Contained within the New Delhi G20 Leaders' Declaration announced on Saturday evening is a commitment by global leaders to "pursue reforms for better, bigger and more effective MDBs". In the declaration, G20 leaders acknowledged the need for an international development finance system "that is fit for the purpose"; i.e., one capable of helping developing countries, "in particular the poorest and most vulnerable", surmount economic challenges, including those posed by climate change.
Of significance in the paragraph on "Reforming International Financial Institutions" is the G20's realisation of the need for a "quantum jump from billions to trillions of dollars for development".
"The international finance system must deliver significantly more financing to help developing nations and EMEs (emerging market economies) fight poverty, tackle global challenges and maximise development impact," the G20 said, noting that stronger MDBs "will be important" to these efforts.
MDBs also found mention in a discussion on mobilising finance to "support the commercialisation of early-stage technologies that avoid, abate and remove greenhouse gas emissions and facilitate adaptation" in order to "support developing countries' implementation of the Paris Agreement".
What Are MDBs?
MDBs, or multilateral development banks, refer to banks like the World Bank, the Asian Development Bank, and the European Bank for Reconstruction and Development. These provide "financial and technical support to developing countries to help them strengthen economic management and reduce poverty" and are key for climate action and to achieve sustainable development goals (SDGs).
The significance of MDBs on issues like combating climate change and ensuring equitable and sustainable global development has been underlined at this summit by United States President Joe Biden's active efforts to boost the World Bank's capacity to support low- and middle-income countries.
Following the declaration's release, the White House said he had worked to "fundamentally reshape and scale up the World Bank to more effectively deliver poverty reduction and inclusive economic growth", and had asked Congress to unlock new concessional financing of over $25 billion from US action alone.
MDBs And Climate Change
Earth's global surface temperature has risen by around 1.15 degrees Celsius and the vast amounts of carbon dioxide spewed into and polluting the atmosphere - mostly by developed countries - since the start of the Industrial Revolution in the late 18th century is widely seen as being a major factor.
At the Paris climate agreement of 2015, world leaders agreed not to let global temperatures rise above that mark. Nearly a decade later, that has still not been reached and the G20 Delhi Declaration speaks of accelerating efforts and enhancing resources in an effort to achieving that temperature goal.
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It is telling that G20 leaders' consensus on "better, bigger and more effective" MDBs follows this.
Simply put, unchecked, the world is looking at a temperature rise of around three degrees by the end of the century and the difference over a 1.5-degree increase is an uninhabitable Earth. Emissions must be halved by 2030, from 2009 levels, to limit the global average temperature rise to 1.5 degrees Celsius.
Developing countries, including India, have long argued that wealthier nations should take greater responsibility given their massive historical emissions, and provide means of implementation, including finance and technology, to assist developing nations in transitioning to clean energy sources.
Role of MDBs
MDBs like the World Bank are critical in ensuring the latter, as they are often the only viable ways of poorer nations funding the required infrastructure and clean energy projects.
At a pre-summit briefing on Friday, Amitabh Kant, India's G20 sherpa said, "We wanted the world to take the lead on green development in the context of the climate crisis... and because both SDGs and climate action require finance, particularly for developing and emerging markets in the Global South."
Six years before Paris, developed nations vowed to provide $100 billion per year, by 2020, to help developing countries combat climate change. As of today, that guarantee has not been met.
Should it be met in the (hopefully) near future, it will be mainly because of increased MDB financing.
Bilateral public finance - the most important indicator of direct contribution by developed countries - has not increased measurably since 2016 and there remain important shortfalls in its quality, shortfalls the G20 New Delhi Declaration hope will be covered by its resolution today.
With input from agencies
