Hard choices loom for finance chiefs’ pledges

Chris Stein - In speeches and communiques from top finance officials at the recent annual meetings of the IMF and World Bank, one word was ubiquitous: climate.

Leaders of the institutions and government ministers pledged action to meet the global climate goals of keeping warning below 1.5 degrees Celsius and reaching net zero emissions by 2050, with an eye towards next month's COP26 climate change summit.

"I'm afraid it is time to roll up our sleeves and detail our plan of actions," Britain's Prince Charles said at a World Bank event.

"With action on climate change, biodiversity loss and a just transition more urgent than ever, I can only encourage us all to get to work and solve this problem."

But behind the rhetoric lies the harsh reality of the extent of the work left to do to meet the goals, and the rancour around the issue.

Washington leaned on multilateral lenders worldwide to step up financing of climate friendly projects, even as activists launched a salvo at the World Bank president.

GROWING ALARM

Meanwhile, the world's largest asset manager warned that expensive investments are necessary to prevent catastrophe.

"Rich countries must put more taxpayer money to work in driving the net-zero transition abroad," BlackRock chief Larry Fink wrote in The New York Times.

Reaching the net-zero emissions goal will require US$1 trillion a year in investments aimed at poor countries, which Fink estimates would need US$100 billion in yearly subsidies to be viable.

"While the figure seems daunting, especially as the world is recovering from the Covid pandemic, a failure to invest now will lead to greater costs later," he said.

The meetings held semi-virtually in Washington came amid growing alarm over what unchecked climate change will do to the planet.

The World Bank last month in a disturbing report warned that reduced agricultural output, water scarcity, rising sea levels and other adverse effects of climate change could cause up to 216 million people to leave their homes and migrate within their own countries by 2050.

An IMF study estimated that direct and indirect subsidies of fossil fuels added up to US$5.9 trillion or about 6.8% of global GDP in 2020, and helped undercut climate goals by keeping gas cheap.

‘OUT WITH MALPASS’

While officials at the two Washington-based multilateral lenders insisted they are razor focused on climate change, not all were convinced.

A total of 77 advocacy groups asked for World Bank president David Malpass to step aside.

Malpass has emphasised the World's Bank's climate investment and said it provides half of all multilateral lending towards such projects - a huge change from years past when the development lender financed controversial projects, criticised for their environmental impact.

But the groups said that since the 2015 Paris climate accord, the institution has steered US$12 billion towards fossil fuel.

"Personnel is policy: The World Bank needs leadership that will support countries with real green and inclusive development pathways," said Luisa Galvao of Friends of the Earth US, which signed the petition.

The actions of the United States during the meetings were closely watched, since Washington hold the most voting power at the organisations, but the world's largest economy also is a major carbon emitter.

WHITE HOUSE

President Joe Biden however has promised a government-wide offensive to tackle climate change.

US Treasury secretary Janet Yellen recently convened leaders of several multilateral lenders - including the World Bank and developments banks in Europe, Latin America, Asia and Africa - and pressed them to dedicate more capital towards projects intended to mitigate climate change.

She also announced that her department would study how climate change is affecting communities and households in the United States, which this year alone has seen deadly winter storms strike Texas and the Midwest, wildfires roast California and successive hurricanes pummel the East Coast.

But while the White House now has a greater emphasis on addressing what Yellen called an "existential threat," agreement among the greater US political class on what to do about it remains elusive.

Biden has proposed two spending bills in Congress that could direct historic sums of money towards improving the country's climate resiliency and cutting emissions, but they are mired in the rancorous and divided US Congress.