Barbados’s Urgent Call for a Global Climate Finance Plan
Article In The Thread
New America / Stephanie Braconnier on Shutterstock
April 4, 2023
Tackling the climate crisis will require coordinated global action. And while there is no shortage of high-level convenings on climate change, they often elicit great skepticism and little momentum. But last year, when Barbados’s Prime Minister Mia Mottley unveiled the Bridgetown Initiative at the UN Climate Change Conference (COP 27), leaders and institutions around the world took notice. In her opening speech, Prime Minister Mottley put a call to action to wealthier nations and global financial institutions to alter their approach to supporting poor nations adapt to climate change — one that would significantly reshape how the world’s biggest financial institutions operate.
The proposals in the Bridgetown Initiative effectively set us down a path of revisiting the archaic institutions stood up by the Bretton Woods agreement in 1944. After World War II, global leaders met at a hotel in Bretton Woods, New Hampshire, to set up financial institutions like the World Bank and the International Monetary Fund to help rebuild the postwar economy and to promote international economic cooperation. The Bridgetown Initiative is seizing on growing momentum behind the idea that this system, forged in the 1940s, is not working: Today’s institutions are simply not equipped to deal with the host of new challenges faced by emerging economies and developing countries when it comes to climate change, from back-to-back hurricanes in the Caribbean to historic floods in Asia and droughts in West Africa. If anything, the debt created by these institutions reinforce poverty in countries that are hit the hardest by climate change. Prime Minister Mottley made it pointedly clear: The legacy of colonialism shows up in how these institutions structure debt — with wealthier countries borrowing at interest rates between 1 to 4 percent and poor countries at around 14 percent. The post-WWII economic order set by Bretton Woods is no longer fit for purpose but is evidence that the world rose to the occasion once and can do so again.
An Unvirtuous Cycle of Debt and Disaster
Countries around the world, and developing countries in particular, are facing multiple inter-related crises. While the most climate-vulnerable countries are batting down crisis after crisis, significantly brought on by weather-related disasters, the burden of debt continues to debilitate their ability to invest in recovery, climate action, and resilience. Just last month, the Vulnerable Twenty (V20) called for the incoming president of the World Bank to make climate action a top priority and to “make major reforms to the world’s international financial architecture to prevent the climate crisis from overwhelming the global economy.”
There is clearly a humanitarian case for investment in adaptation and mitigation, but there is a strong economic case as well: For every one dollar invested in climate-resilient infrastructure, six dollars are saved. Because of the cycle of debt and disaster, frontline countries — those most vulnerable to the impacts of climate change — are unable to make that investment and promises made by larger economies to step in with funding have not yet materialized.
Emerging economies and developing countries face higher debt servicing costs, especially if they have borrowed from international financial institutions or private creditors. These same countries have limited access to finance, making it difficult for them to secure the funding needed for climate adaptation. The UN contends that “a great finance divide” forces developing countries to pay up to eight times more than developed countries for borrowing. This is why calculating the true costs of adaptation means adopting not only a new kind of math, but a new kind of politics.
A New Kind of Politics
Prime Minister Mottley, with an audience of global leaders, offered an approach that unlocks financing on more favorable terms for crisis-hit countries and calls for the creation of a global mechanism that would accelerate private sector investment in mitigation and reconstruction. As Mottley’s longtime friend and the architect of the initiative, Avinash Persaud has pointed out, this is not a case of lower-income/middle-income countries imploring larger economies to shore up their official development assistance or even offer reparations. Instead the Bridgetown proposal seeks to substantially tweak the global financial architecture to make a lot more money available, allow more flexibility in how countries could spend it, and have the international financial institutions act as a guarantor for larger, more substantial private sector funding.
The energy around the Bridgetown Initiative is palpable and the promise of achievable goals, presented in ways key stakeholders can appreciate, makes it politically feasible. The question now is: Will global leaders seize the opportunity to take the steps to implement real reform and reshape nearly 80-year-old institutions to meet the needs of today’s world?
At the time of the creation of Bretton Woods’s institutions, many of the most vulnerable countries today did not exist and therefore had no voice. There is an existential need for the system to be reformed to bring forth a new internationalism that is inclusive of and responsive to today’s challenges — one that reflects the needs of all global citizens, including the thinkers, activists, and policy practitioners who live through the daily impacts of climate change.
We are in a moment now that it is impossible for those in power to ignore the massive inequities perpetuated by the current system. This is why New America’s call to action for reimagining a more inclusive, equitable, and sustainable global order is urgently needed. Climate-driven floods and extreme droughts are no longer viewed through American television screens — more and more, they are lived experiences. Now is the time to build new global institutions that put people at the center of today’s planetary politics. If the Bridgetown Initiative can be a vehicle to help get us there, we need to make sure that it truly reflects the voices and needs of the communities on the frontlines of the climate fight.
Read more from our Climate Changes Everything themed issue:
🏘️ The U.S. Can Build Climate-Resilient Housing Solutions — Here’s How: The climate crisis has major impacts on the current U.S. housing crisis, but proactive policies can help secure housing for all communities.
🖊️ Why We Need Stories of Climate Optimism: Meeting the challenges of climate change will require imagination at every level, from local communities to global institutions.
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