United Nations chief António Guterres has some damning words for the global financial system. He called it “morally bankrupt,” saying in a speech last week that its structural mechanisms promote “imbalances” and that the “divergence between developed and developing countries is becoming systemic.”
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What’s needed is reform, he said. This should include a review of governance mechanisms and financial metrics that assess not just GDP but also climate and investment risk, as well as vulnerability, Guterres argued. And he advocated for adjusting credit ratings systems so they’re not based on “harmful preconceptions.”
Still, other events from last week leave us wondering whether this will be the year that the financial industry makes changes.
• One institution offering that potential is the new International Sustainability Standards Board, which aims to create comprehensive sustainability-related disclosure standards. Standardization stops the proliferation of different sets of metrics, reduces confusion, and improves accountability, said Brian Moynihan, CEO at the Bank of America. “We can’t debate how to measure anymore. We’ve got to go out and make a step” to address environmental change and other issues, he said during a World Economic Forum event.
• Another move toward standardization could come from the U.S. Securities and Exchange Commission, which may release a rule later this year requiring companies to disclose information about environmental impact and human capital, Moynihan said.
• An Accenture report found that only 31% of companies say they’ve fully embedded environmental, social, and governance data and measurement in core operational and management information systems. “This is not rocket science … It’s a decision to measure and then to take the steps,” said Accenture CEO Julie Sweet during the WEF event, adding that companies need to change their thinking and must fully integrate ESG.
• Health tech company Philips took a year or two to fully integrate ESG metrics throughout its operations, including tying them to compensation. And “it’s not that difficult,” said CEO Frans van Houten during the event. “There is no time to lose,” he said, adding that a common set of metrics can push laggards to change.
+ ICYMI on Devex Pro: Adva wrote last year about the progression of ESG standards.
Another grim outlook
IMF’s outlook for the year, published this morning, downgrades economic growth prospects for the United States and China, key drivers of global growth. "With interest rates rising, low-income countries, of which 60 percent are already in or at high risk of debt distress, will find it increasingly difficult to service their debts," writes Gita Gopinath, first deputy managing director at IMF, in an accompanying blog post.
We’ll be covering the World Economic Outlook in depth today, so keep an eye out.
+ ICYMI: IMF warns of soaring debt amid divide between high- and low-income nations.
Who owns the debt?
World Bank President David Malpass said last week that China is owed $13.1 billion in debt service payments due this year from low-income countries, representing more than a third of the total. A similar amount, $13.4 billion, is owed to the private sector. Only $8.6 billion is destined for other bilateral creditors, including those in the Paris Club.
Malpass argued this new setup “poses a challenge for the world,” urging the G-20 to come up with new solutions that include China and force the private sector to the table for talks.
World Bank: China is owed 37% of poor countries’ debt payments in 2022
Show me the details
IMF released more details on a proposed trust for channeling Special Drawing Rights from wealthy nations to a host of countries in need, including for climate finance. The $50 billion Resilience and Sustainability Trust would be open to about three-quarters of IMF member states, and the loan conditions would be relatively concessionary.
Chiara Mariotti of the European Network on Debt and Development argued on Twitter that the RST is no “silver bullet” and that IMF may be wading into territory where it lacks expertise.
IMF: $50B trust charts path to rechanneling SDRs
How tech philanthropists give
This week, our colleagues Stephanie Beasley and Catherine Cheney take a deep dive into how tech entrepreneurs are approaching their philanthropy.
“This group of tech philanthropists tend to be hands-on, deadeye-focused on impact, and want a quantifiable [return on investment],” says Stephanie Ellis-Smith, a philanthropy adviser and co-founder at the Giving Gap, which helps connect donors to Black-led nonprofits. “And to ensure they get those things, they apply startup tech principles to the sector, often with disastrous results.”
Read: Tech entrepreneurs bring new approaches, challenges to philanthropy
+ Pro subscribers can look more closely at the five things that set tech donors apart from other philanthropists. Not yet a Pro subscriber? Sign up now and start your 15-day free trial.
Foot off the gas?
Our colleague Vince Chadwick reports that the European Commission has outlined its criteria for supporting gas investments in Africa, ahead of a leaders summit next month where it is expected to be a hot issue.
The verdict: Gas is “a bridge to climate neutrality” that can be used if other options are lacking, it replaces coal, and the investments are “hydrogen-ready,” according to Frans Timmermans, the commission’s executive-vice president responsible for climate policy.
Read: Brussels aims to quell renewable energy tensions ahead of Africa summit
What we’re reading
Here’s what we know so far about one of USAID's largest set of contracts. [Devex Pro]
A group of startups is pushing Zambia to become a low-tax startup hub. [Rest of World]
Oil giants TotalEnergies and Chevron have decided to pull out of Myanmar due to the humanitarian situation following the military takeover. [Nikkei Asia]
BlackRock CEO Larry Fink has released his annual letter to CEOs, which is about the power of capitalism. [BlackRock]
About the authors
Shabtai Gold
Shabtai Gold is a Senior Reporter based in Washington. He covers multilateral development banks, with a focus on the World Bank, along with trends in development finance. Prior to Devex, he worked for the German Press Agency, dpa, for more than a decade, with stints in Africa, Europe, and the Middle East, before relocating to Washington to cover politics and business.
Adva Saldinger@AdvaSal
Adva Saldinger is a Senior Reporter at Devex where she covers development finance, as well as U.S. foreign aid policy. Adva explores the role the private sector and private capital play in development and authors the weekly Devex Invested newsletter bringing the latest news on the role of business and finance in addressing global challenges. A journalist with more than 10 years of experience, she has worked at several newspapers in the U.S. and lived in both Ghana and South Africa.
