including for win-win investments in climate-resilient and pandemic-resilient health systems.
REFORM OF THE MULTILATERAL DEVELOPMENT BANKS (MDBS)
MDB Reform: The G20 should welcome and rapidly implement the recommendations of the report of the G20 MDB Independent Expert Group. We call on all MDBs and their shareholders to work together and agree on the proposed target to triple sustainable lending levels to mobilize sufficient additional resources through the full implementation of the CAF recommendations and in return, but without delay, the G20 should agree to future recapitalization of the MDBs willing to implement reform. G20 Finance Ministers must recognise that signaling support for a capital increase will aid with balance sheet optimisation with credit rating agencies, and balance sheet optimisation will aid the case for a capital increase with shareholders. This tripling target should be agreed by the Annual Meetings by both MDBs and their shareholders. An Independent Monitoring Group, such as outlined in the IEG paper, should be appointed to help ensure the MDB system reform and recapitalisation roadmap is adhered to over the next few G20 presidencies.
Vulnerability: The G20 should give a mandate to the WB and IMF to develop a Vulnerability Index for access to concessional financing that better accounts for climate vulnerability. These institutions should also utilize their knowledge and explore options to introduce criteria to account for the positive effects investing in climate resilience might have in the economies and the potential positive impact on their credit worthiness.
Boosting grant financing: The G20 should call for an early, ambitious IDA replenishment as a cornerstone of grant financing for Low Income Countries and Lower Middle Income Countries. G20 countries should also fully capitalize the Pandemic Fund at the rate of $10.5B/year without delay. The Fund has only raised 1,65B so far, and demand from LMICs was more than 8 times the funding available in the first funding call.
Forex guarantee mechanism: In order to lower the cost of capital in developing countries and accelerate investments into the green transition and climate and pandemic proof infrastructure, the G20 should support the proposed Forex guarantee mechanism by instructing the IMF and World Bank, working with TCX, to establish such a mechanism.
Debt pause clauses: The G20 should build on the momentum achieved on this issue at the Paris Summit, asking all lending institutions - including multilateral and bilateral public lenders as well as private institutions - to agree to debt suspension clauses for LMICs and SIDS when they are affected by natural disasters or by pandemics; those that have already agreed such clauses must ensure pandemics are included.
Debt restructuring and relief: It is vital that the G20 calls on creditors to accelerate talks under the Common Framework with countries in or at high risk of debt distress. At the same time it should agree a more efficient and coordinated approach to the Common Framework and ad hoc middle income country debt restructurings, such as in the cases of Sri Lanka and Pakistan. We request all these measures be reported through more transparent interoperable data systems across climate and development finance, so that countries, citizens and partners can track the trillions and ensure improved efficiency and verifiable results.
Vice President, Advocacy,
The ONE Campaign
Associate Director, Sustainable Finance,
Executive Director & Co-Founder,
Pandemic Action Network