Why 2023 will be a year of climate action

Gradually and seamlessly, as a global community, we have dropped the fiction that we live in normal times.

Perhaps it’s because we still default to traditional, incremental solutions to global systemic threats. We allocate a little more money here or there or create a new trust fund. We may issue a new UN resolution, expressing our concern and believing these actions are enough to congratulate ourselves on a job well done.

In doing so, we appear to shy away from the uncomfortable truth: the existing international system needs reform.

Climate impacts are growing worse and at increasing rates. Crises have engulfed the world – food, fuel and financial – with ripple effects that touch every facet of life. Russia’s invasion of Ukraine, protests in Iran and largely hidden conflicts and humanitarian breakdown in South Sudan, Yemen and now Haiti further compound this singular moment.

Around 345 million people are moving closer to starvation, from 135 million before the pandemic. In addition, soaring energy prices are fuelling inflation while many fear what a surge in new cases could mean.

The existing international system, collectively requires more ambition, trust and a reformed economic and governance model to get us to where we need to be. Climate action isn’t the only victim of institutional capacity needs but it is the most urgent.

Multilateral institutions, where western stakeholders tend to dominate, lean towards mitigation before adaptation and the investment it needs. Unfortunately, this approach can aid wealthy countries before addressing energy poverty and sustainable growth. That is where multilaterals could be ambitious.

The record of mobilizing private capital for climate action in developing countries needs improving. Total mitigation and adaptation spending currently amount to an estimated $653 billion a year over 2019 and 2020 – only $83.3 billion, however, was mobilized for developing countries in 2020.

According to the UN, developing countries will require up to $340 billion annually by 2030 and $565 billion by 2050, for adaptation. Yet, only 6% of total adaptation finance went to small island states in 2020 and 25% to the least developed countries. While these figures are an improvement from the previous year, which were 3% and 17% respectively, there is still significant under-financing of those most at risk of and least responsible for climate damage.

International financial institutions (IFIs) – schools as the World Bank, African Development Bank, Asian Development Bank – are often brought in to help when international capacity is under pressure as it currently is. However, as a 2022 G20 review indicated, IFIs themselves need boosting, particularly when it comes to their capital adequacy frameworks i.e. the amount of capital the bank needs to hold against risk-weighted assets.

If they cannot manage to put climate consciousness at their core, take up the 2022 United Nations Climate Change Conference (COP27) mantle on “loss and damage” to help developing countries manage the effects of climate change or increase their lending power and innovate, they risk deterring from their original mission.

Almost 80 years after the Bretton Woods Conference, it is possible for like-minded countries to consider building a climate finance institution that can deliver trillions of dollars to finance a green transition. That is where multilaterals could rebuild trust.

The existential challenge of climate change could bring us together because we still have time, albeit limited time, to do the right things. And because solutions must be shared if they are to work.

Climate change is not confined by geography or sector and our response cannot be either. Multilaterals could pave the way for the economic and governance models and strategy sharing necessary for our future stability. Austerity only defers the inevitable; investment in green growth has the luxury of being economically sound and supportive of a sustainable future for all.

The roadmap to our success is paved in the calendar of conferences and by proxy, the traditions of the organizations we’re hopeful should evolve to meet the challenges of this moment.

This year, we hit the ground running over 2023, including at the Spring meetings of the International Monetary Fund and the World Bank, the G7 in Japan, the G20 in India, the UN General Assembly, the Annual Meetings of the World Bank and IMF and lastly, COP28 in the UAE.

The trick is to run a thread of reform through these high-level meetings that deliver results by the end of the year. COP27 gave us a blueprint for how vulnerable countries can change the debate and lead us in the right direction. Their historic advocacy and victory in securing funding for loss and damage is not a fluke. Indeed, it heralds the future of a post-colonial international system.

Leaders must be encouraged to take this forward by leveraging public and private capital and driving fundamental change to the multilateral banks.

Civil unrest, state collapse and an inhibited multilateral system is not a fate we need to resign ourselves to if, with a little courage and foresight, we could take the steps now invigorate our international system. With a clear understanding of the gaps and vision for the future, the new path could be greater than the sum of its parts.