US Secretary of State for the Treasury Scott Bessent has decided not to attend the meeting of G20 Finance Ministers and Central Bank Governors in South Africa on 17–18 July. It is the latest move underlining the new US administration’s withdrawal from global efforts on sustainable finance.
The US objects to the South African presidency’s overall G20 summit themes of solidarity, equality and sustainability. Critically this includes the work of the G20 Sustainable Finance Working group, which is focused on three priorities – strengthening the global sustainable finance architecture, scaling financing for adaptation to climate change and just transitions, and unlocking the financing potential of carbon markets.
In addition, the US has sought to block further work on climate risk in the Financial Stability Board, with the result that the organization has not extended its medium-term work plan. Scott Bessent has called for an overhaul of the IMF, describing its extensive work on the macroeconomic and financial stability aspects of climate change as ‘mission creep’. The US has also pushed the boards of the World Bank and European Bank for Reconstruction and Development (EBRD) to drop references to climate change from their strategy documents.
The US strategy appears to be to force those international organizations where it is keen to retain a prominent role to abandon work on climate change. Meanwhile it will ignore (and refuse to fund) international processes focused on building political support for action on sustainable finance. In June, the US withdrew from attending the UN’s fourth Finance for Development conference in Seville.
Why it matters
The administration of President Donald Trump is well known for its domestic agenda to roll back action on climate change. But the administration’s actions to broaden the roll back internationally are less well understood.
The two most important impacts will likely be to further reduce public international finance for climate action (on top of that already delivered through cuts in USAID) – and, crucially, to weaken the drive for private finance to align with climate action.
June’s data from the Climate Policy Initiative shows that global climate finance flows have continued to accelerate in recent years, reaching $1.9 trillion in 2023 and may have exceeded $2 trillion in 2024. Climate mitigation finance reached $1.8 trillion in 2023, largely driven by private investment in renewable energy in advanced economies and China.
Driving this in part are the rapidly growing risks attached to hydrocarbon-intensive investments. These include policy risk – it is increasingly likely that strong public reaction to extreme weather events will cause governments to shift positions suddenly on hydrocarbons; Technology risk – as the price of solar panels, battery storage and EVs falls rapidly the business case for hydrocarbons is undermined; And there are geopolitical risks – leading countries without domestic hydrocarbon resources will favour domestic renewables for reasons of energy security.
In theory, private investment should respond to these incentives without the need for government intervention. But in practice public policies (even though often fragmented, confused and incomplete) remain very important.
This is partly because public international finance – including that from the multilateral development banks – can facilitate the flow of private climate finance to emerging economies. But it is also because of the central role the analytical and policy work of the IMF, FSB, World Bank, IEA, OECD and others plays in overcoming the market failures which limit the private sector response to climate risk.
These include lack of appropriate data for decision making, short-term horizons for fund managers, simplistic models for financial decision making, liquidity illusion, lack of appropriate training and incentives for asset managers, and moral hazard.
How other countries should respond
The Trump administration’s demands do not reflect any new data or analysis indicating a reduced threat from climate change or more limited implications for global growth or financial stability.
In fact the trend is clearly in the opposite direction. Climate change is bringing unprecedented, irreversible change and remains fundamental to the work of all international economic organizations. And trying to make policy in almost any area without giving it full consideration is likely to fail.
Moreover, the US is the only major country to take the position that the work done on climate change is excessive or outside the mission of these institutions. And while it is a highly influential player in many global institutions, its voting weight is typically at or less than 16 per cent (the figure in the World Bank and IMF).
The temptation for other countries will be to try and find a compromise on language with the US. That would involve agreeing to drop references to climate change in the international organizations’ strategy documents and work plans in the expectation that the bulk of climate-related analysis, policy development and operations will continue. The administration’s on-going review of international organizations (due next month) may provide a further incentive to adopt this approach.
However, this is unlikely to be successful. The Trump administration’s domestic record shows it will look beyond the wording of agreements and seek to enforce the substance.
