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Analysis

Integrating the Environment into the G20 Finance Meeting

John Kirton, Director, G20 Research Group
February 24, 2020

At their meeting in Riyadh on February 22–23, G20 finance ministers and central bank governors made a small but promising start in integrating the natural environment into their core economic work, even if much remains to be done by them and others for the G20 leaders to do at their summit on November 20–21, 2020.

The G20 finance meeting is the precursor and parent of the G20 summit. It remains the most frequent and influential of the many ministerial meetings the G20 system has spawned and this most recent one was the first ministerial meeting held during Saudi Arabia's year as G20 host in 2020. It was thus central to meeting the global need to properly value and synergistically integrate the natural environment with the human-constructed economy, and the act of Saudi Arabia's opening priority agenda, which, for the first time in G20 summit history, gave the environment a prominent place (Kirton 2019). Despite the many constraints from U.S. politics in a presidential election year, the now familiar trade and geopolitical tensions, and the outbreak of the deadly COVID19 epidemic infecting many G20 members, the finance ministers and central bank governors took several promising steps on this urgent, existential cause.

For the first time ever in their communiqué, and the first time since Donald Trump became U.S. president, the finance ministers and bank governors referred "climate change" by name (Partington 2020). At the end of paragraph nine in their 13-paragraph communiqué (plus two Annexes), they stated: "The FSB [Financial Stability Board] is examining the financial stability implications of climate change. We welcome private sector participation and transparency in these areas." This directly connected the core subject of climate change to the G20's core subject of finance, and to the first of the G20's two distinctive foundational missions, namely to promote financial stability (Kirton 2013; Kirton and Kokotsis 2015).

They also made four references to the natural environment elsewhere. The third paragraph opened with the words: "We are facing a global landscape that is being rapidly transformed by economic, social, environmental, technological and demographic changes." The environment thus rose to the top tier of the global transformations of greatest G20 concern, joining the four human-constructed ones the G20 has recently focused on.

The fourth paragraph moved from this statement of an ecological fact to one of causation, by noting that the use of technological in infrastructure "improves investment decisions over the lifecycle, enhances value for money of infrastructure projects, and improves the efficiency in building, operating and maintaining quality infrastructure for the delivery of better social, economic and environmental outcomes." It thus built on the achievements of the 2019 G20 Osaka Summit on quality infrastructure investment and extended them into the innovative 2020 focus on digital infrastructure.

Despite these promising small steps, there were several shortcomings where further G20 work remains to be done. The following ones stand out.

First, the outcome defeat for the many G20 members who had wished to include climate change as one of the risk factors for the global economy highlighted in the opening paragraph of the communiqué (Shalal and Nienaber 2020; Partington 2020). Prior to the meeting, the Europeans proposed including the words "macroeconomic risk related to financial stability." Almost all G20 members agreed. Just before the meeting, the International Monetary Fund identified the dangers that climate-related disasters could damage global economic growth in 2020 and its managing director, Kristalina Georgieva, said in Riyadh that the climate crisis had arrived. Yet during the G20 discussions of financial risks, U.S. treasury secretary Steven Mnuchin and his team strongly resisted the inclusion of such a passage. They argued that the G20 was an economic forum, so that it was inappropriate to identify climate change here, even though questions of disclosure and an FSB report allowed it to be noted in that context. This was the compromise produced at the meeting. Although Mnuchin said the single reference to climate change was simply a statement of fact, for others that represented progress in recognizing the risks posed by climate change to financial stability and the economy.

A second shortcoming was that none of the three references to climate change or the environment took the form of commitments. They remained in the realm of principled direction setting rather than collective decision making by the G20.

A third shortcoming was the absence of any link to other subjects beyond infrastructure that were integrally linked to climate change. This included gender equality and women's empowerment, which did secure two references in the communiqué and took the form of commitments.

Fourth, both climate change and the environment were entirely absent from the 20 items in Annex I: Issues for Further Action that the ministers and governors specifically mandated or encouraged future work on before the G20's Riyadh Summit, six of which were directed at the FSB. Nor did they appear in the list in Appendix II: Reports and Documents Received. This suggests that the environment-economy balance and link are not yet embedded in the G20's ministerial or lower-level work, or even in that of the distinct if G20-dominated FSB.

At the end of the meeting, its host and chair, Saudi Arabian finance minister Mohammed al-Jadaan, publicly stated that climate change remained an important Saudi priority for its G20 presidency and that discussions of it and the environment more broadly would continue at subsequent ministerial and official meetings. There are indeed many opportunities for this to happen, given the broad array of ministerial meetings the Saudis will mount, including three more for finance ministers and central bank governors, who can still advance the small steps they took at their Riyadh start.

References

Kirton, John (2013). G20 Governance for a Globalized World (Abingdon: Routledge).

Kirton (2019). Promising Prospects for Planetary Preservation at Saudi Arabia's G20 in 2020. G20 Research Group, December 6.

Kirton, John and Ella Kokotsis (2015). The Global Governance of Climate Change: G7, G20 and UN Leadership (Abingdon: Routledge).

Partington, Richard (2020). G20 Sounds Alarm Over Climate Emergency Despite US Objections. Guardian, February 23.

Shalal, Andrea and Michael Nienaber (2020), Climate Change Gets First Mention in G20 Finance Communiqué of Trump Era. Reuters Business News, February 23.

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