Finance ministers, climate champions of our time

In 2015, we made history in Paris by agreeing to keep global warming "well below 2 degrees," an commitment that spoke to the urgency of the time. Fast forward to 2018, and the world’s leading climate scientists issued a stark warning: climate impacts at 1.5 degrees of warming will be worse than previously thought; the window of opportunity to act is fast closing; and the difference between 1.5 degrees and 2 degrees is huge. At 2 degrees of warming, floods would be 170% worse, grain production could be up to 20% lower, and corals 100% extinct.

To achieve a low-carbon future, we need economic transformation at the magnitude and scale that the world has never seen: a new industrial revolution, focused on clean technologies, on resilience, and on decoupling economic growth from emissions. But this discussion has largely been constrained to climate negotiators, and ministries of environment or foreign affairs. Those who define the economic priorities of a country, and the national budgets - the finance ministers  - have been largely absent in this discussion. In April 2019, that changed with the launch of the Coalition of Finance Ministers for Climate Action.

The leaders behind this effort, Finance Ministers from Chile and Finland, led their counterparts in over 25 countries to endorse six “Helsinki Principles” that promote national climate action, especially through fiscal policy and the use of public finance.

Historically, finance ministers have discussed fiscal responsibility, stability of the financial markets, or economic growth. Here, they talk about the same, but in climate code: they commit to support the implementation of the Paris agreement, incorporate climate risk in macroeconomic planning, budgets, public infrastructure management, and support green public procurement.

But perhaps the most innovative is their efforts to mobilize the private sector to support investments and develop a financial sector that supports adaptation and mitigation to climate change. This issue has been addressed by some private banks, including a network of 34 central banks, but the political managers that regulate this sector have never been involved. Indeed, for the finance ministers, who must address the growing expense in recovery from natural disasters and who see the virtues in reducing energy costs with clean technologies, addressing climate change is akin to good stewardship of public finances. Their commitment to the implementation of the Paris agreement, to mobilize national budgets and the private sector, to build a low-emissions, resilient-economy, is something that brings me great hope and optimism.

Of course, no one has all the answers to arguably the most challenging global issue of our time. That is why finance ministers are committed to collaborating and exchanging the best practices. The Helsinki principles remind us that the threat of climate change and the opportunities provided by the climate economy require a systematic effort by the entire government, with the private sector as an important catalyst.  Fortune recently put out an article stating that central bankers are the unlikely new climate activists.  I would also include ministers of finance. As Jeffrey Sachs said: This is perhaps the most important coalition that has been created around climate change. And as a former minister of the environment who has participated in many coalitions, I could not agree more.