Finance must be the golden thread for climate diplomacy in 2022

Diplomacy never sleeps and diplomats are already steaming ahead to prepare for next year’s world leaders summits. G20 host Indonesia and G7 hosting Germany will both be trying their best after Cop26.

Both summits must have a strong thread of finance commitments and reform to address climate change in order to succeed. Climate change is the central issue facing this generation of world leaders. Finance is the most powerful fuel to tackle it. 

Cop26 produced some positive outcomes, but it also made some mistakes: failure to properly address loss and damage, and a last-minute agreement to weaken coal commitments eroded trust.

Next year, Germany as well as Indonesia will be required to Climate finance can be mobilized to provide all countries the resources they need in order to combat the climate crisis.  Here are four ways you can deliver.

1. Financial assistance for the loss and damage caused climate change. That should start with understanding what’s achievable outside of UN processes and The gaps that can be filled by summits of world leaders. Germany should use its G7 muscle to bring round the US and France – two countries most reluctant to make meaningful progress on finance mechanisms for loss and damage. 
2. Cop has the potential to help you realize your potential. We saw South Africa making commitments to support the transition away from coal.. Now we need more plans, processes and platforms. We saw Italian prime minister Mario Draghi call for multilateral development banks – non-commercial banks set up to support development – to play a stronger role in mobilising the trillion for climate needs. Mia Mottley, Barbados PM, outlined a vision for special drawing rights that would help countries finance the transition. Leaders should agree to make these reserve assets available to all countries, not just those in IMF programmes, to reflect the fact that climate change impact are largely outside of governments’ control. They should also examine new SDR issuances to address the enormous amounts required for climate change transition.
3. Accelerate the development of climate-friendly infrastructure, focusing on resilient and zero carbon infrastructure in emerging and developed countries. Leaders The private sector should channel $130 trillion promised at Cop26 to these assets. Greenwashing must be avoided by ensuring the integrity of private sector promises.
4. Establish a taskforce to increase financial action. The leaders of Germany, Indonesia, Italy and the UK should work together reforms to global financial architecture, including making the sovereign debt architecture more transparent and more functional, and changes to debt sustainability assessment that recognize the need to take climate action. To close the 1.5C gap and to increase resilience, countries should cooperate to align standards, policy and regulation, and mobilize finance.

 The G20’s efforts won’t come to fruition without the G7’s money and influence. The world’s biggest economies are central to public finance, and major shareholders of development banks. Those most powerful countries need to build an open framework to mobilise money – not exclusive climate clubs that only protect them. 

Recent events in Germany, Indonesia and elsewhere should give both presidencies the motivation to achieve results. This summer saw cars rushing down German streets in floods that were caused by climate change. Up to nine times as likely. In Indonesia, there are fatal fallout from Cyclone Seroja revealed the country’s huge vulnerability to climate catastrophe.

If Cop27 is a success a year from now, it won’t just be because of what happens in Egypt. It will be because of the G7 and G20 leaders’ engagement and agreement on a new “trillion vision” for long term finance and climate needs. It’s only progress like this that will move us closer to a safer world and show that those most responsible for the climate crisis are finally working together.

Luca Bergamaschi is co-founder of the Italian think tank ECCO, working together with Governments, philanthropy and civil society organisations to accelerate climate action in Italy, Europe and globally.