The year 2022 saw much action in development finance. As we predicted in our last year’s outlook, development finance has become more strategic with financiers picking allies and partners to the disadvantage of global coordination.
While all development finance initiatives promise to uphold multilateralism and while they all borrow language from UN frameworks (e.g., 2030 Agenda, Sustainable Development Goals), these initiatives not only compete for attention, but aim to be more exclusive. Similarly, while “green” development is supposedly a focus of all developments, too little was achieved in accelerating finance and putting us on the path of a climate-neutral and biodiversity-positive path.
Global Development Initiative (GDI)
After the announcement of the Global Development Initiative (GDI) by China’s President Xi at the UNGA in September 2021, many open questions existed about yet another development initiative. A year later, in September 2022, China’s foreign minister Wang Yi was able to chair the Ministerial Meeting of the Group of Friends of the GDI. The meeting attracted nearly 40 foreign ministers, international organizations (e.g., FAO, IEA), and presented a video message by UN Secretary General Antonio Guterres.
Wang Yi highlighted seven measures of the GDI with a focus on aspects with strong Chinese experiences, such as food security, digitalization, trade, energy and poverty reduction, including
- 50 cooperation projects in poverty reduction, food security as well as 1,000 new capacity building projects
- Food Production Enhancement Action to utilize digital and innovative agricultural financing and production in cooperation with FAO
- Global Clean Energy Cooperation Partnership in cooperation with the IEA
- Smart Customs, Borders and Connectivity in collaboration with the World Customs Organization
The GDI is separate from the Belt and Road Initiative (BRI). While both initiatives highlight the central role of China, the GDI seems to be focusing more on official development assistance (ODA) and the 2030 Agenda for Sustainable Development across the world. The BRI focuses on international economic cooperation and is thus more commercial.
Shanghai Cooperation Organization (SCO)
China, as a founding member of the SCO, has supported a joint statement on climate change response in September 2022. The statement that included aspects of
- experience exchange on investment criteria and sustainable projects including green classification,
- studying the prospect of deepening cooperation in the field of fund raising to prevent and adapt to climate change,
- conducting dialogues on carbon markets among SCO member states including entering into and participating in international carbon markets.
Formed as a political, economic and security alliance, SCO saw its membership increase from its original 5 in 1996 to 6 members, 6 observers and 9 dialogue partners, 3 of which joined in 2022 (Egypt, Qatar, Saudi Arabia).
China virtually hosted the 14th summit of the BRICS (Brazil, Russia, India, China, South Africa) in July 2022. Not only did Argentina and Iran formally apply to join BRICS, but Egypt, Saudi Arabia and Turkey also expressed interest in joining BRICS.
The Summit Declaration under the theme “Foster High-quality BRICS Partnership, Usher in a New Era for Global Development” highlighted the BRICS success and future of cooperation. It emphasized the need for developed countries (thus none of the BRICS) to
“honor their Official Development Assistance (ODA) commitments” and that “peaking of Greenhouse Gas (GHG) emissions will take longer for developing countries” (thus BRICS countries). Furthermore, expectations were voiced “to enhance developed countries’ commitments to provide financial support and technology transfers to developing countries” during the climate COP27.
G7 Partnership for Global Infrastructure and Investment (PGII)
After the launch of the Build Back Better World (B3W) in 2021 with little results to date, the G7 launched the PGII in June. The PGII aims to mobilize USD600 billion in public and private funding for infrastructure by 2027, USD200 billion of which promised by the USA.
Contrary to the lack of announcements for B3W, the USA already announced specific projects, such as industrial scale vaccine manufacturing in Senegal, a USD2 billion solar project in Angola, and an USD600 million undersea cable to connect Singapore and France and bring high-speed internet to places in Bangladesh, Djibouti, Egypt, India, the Maldives and Pakistan.
COP27 Loss and Damage Fund
While the overall results of COP27 were not sufficient to reduce risks of catastrophic global warming, significant progress was made on a global fund for “loss and damage”. The fund aims to provide financial assistance to poor nations hit by climate change.
As a first and related step, various states, regional governments and development agencies pledged USD230 million to an Adaptation Fund. While details need to be worked out, the fund was welcomed by developing nations which are at risk of climate change while having had little contribution to global emissions.
China has been supportive to the establishment of the fund, but has not been committing funds for the fund.
EU Global Gateway
The EU launched the Global Gateway in 2021 and prepared an update for the G20 conference in November 2022. It highlighted the mobilization of EUR300 billion by 2027 and some project examples. These include, for example, transport in Namibia, raw materials in Kazahstan and Chile, and hydrogen investments in India.
Development Finance Outlook for 2023
|Outlook for sustainable development finance in 2023|
Three issues stand out for the coming year(s):`
1. In this more geo-competitive world, how can we improve international environmental and technical standards to ensure technical interoperability, opportunities to co-finance, international cooperation, and ensure long-term sustainability?
2. How can recipient economies increase ambitions for sustainable development while ensuring sufficient access to finance from multiple sources?
3. Does the fragmentation of development finance initiatives offer opportunities to deliver development finance faster and more effectively?
Title photo credit: Ellie Van Houtte/USAID
Dr. Christoph NEDOPIL WANG is the Founding Director of the Green Finance & Development Center and a Visiting Professor at the Fanhai International School of Finance (FISF) at Fudan University in Shanghai, China. He is also the Director of the Griffith Asia Institute and a Professor at Griffith University.
Christoph is a member of the Belt and Road Initiative Green Coalition (BRIGC) of the Chinese Ministry of Ecology and Environment. He has contributed to policies and provided research/consulting amongst others for the China Council for International Cooperation on Environment and Development (CCICED), the Ministry of Commerce, various private and multilateral finance institutions (e.g. ADB, IFC, as well as multilateral institutions (e.g. UNDP, UNESCAP) and international governments.
Christoph holds a master of engineering from the Technical University Berlin, a master of public administration from Harvard Kennedy School, as well as a PhD in Economics. He has extensive experience in finance, sustainability, innovation, and infrastructure, having worked for the International Finance Corporation (IFC) for almost 10 years and being a Director for the Sino-German Sustainable Transport Project with the German Cooperation Agency GIZ in Beijing.
He has authored books, articles and reports, including UNDP's SDG Finance Taxonomy, IFC's “Navigating through Crises” and “Corporate Governance - Handbook for Board Directors”, and multiple academic papers on capital flows, sustainability and international development.