G20 needs to deliver on debt, development and decarbonisation plans

We are living in extraordinary times with heat waves delivering the hottest month on record for the planet, forest fires creating havoc in Canada, Greece and Hawaii, and floods affecting a third of Indian states. In parallel, growing indebtedness (more than 50 countries need debt relief), exacerbated by climate shocks, continues to put pressure on fiscal balances and constrains their ability to invest in longer-term developmental objectives. The Russia-Ukraine crisis and persisting tensions between the United States and China have kept the geopolitical landscape turbulent. India’s G20 presidency must find solutions to navigate the rough waters of debt default, economic underdevelopment and extreme weather — without crashing into the iceberg of geopolitical rivalry.

As the G20 Leaders’ Summit nears in September, it is important to take stock of what has been achieved and what remains to be done. The lack of a joint communique should not be misinterpreted as a lack of consensus. On several matters, G20 ministerial meetings in recent weeks have delivered consensus in the outcome documents.

For instance, the development working group meeting in June called for the mobilisation of resources for accelerated action on all Sustainable Development Goals (SDGs), a key priority of India’s G20 presidency. In addition, the working group also unanimously adopted the high-level principles on lifestyles for sustainable development to shine a light on the need for sustainable consumption and resource efficiency. Similarly, the energy transition working group (ETWG), in its final meeting in July, delivered several key outcomes. It recognised that the low-carbon transition depended on more resilient and diversified supply chains. It also included, for the first time, extensive attention to critical minerals, with the G20 taking note of the voluntary high-level principles for collaboration on critical minerals. On the theme of energy security — a key concern for developed and developing countries alike — ETWG critically drew attention to ‘fuels for future', including hydrogen. The outcome document affirmed the high-level principles on hydrogen, which can help develop the rules for a global market for green hydrogen.

India’s G20 presidency has also instituted a disaster risk reduction working group, whose priorities include the global coverage of early warning systems and mobilising finance to combat disasters. The environment and climate sustainability working group, in addition to its references to the need to keep global temperatures below 2°C of warming, also delivered outcomes focused on resource efficiency and circular economy, and adopted principles for a blue/ocean-based economy.

Despite this progress, there remain two key fault lines. The first is about climate ambition. The G20 is not a climate negotiation. Yet, discussions have stalled on phasing out versus phasing down fossil fuels, tripling renewable energy deployment by 2030, and 60% reduction in emissions by 2035. But ambition only counts if actions follow. Rather than fretting about the lack of consensus on climate action, India’s presidency must reflect its own domestic example: Talk less, deliver more. The rapid growth of renewables since 2010 has already made India the fourth largest clean energy market. At the Leaders’ Summit, India must propose a positive, forward-looking narrative, to demonstrate that investing in clean infrastructure is consistent with jobs, growth and sustainability.

Such a narrative might still stumble at the second fault line: Trillions for the billions of people in the Global South, as noted before in this column. Ambitious targets for clean energy, green industries, supply chains for renewables or minerals, circular economy, or disaster resilience will not be met without money. Global capital markets have well over $200 trillion. For capital to reach those who need it the most, India’s presidency must deliver a package to make finance cheaper, longer, and more convenient.

In order to make finance cheap, we need de-risking at scale. The cost of finance is too high in emerging markets and developing countries, which need clean infrastructure to rapidly grow their economies. Clean infrastructure (where upfront capex costs are often high) needs longer tenure of finance, not just for large projects but to also support small businesses in adopting resource-efficient technologies. Sustainable finance must be more convenient to access, whether it be insurance payouts when disasters strike or concessional finance to prepare project pipelines or as investment guarantees. More convoluted procedures make projects costlier and less attractive.

This is where the reform agenda for multilateral development banks (MDBs), as suggested by the G20 committee chaired by NK Singh and Lawrence Summers, becomes critical. The committee emphasises tripling the lending size of MDBs by 2030 to provide low-cost, long-maturity financing that can share risks and bring in private investors. Finance won’t be convenient or easy to access unless MDBs become more nimble and catalytic to meet the demands of developing countries.

India’s G20 presidency is aiming for a green development pact. At its core should be the forward-looking narrative of climate action and sustainable development bolstered by a package of financial solutions and institutional reform. The alternative scenario — stalemate and finger-pointing — will dampen hard-won progress and sour the mood for the COP28 climate meetings in Dubai in December and throw the world further off-track on climate goals. Finance must become the beacon on a lighthouse to guide our pathways out of indebtedness, towards greater resilience against climate risks, and quicker progress on broader development goals.

Arunabha Ghosh is CEO, Council on Energy, Environment and Water. He serves on the Government of India’s G20 Finance Track Advisory Group and provides guidance to the Sherpa Track for India’s G20 presidency. The views expressed are personal