Dear Reader,

We are at a politically volatile moment. While the pandemic continues to disrupt our livelihoods and economies, collaboration for a global and equitable green recovery is being tested by hard choices around vaccinations and debt. The importance of financing the world’s sustainability needs has never been more obvious. But who will benefit, and who will pay?

Familiar lines of thinking are being shaken up. The United States has re-entered the global community on climate action, not only committing to re-join the Paris Agreement but also putting all three Paris Agreement goals, including its finance goal, at the heart of a new Executive Order. The world’s eyes are on how the US will engage in the major international meetings of 2021, which will shape the global economy for years to come.

While the US accelerates from a standing start, Europe is struggling to maintain its previous position as an international leader on sustainable finance. Debates between Member States over the pace and ambition of green recovery measures are delaying both the finalisation of Europe’s flagship green taxonomy, and its new sustainable finance strategy. Given the scale of Europe’s investment plans, these debates could also risk undermining Europe’s commitment to achieve climate neutrality by 2050.

Meanwhile, a crisis is unfolding among developing countries. Hit hard by the economic impacts of the pandemic, many countries are struggling to service debt and have limited ability to make the investments that their economies badly need for future growth and stability. Finance ministers of developed and developing economies must work together to find a rapid solution to this crisis. Crucially, that solution must enable investment flows for green growth, rather than locking countries into unsustainable economic structures.

In this newsletter we look at why 2021 is such a key year for economic and financial decision-making, including the potential for action by G20 finance ministers and the new US administration. We also take a closer look at key areas for action including MDB capitalisation and Europe’s ongoing debate around the pace of transition. My thanks to colleagues Sima Kammourieh, Sara Dethier, Tsvetelina Kuzmanova, Jonathan Walters and Dan Firger.

Thank you for reading,