The Global Financing Pact: an effective response to environmental and economic challenges?

Launched in 2023 at the Summit for a New Global Financing Pact in Paris, this ambitious framework aims to reform the international financial system to make it more inclusive and sustainable, particularly for developing countries, which bear the full brunt of climate change and economic inequality.

Is it a viable and sufficient solution to meet environmental and economic challenges by 2025, especially in the run-up to COP30? Or are we at risk of falling short of the global climate and social challenges?

The New Global Financing Pact

The New Global Financing Pact is an ambitious initiative to overhaul the international financial system so that it can better address challenges such as climate change, inequality and poverty. Launched at France's initiative in June 2023, the pact brought together many states, international organizations and civil society players at a summit in Paris. The goal was to mobilize massive funding to support developing countries in their transition toward more sustainable and resilient economies. The commitments made at the Paris summit include reforming international financial institutions, strengthening official development assistance and developing new financial instruments to support investment in global public goods such as health and the environment.

A promising framework, but persistent challenges

Since the Global Financing Pact was set up, several significant advances have been made, but the road is still full of obstacles. Discussions around the pact have put major issues on the table, such as restructuring the debt of developing countries, accelerating climate finance and mobilizing private capital to support ecological and inclusive projects.

1. Restructuring the debt of countries in the Global South

One of the central issues of the Global Financing Pact is managing the debt of developing countries. These countries, often the hardest hit by climate change, are also those with the most limited resources to cope with it. In 2023, the public debt of low-income countries reached alarming levels, with an average debt-to-GDP ratio of more than 50%, according to the International Monetary Fund (IMF). The Pact provides for a review of debt restructuring rules, in particular by integrating environmental criteria to ease the debt burden of countries committed to the ecological transition. However, negotiations with private creditors and international financial institutions remain complex, and the risk of political deadlock is high.

2. Mobilizing climate finance

One of the goals set at the summit is to unlock 100 billion dollars a year to support climate action in developing countries. This amount, promised under the Paris Agreement in 2015, has not yet been fully reached. Climate finance aims to support initiatives such as the energy transition, adaptation to the impacts of climate change (resilient infrastructure, sustainable agriculture) and the protection of natural ecosystems.

Although progress has been made, financial flows remain insufficient and unevenly distributed. For example, in 2021, only 21% of climate finance was allocated to adaptation, even though this dimension is crucial for the most vulnerable countries. By COP30 in 2025, it is imperative that these financial promises are fully delivered to meet the growing needs of countries in the Global South.

3. Private sector commitment

The role of the private sector in financing the ecological transition is crucial. The Global Financing Pact encourages the mobilization of private capital to fund environmentally sustainable projects, in partnership with states and international institutions. Initiatives such as the Climate Finance Partnership, which brings together sovereign wealth funds, asset managers and development banks, aim to create sustainable investments and generate returns while addressing climate challenges. However, private investors are still reluctant to commit to projects perceived as risky, particularly in the least developed countries.

To learn more, read our article on sustainable finance.

4. The road to COP30: decisive steps

Between now and COP30 (in 2025), several key steps are expected to advance the goals of the Global Financing Pact. First, it is crucial that developed countries honor their financial commitments to countries in the Global South. Second, the reform of international financial institutions, such as the IMF and the World Bank, must make it possible to better integrate climate and social issues into their lending and investment strategies.

Moreover, the next decade will be decisive in closing the gap between promises and concrete action. At this stage, the risk of falling short of the challenges remains real if bolder measures are not quickly put in place.

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