With the 4th International Conference for Financing for Development (FfD4) and COP30 fast approaching, the ‘diplomatic runway’ ahead offers a critical window for the G20 to reset its course. G20 countries must demonstrate that they can still provide the leadership needed to advance a global economic agenda that enables sustainable development and long-lasting security. The G20 now faces a pivotal decision: will this forum lead the multilateral space on climate finance for development, or will it allow alternative coalitions to take the lead?
Two conversations
The G20 finance ministers and central bankers met in Cape Town on February 26-27, 2025, under South Africa’s Presidency. The Finance in Common Summit (FiCS) took place in parallel, bringing together the global public development bank community to discuss practical solutions for scaling climate and development finance. The contrast between the two discussions was striking.
At FiCS, the focus was on implementation and mobilisation. Key themes included:
- Country platforms as a mechanism for scaling investment – While the G20 Chair’s summary mentioned country platforms in passing, discussions at FiCS focused on how to make them work by ensuring they are backed by robust project pipelines, effective risk mitigation, and clear investment frameworks.
- The role of national and public development banks – FiCS emphasised the need for multilateral development banks (MDBs) and national development banks (NDBs) to step up with more innovative financial instruments, particularly in de-risking private investment and enhancing concessional capital deployment.
- Bridging the gap between pledges and action – Unlike the G20, where financial flows remain constrained by political caution, FiCS saw a greater focus on aligning capital flows with real investment opportunities, particularly for adaptation, resilience, and just transition strategies.
At the G20 table, discussions failed to reach consensus on a communique, and have been summarised in the G20 Chair’s summary.
The elephant in the room
The geopolitical backdrop loomed large over the G20 meeting, with the result that the G20 failed to act as a bridge between developed and developing economies, leaving crucial financial system reforms in political limbo.
The US is “reviewing all international intergovernmental organizations of which they are a member”, Europe is bogged down by security concerns and domestic challenges, and major emerging economies are seeking alternative pathways through BRICS and regional initiatives.
With the 10-year anniversary of the Paris Agreement at COP30 and the upcoming 4th Financing for Development Conference marking a decade since the Addis Ababa Action Agenda, the lack of ambition in the G20 discussions further weakens the credibility of global economic governance.
What the G20 must do now
To regain its role as a credible forum for global governance, the G20 must focus on concrete actions that can bridge the growing divides and bring financial resources to where they are most needed.
The G20 must take the following actions:
- Scale up financing capacities of PDBs and MDBs. PDBs are crucial for unlocking finance but need great financial capacity and stronger coordination with MDBs.
- Enhance the mobilisation of private finance. Public finance alone cannot cover overall needs. It is therefore urgent to update financial regulations which, in some respects today, discourage risk-taking in countries that need private capital, including those most vulnerable to climate impacts. This is not an agenda of deregulation but of evolution, in order to secure a balanced approach that recognises climate risks while also sending the right incentives and removing undue barriers for private investment in emerging markets.
- Break the debt-climate nexus. A strong correlation exists between climate vulnerability and sovereign debt, and if ineffectively addressed, current pressures on sovereign debt in several low-income countries will only worsen, particularly for those most exposed to climate change. Each case is specific and requires a tailored solution but the G20 must engage more political capital in designing a framework that relieves debt pressure when needed. It’s not charity – it’s a necessity.
- Unlock non-debt new sources of finance. New, additional, predictable resources which do not add to existing debt burdens would help close the climate and development financing gap. This includes global levies that channel proceeds to developing countries. The Global Solidarity Levies Task Force has already identified potential levies on undertaxed yet polluting economic activities, such as maritime shipping, aviation, and fossil-fuel industries. There’s also a debate on contributions from the super-wealthy. As sensitive as it is, the G20 should not avoid this discussion. A subgroup of willing countries could eventually pledge to implement such levies.
G20 countries now have an important choice to make. Will they support the forum to step back up into leadership, or will they work to achieve their goals through other platforms? The consequences of their choice will have global impact.
