International financial architecture reform
Today’s global financial system is failing the people and the planet. Governments, financial institutions, intergovernmental organisations, and systems continue to accelerate the climate and biodiversity crises; exacerbate poverty, inequalities and injustices; and are unfit to fund the transformations urgently needed.
Currently, there is no realistic expectation that climate finance will be delivered at the scale or urgency required by communities on the frontline of this crisis, and ODA is shrinking. We cannot continue the business-as-usual approach in global finance and expect to get different results. Change is needed.
Low- and middle-income countries (LMICs) have long been raising the alarm that the current financial system is a barrier to their ability to thrive; locking in cycles of debt and underinvestment, while at the same time pumping trillions of dollars into the causes of climate change and failing to deliver the scale of grant-based finance needed to fairly address climate change.
Read CAN’s Principles for Finance System Transformation here
CAN-UK calls for
- Debt Justice: The climate emergency is fuelling the accumulation of debt in countries in the Global South. We call for large scale debt cancellation for all countries that need it, a renewed consensus on responsible lending and borrowing, and significantly scaled up new, additional and grant-based climate finance.
- Tax Justice: Burning fossil fuels have made northern nations and fossil fuel corporations rich, but those who did the least to contribute to the climate crisis are now paying the price. We are calling for polluters to pay for the damage they have caused.
- End Fossil Fuels: Ending finance for fossil fuels is a fundamental requirement of reforming the global financial system. Institutions and governments cannot deliver meaningful climate action or full alignment with the Paris Agreement if they are continuing to finance coal, oil, and gas projects. Global North countries must pay their fair share for a just transition and this must start with shifting their funds away from fossil fuels and ending fossil fuel and other harmful subsidies.
- Trade Justice: Investor-State Dispute Settlement (ISDS) provisions in trade agreements are a genuine obstacle to climate action, leaving governments exposed to being sued by wealthy fossil fuel investors. The UK must protect taxpayers money by banning such provisions and globally these measures must be stopped to prevent LMICs being sued too.
- Inclusive Governance: Current international governance and decision making processes are deeply unequal and skewed in favour of global north governments, institutions, and corporations who have long prioritised their own gains over addressing the root causes of inequality, poverty, nature loss, and the climate crisis. Current proposals for reform just tweak these existing structures rather than making concrete proposals to democratise and improve processes so that global south countries and impacted communities have a meaningful seat at the table. The UK should support LMICs calls for a UN Tax Convention and UN Debt Convention to create a more just system for tax and debt globally.
| What we want | What we don’t want |
|---|---|
| ✅ Increased public/grant finance for LMICs to address climate change. ✅ Tax on fossil fuel profits to deliver new and additional climate finance. ✅ Debt cancellation for all countries that need it. ✅ Renewed consensus on responsible lending and borrowing. ✅ End to IFI and MDB finance for fossil fuels. ✅ Increased public finance and investment in a just and equitable renewable energy transition. ✅ Scrapping harmful subsidies and rechanneling to sustainable development and climate action. ✅ Strong support for the UN Climate Funds, more than tripling current provision. ✅ And end to ISDSs in the UK and globally. | ⛔ Increased reliance on debt-inducing instruments and to finance development and climate action. ⛔ More climate finance being delivered as loans not grants via MDBs. ⛔ Debt actions with conditionalities and limitations, including debt swaps. ⛔ Continuation of business-as-normal in the governance arrangements of global finance. ⛔ The role of blended finance continuing to be oversold – projects that are both profitable and good for climate and development are limited, which is why the ‘Billions to Trillions’ paradigm has failed. |