Brazil Pitches Financial System Plan to Scale Climate Funds
(Bloomberg) -- Brazil, host of the COP30 climate summit, presented its vision for how to rewire the global financial system in order to provide $1.3 trillion per year to developing countries by 2035.
The “Baku to Belém roadmap to $1.3T,” which Brazil wrote with last year’s COP host, Azerbaijan, leans heavily on reforming key financial institutions, including the International Monetary Fund, to channel climate funds to poorer nations. The report also floats potential new sources of revenue, such as taxes on financial transactions and the ultra-wealthy.
“If the international financial architecture is reset to fulfill its original purpose of ensuring decent prospects for life, the $1.3 trillion goal will be an achievable global investment,” wrote André Corrêa do Lago and Mukhtar Babayev, the presidents of COP30 and COP29 respectively, in the report.
Right now, developing countries lack sufficient funding to help them scale up clean sources of energy, and also to adapt and deal with the increasingly extreme weather resulting from climate change. Many have called for changes to the financial system to ease crippling debt loads and free up much-needed climate cash.
Last year, rich countries agreed to provide $300 billion per year of predominantly public finance to developing nations by 2035. It also was agreed that a further $1 trillion would be mobilized through other sources, the details of which would be laid out by the Baku to Belém roadmap.
The 81-page report outlines a series of measures that could be taken in the short term, including a delivery plan for the initial $300 billion, and credit-rating agencies updating their methodologies to better account for the impacts of climate change. It also suggests that the world’s 100 biggest companies and institutional investors could report on how they are financing climate pledges made by countries.
Colombia, the world’s only significant oil producer to join a bloc of nations vowing to quit fossil fuels, has frequently bemoaned how financial markets and credit-rating agencies have punished it for the decision.
The IMF could assess by October 2027 the potential of reallocating so-called special drawing rights, a kind of international reserve asset, to developing nations to help fund climate-related activities, according to the report. It could mobilize around $230 billion per year, it added.
Innovative financial tools “can help put money to work where it matters most,” UNFCCC Executive Secretary Simon Stiell said in a statement. “Every early dollar deployed now helps avoid far greater costs later for all nations — there’s no time to waste.”
Many of the proposals outlined by the Baku to Belém roadmap will require political backing, and developed nations have warned that their budgets are increasingly under strain. How quickly key international institutions would be able to reform is an open question, especially given that the biggest shareholder of many is the US under President Donald Trump.
“The roadmap isn’t supposed to be acknowledged, approved or well received,”Corrêa do Lago said during a press conference on Wednesday. “We have so many things we need to approve and negotiate at the COP. I think that both Babayev and I are very comfortable to have fulfilled what was asked. There is no priority in having it approved.”
Babayev, the Azerbaijani official, added that what’s been proposed is a “living document” that can be altered.
One of the programs in the roadmap is called ReInvest+. It would use multilateral development banks to open up developing country loans to foreign investors. There are already $3 trillion worth of performing loans that could be bought by US and European investors, said Avinash Persaud, special adviser on climate to the president of the Inter-American Development Bank. Once investors buy up those loans, it will free up capital for local banks to invest in national priorities as laid out in a given country’s climate plan.
Some of the tools that may raise the most money are also among the more controversial. The report highlights possible levies on airfares, high net-worth individuals, luxury goods and financial transactions as being able to deliver hundreds of billions of dollars of funds, but notes that the potential of securing political agreements on them “remains to be determined.”
“We are aware that this journey begins in turbulent times, with scarce financial resources and difficult budgetary trade-offs,” wrote Corrêa do Lago and Babayev. “Either we thrive collectively, or we fail and decline individually.”
Carolina Pasquali, executive director of Greenpeace Brasil, said in a statement that the roadmap doesn’t do enough to hold developed nations accountable. Although it “rightly” acknowledges the gap in concessional finance, “we still need significantly more public finance for mitigation, adaptation and loss and damage,” she said.
(Adds comment from the president of COP30 in the 11th paragraph.)
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