Note4Students

From UPSC perspective, the following things are important :

Prelims level: Paris Pact for People and the Planet

Mains level: Paris Pact for People and the Planet, private-sector funding and India's Role in the Global Sustainable Financial Landscape

What’s the news?

The Paris Pact for People and the Planet signifies a milestone in the global commitment to sustainable development.

Central idea

June saw more than 100 countries converge in Paris with a shared vision: no nation should be torn between combating poverty and preserving the planet. This led to the establishment of the Paris Pact for People and the Planet, crafted with invaluable insights from India.

The debate around developed countries’ commitment to furnishing USD 100 billion a year for climate finance from 2020 to 2025 has been heated.
The target is set to be achieved by 2023.
France surpassed its share, contributing €7.6 billion in 2022 for climate financing.
Since 2012, the French Development Agency has invested over €2 billion in India for sustainable ventures.

Leadership in Global Forums: India co-chaired the summit for the Paris Pact for People and the Planet.
Collaboration with France: India and France jointly act to bridge global financial divides.
G20 Presidency: India led significant progress in sustainable finance discussions under its G20 Presidency.
Regional Debt Management: India collaborated with the Paris Club for debt restructuring in Sri Lanka.
Championing Cohesion: India, with France, emphasizes unity and cooperation in the global financial landscape.

Public Sector Limitations: Public sector financing is not enough to address global challenges.
Regulatory Impacts: Post-2008 financial regulations may hinder the flow of OECD savings towards non-OECD countries.
Green Finance Framework: Misunderstandings between developed and developing countries on aligning finance with the Paris Agreement’s objectives
Debt Vulnerabilities: Many low- and middle-income countries are on unsustainable debt trajectories.

Reviewing Global Climate Funds: Start an in-depth analysis of global vertical climate funds to make better use of resources and encourage greater cooperation among climate finance ecosystem stakeholders.
Expanding the Green Finance Framework: Further develop the green finance framework to align the financial sector with the objectives of the Paris Agreement. This entails leveraging private finance to support low-carbon and resilient pathways worldwide, using mitigation costs as a guiding principle.
Promoting Just Energy Transition Partnerships: Encourage country-led, multi-actor partnerships, such as the Just Energy Transition Partnerships already operational in countries like Indonesia, Vietnam, South Africa, and Senegal, to attract investments for phasing out coal from electricity production.
Engaging Credit Rating Agencies: Include credit-rating agencies in the reform agenda of multilateral development banks (MDBs) to ensure that these institutions are not penalized due to reforms aimed at enhancing their effectiveness. Rating agencies should consider innovative blended finance schemes and data on defaults, revealing the resilience of projects with multilateral guarantees.

The global community, with India at its helm, is making strides towards reshaping the financial landscape in favor of sustainable development. Harnessing both the public and private sectors, and with partnerships like the non-French collaboration, there’s hope for a balanced planet where poverty alleviation and environmental preservation coexist.