France pushes ‘new vision’ for development finance 

Despite unveiling rather lukewarm climate policies at home this week, France’s president Emmanuel Macron has been trying to shape the global conversation on the drive for net zero emissions.

The head of France’s development bank and its minister of state for development both pushed hard for a vision of French climate finance leadership when Kaori and I spoke to them in Paris and New York recently. 

And the two officials sought to contrast this new multilateralism with the inwards turn by the US under former president Donald Trump. They emphasised the need to empower local actors, and to keep climate investments from major Chinese lenders flowing, echoing Macron’s own bid to distance France from US-China tensions.

Read on for more. — Kenza Bryan

France’s fresh vision to empower local development banks

The World Bank’s former president, David Malpass, was accused of failing to act on climate change and the energy transition — but there was a silver lining to his tenure, according to Rémy Rioux, chief executive of the Agence Française de Développement (AFD), France’s main development-focused lender.

Amid a lack of progress at the World Bank, medium-sized players in development finance were pushed to innovate on climate issues, Rioux told me.

“We took the climate turn before the World Bank,” Rioux told Moral Money from the AFD’s headquarters in Paris. “I am smaller, more agile, and only have to convince one person in the end,” he added. While the AFD’s only shareholder is the French government, the World Bank has 189 member countries to consider when it takes a decision.

In 2020 Rioux created the Finance in Common Summit, an annual gathering of more than 500 development banks, which are collectively responsible for $2.7tn in annual investment. The collective sum could go a long way towards meeting the $3tn that the UN says is needed to reach its global sustainable development goals.

Yet of global development banks’ total capital, most is held not by giant institutions like the World Bank — or the AFD — but rather national banks focused on investing locally, including the development banks of Brazil, China and South Africa.

Rioux argued that this pot of money is largely ignored in conversations about global financial architecture reform. This may be in part due to the perception of corruption or mismanagement associated with smaller development banks.

He plans to ask both the IMF and the World Bank at their annual meetings in Marrakech next month to do their part, for example by asking governments to add climate finance obligations to national banks’ mandates. “Get rid of the stigma attached to these institutions . . . and better position them in the financial system of their own country,” he said. 

Locally-rooted banks are better at assessing risk and more protected from currency risk themselves, he argued, compared with multilateral development banks and even the private sector.

“The problem of the world today is that there are no investment bankers in the Global South,” Rioux said. “They’re not in Africa, they’re not in Latin America . . . We need a deal origination machine, for bankable projects, that can mobilise national and international projects.”

The AFD’s own projects on the ground in developing countries are on show at the bank’s Paris headquarters. In particular, it is impossible to miss the posters referencing its close connection to francophone Africa, including during the turbulent period of decolonisation in the 1950s. But following coups in Mali, Burkina Faso and Niger this year, France’s military presence in north Africa has come under pressure.

In this context the AFD’s increased focus on financing national development banks abroad, rather than running its own projects, seems in part a savvy political tactic to minimise tension around France’s foreign presence.

“We are not at all an instrument of the French colonial empire,” Rioux said, referencing the bank’s origin story as a funding mechanism for France’s exiled General Charles de Gaulle’s battle during the second world war.

On the other side of the Atlantic, Moral Money met with Chrysoula Zacharopoulou — French minister of state for development, Francophonie and international partnerships — who was in New York for the United Nations General Assembly’s week of meetings.

High on the agenda for many western delegations at UNGA, was garnering support from the “Global South” for Ukraine. Yet this was a bitter pill to swallow for developing nations frustrated with a lack of progress in achieving the UN’s SDGs.

Against this backdrop, France was keen to demonstrate its commitment to accelerating reform of international financial institutions.

“What we tried to do in Paris and at the UNGA . . . was to find people who want to engage in this new vision, this new multilateralism,” Zacharopoulou said. “From the first day, we were [in Africa] when there was Covid. Here, it was America first. But we never said Europe first,” she said.

At the same time, France has carefully tried to keep China, a major holder of African debt, involved in its efforts amid criticisms of the slow pace in debt restructuring. “France is a convening power. That means we speak with everybody,” Zacharopoulou said. “It is important to demonstrate that China is part of this new multilateralism and that they can have an important co-operative role,” she said.

Now that the UN General Assembly debates have come to a close, all eyes are on the upcoming World Bank and IMF meeting in Marrakech and COP28 in Dubai. “The diagnosis was done, the proposition of the treatments are there. So now, we have to deliver,” said Zacharopoulou. (Kenza Bryan and Kaori Yoshida, Nikkei)

UK regulator issues its first fine to a pension scheme over climate disclosure

A pension fund run by oil major ExxonMobil has become the first to feel the heat from UK regulators for failing to meet new climate disclosure rules.

Since 2021, trustees of the UK’s biggest pension schemes have been required to identify, assess, manage and disclose climate-related risks and opportunities. The disclosures — designed to crank up transparency over carbon emissions buried in pension portfolios — must be published online and accessible free of charge.

The regulator issued a £5,000 penalty against the ExxonMobil pension scheme for failing to publish its report on time. The ExxonMobil scheme, which has about £7bn in assets and 20,000 members, said a faulty URL meant the report was still not publicly available online 10 days after the deadline.

While the fine was small, this was the first penalty issued by The Pensions Regulator for breaches of the new climate reporting duties. Nicola Parish, TPR’s executive director for frontline regulation, said the regulator took climate change requirements “extremely seriously”.

“This will continue as we analyse the second phase of climate change reporting, when smaller schemes will be required to report,” she added.

However, an external analysis of pension funds’ climate reports concluded that the regulator had much more work to do, with problems found with incomplete and inconsistent reporting of climate change risks.

Several different interpretations of “carbon footprint” were used in climate reports by 17 large pension master trusts, overseeing combined assets of £131bn on behalf of 25mn members which were examined by West London Business, an employers’ federation supported by the Mayor of London’s office.

But after Prime Minister Rishi Sunak’s decision to water down national clean energy measures, it remains to be seen whether UK officials will keep up the pressure around climate reporting. (Josephine Cumbo and Chris Flood)

Smart read

On Sunday, the EU begins the “transitional phase” of its carbon border adjustment mechanism, which will in due course impose new costs on carbon-intensive imports. In this FT column, EU commissioner for the economy Paolo Gentiloni seeks to calm foreign companies’ worries about the impact on their business.