French president Emmanuel Macron’s high-stakes climate financing summit hit a snag early on Thursday (22 June) when sharing the stage with Kenyan president William Ruto.
After years of broken climate financing promises by wealthy countries, leaders from the Global South came to Paris seeking tangible change and, above all, more money.
In an effort to score an early win Macron — with great fanfare — announced the creation of a new Private Finance Lab led by the World Bank tasked with “better catalysing private investment” in developing countries,
Macron called on others to “commit” to making the lab a success in what he described as a “key announcement” of the summit.
Also on the stage were World Bank president Ajay Banga, and the managing director of the International Monetary Fund, Kristalina Georgiana.
But when given the microphone, Kenya’s Ruto sounded less than enthusiastic. “Tokenism will not solve the problem,” he told Macron. “If we continue talking this way, we will never solve this problem,” he added.
According to the most recent UN estimates, the developing world will need €2.2 trillion annually to meet climate investment targets by 2030. At the same time, low-income countries have to raise €2.5 trillion in the next five years just to pay off creditors.
“We need a transformation of the financial system, not reform,” Barbados prime minister Mia Amor Mottley told 50 heads of state and government who had gathered in the Palais Brongniart, the former stock exchange in Paris, in her opening speech.
She also said she privately described the proceedings in Paris as the “how dare you summit”, referring to the risk Macron had taken inviting leaders from low-income countries to a palace in one of the world’s financial centres to discuss debt and climate finance reform.
For his part, Ruto praised Macron’s efforts to bring global leaders together but suggested attracting more private finance to invest in developing “public goods” such as hospitals, education and roads, which would not be enough.
“We need deep reform of our financial architecture where the power is not in the hands of a few people with institutes that are not subject to national politics,” he said. “Let us agree to look for $500bn [€450bn] in fresh money.”
One example of an idea of this scale floated by Mottley last year was to establish a $500bn [€458bn] trust for low-interest loans, paid for by rechanneling IMF’s mostly unused reserve assets — the so-called Special Drawing Rights (SDRs).
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The plan was hailed as a breakthrough at last year’s climate summit in Egypt and was quickly embraced by Macron. But the plan has since become bogged down — over a technicality at the European Central Bank (ECB), and an unwilling US Congress, respectively.
This points to a familiar struggle. Although the World Bank and the IMF are owned by shareholders around the world, due to how the voting system works, both institutions are dominated by the US and the EU.
This makes the decision-making process vulnerable to domestic political dynamics in those countries.
Pointing to this fact, Ruto called for a new global “organisation of equals because now we don’t have control over the outcome.”
“I love your view,” said Macron. “But let’s reform the IMF and the World Bank. Let’s not make a new one.”
The final results of the summit will be announced on Friday.
