Summary

The report, “Breaking the cycle of risk: Addressing resilience and debt for a new global financial architecture”, shows that we have the opportunity to move climate vulnerable countries out of debt by reforming the financial architecture.

The world is facing interlinked climate and debt crises. Each has the potential to make the other worse. This report, by E3G and Mistra Geopolitics, explores the relationship between climate, debt and resilience and the influence of geopolitics.

The geopolitics of dept and finance

As we consider how to reform the international financial architecture, we have the opportunity to map the journey out of the debt and resilience crisis for climate vulnerable countries. This report explores the geopolitics of debt and finance in relation to the critical need to build resilience globally and specifically in relation to those countries at the forefront of climate impacts.

In this report, we map the critical nature of resilience, especially in the light of climate change; we examine the evolving debt crisis, and what makes this present situation particularly challenging; and we explore why action is so politically and geopolitically contentious. With this background, we outline some possible ways forward to resolve these issues.

Key messages

• Resilience is essential to the success of economies and societies and the smart economic option, but the vicious cycle between the debt and climate crises, intertwines a lack of economic resilience with a lack of climate resilience, creating fragility.
• The availability of financial aid remains inadequate, while vulnerability itself leads to higher interest rates, making debt harder to pay off.
• Clear roadmaps, and transition plans, will help frame the roles, and actions, of debtor countries, their donors and creditors in emerging from the present crises.
• The debt products, the institutions, and the whole social contract between these parties must move to a more just, mutually engaged and supportive one, if the world as a whole is to move to a more resilient future.

Conclusion

As we consider how to reform the international financial architecture to fund the climate transition, we can map the journey out of the debt and resilience crisis for climate vulnerable countries.

Citation

Benomar, I., Cecilio, C, Lucy Hayes, L., Dileimy Orozco, D., Palmer, R, and Smith, O. (2024). Breaking the cycle of risk: Addressing resilience and debt for a new global financial architecture. Report by E3G and Mistra Geopolitics. https://www.e3g.org/publications/breaking-the-cycle-of-risk/