Experts kick off independent review of link between sovereign debt and climate change

Established by Colombia, Kenya, France and Germany as part of the ‘Pact for People and the Planet’ (4P) agenda, the Expert Review on Debt, Nature and Climate will be led by Vera Songwe, former UN Under-Secretary General, and Moritz Kraemer, Chief Economist at LBBW and former Global Chief Ratings Officer of S&P Global (formerly Standard and Poor’s). The Review was originally proposed at the Summit for a New Global Financing Pact in Paris in June 2023, and announced at COP28. As low and middle income countries face rising emerging debt pressures, the independent review will look at how to make debt both fiscally and environmentally sustainable. Proposals it will examine include debt for nature / climate swaps, sustainability linked bonds, and possible improvements to the IMF’s Debt Sustainability Analysis methodology.

It is expected to report in early 2025 and will make recommendations to creditor and borrower countries, private creditors, the IMF and multilateral development banks.

The Review forms part of the follow-up to the Summit for a New Global Financing Pact hosted by French President Emmanuel Macron in June 2023. AT the Summit world leaders responded to the urgent need to expedite progress towards meeting the Sustainable Development Goals by establishing the Paris Pact for People and the Planet (4P) as a new way of working together for the renewal of the international financing architecture. The 4P now gathers 52 countries, from across all continents and income levels with the goal of working together on a shared agenda to drive forward positive change.

Vera Songwe said:

“At the Spring Meetings the need for more fiscal space to focus on growth has been raised consistently by developing countries. There is an urgent need for liquidity in many countries to avert a crisis and for others a debt crisis is already afoot. Net outflows to the private sector from emerging markets stand at $68 billion. Climate and nature spending are already being squeezed. Many cannot borrow more to invest in climate action. We need to look urgently at how more effective growth strategies which reduce debt, or provide more efficient treatment of distress, can be designed.”

Moritz Kraemer said:

“We desperately need to find new arrangements which allow developing countries to borrow sustainably for climate and nature action. It is a good sign that a group of countries from the global North and South have come together to set up such a globally respected panel of experts. It is an honour to be asked to co-chair it. We are looking forward to beginning the work.”

The Independent Expert Group includes world-leading experts in the field, including Avinash Persaud, special adviser on climate change at the Inter-American Development Bank; Masood Ahmed, Director of the Center for Global Development; Wanjira Mathai, Managing Director for Africa of the World Resources Institute; Ma Jun, President of the Institute of Finance and Sustainability, Beijing; and Brad Setser, Senior Fellow of the US Council on Foreign Relations.

The Secretariat will be hosted by the UN Economic Commission for Latin America (based in Santiago), ODI global affairs think tank (London), the Finance for Development Lab (Paris) and the Africa Centre for Economic Transformation (Accra).