Reforming Global Finance: The Vision of Bridgetown Initiative 3.0
By Lillian Caldwell, Beyond Bretton Woods Summer Fellow
Aug 15, 2024
“Try harder, try harder. Because our people, the climate army, the world, our planet, needs our action now.” Prime Minister of Barbados Mia Mottley took the world by storm with her powerful speech in 2021 at the opening of COP26 in Glasgow, UK. Calling for urgent and decisive global action to address climate change, Mottley established herself as a champion for climate justice and equitable sustainable development.
At the subsequent COP27 in Egypt, Mottley unveiled the Bridgetown Initiative, comprising three essential steps to drive financial resources toward accelerating climate action and achieving the Sustainable Development Goals. Many countries most at risk of climate-related disasters also face severe debt distress. As such, the first step in Mottley’s initiative proposes to provide immediate emergency liquidity to vulnerable countries by temporarily suspending interest surcharges, rechanneling unused Special Drawing Rights to those in need, and incorporating natural disaster and pandemic clauses into debt instruments to protect vulnerable nations from such shocks. The second step calls on development banks to expand multilateral lending to developing countries by $1 trillion USD in order to invest in climate resilience. The third step seeks to establish new multilateral mechanisms to fund climate mitigation and post-disaster reconstruction.
Bridgetown 2.0, released in June 2023 before the UN climate summit in Bonn, contained six calls to action: immediate liquidity support, restoration of debt sustainability, mobilization of private sector investment for green and just transition, increased official sector development lending for SDGs, support from multilateral trading system for green and just transition, and reform of the governance and operations of International Financial Institutions.
The first two versions of the Bridgetown Initiative have seen notable progress. For example, the International Monetary Fund created the Resilience and Sustainability Trust (RST) in 2022 to help countries build resilience to external shocks and ensure sustainable growth. And the Group of Twenty committed to re-channeling $100 billion in Special Drawing Rights to support vulnerable and low-income countries. But despite these advancements, the global effort still falls short of what is required. To name a few, efforts to restructure unsustainable debt have been slow and insufficient, and aligning private capital with sustainable remains limited in scale.
“The voices of the people can no longer be left behind.” These words encapsulate the essence of Bridgetown Initiative 3.0, the latest version of Mottley's action plan, released to the public in a consultation draft on May 28th, 2024. Many of this draft’s 15 recommendations continue or slightly modify policy areas from the two previous Bridgetown versions, with three substantial differences:
The mobilization target for mobilizing private investments for mitigation and adaptation measures has been lowered from $1.5 trillion USD per year to $500 billion USD per year.
Bridgetown 3.0 calls for an extra $300 billion USD in MDB lending per year, compared to the $1 trillion USD proposed initially in Bridgetown 1.0.
The initiative proposes new financial mechanisms, such as a levy on fossil fuel company windfall profits, financial transactions, and emissions from shipping and aviation, to fund global public goods and establish a governance framework for their use. It also advocates for the rechanneling of SDRs through MDBs, with lending by the African Development Bank and Inter-American Development Bank.
Prime Minister Mottley’s Bridgetown Initiatives prioritize climate resilience and sustainable development and serve as a blueprint for global sustainable finance initiatives. Bridgetown 3.0 is not just a set of policy recommendations; it is a manifestation of the urgent plea Mottley made in her powerful COP26 speech. Her call for the world to “try harder” resonates deeply within this latest iteration of the Bridgetown Initiative. The world must act now, and Bridgetown 3.0 offers a comprehensive outline for the world to follow.
Citations
“Bridgetown Initiative 3.0 – Bridgetown Initiative.” n.d. Accessed July 12, 2024. https://www.bridgetown-initiative.org/bridgetown-initiative-3-0/.
Ellmers, Bodo. 2024. “Bridgetown Initiative 3.0 Released: What’s the News?” Global Policy Forum. June 5, 2024. https://www.globalpolicy.org/en/news/2024-06-05/bridgetown-initiative-30-released-whats-news.
Georgieva, Kristalina, Bernard Lauwers, and Ceyla Pazarbasioglu. 2023. “How Channeling SDRs Is Supporting Vulnerable Economies.” October 13, 2023. https://www.imf.org/en/Blogs/Articles/2023/10/13/how-channeling-sdrs-is-supporting-vulnerable-economies.
“IMF Executive Board Approves Establishment of the Resilience and Sustainability Trust.” 2022. IMF. April 18, 2022. https://www.imf.org/en/News/Articles/2022/04/18/pr22119-imf-executive-board-approves-establishment-of-the-rst.
“The Bridgetown Initiative: History.” n.d. https://www.bridgetown-initiative.org/history/.
UN Climate Change, dir. 2021. Speech: Mia Mottley, Prime Minister of Barbados at the Opening of the #COP26 World Leaders Summit. https://www.youtube.com/watch?v=PN6THYZ4ngM.