Decoding Mark Carney

AT THE UN BIENNIAL SUSTAINABILITY SUMMIT

Last week, Canada’s Prime Minister Mark Carney attended the new UN Biennial Sustainability Summit. The point of this summit, mandated by last year’s UN Pact for the Future, is to work out how to increase climate spending or climate finance in developing countries. Carney spoke for about four minutes to emphasize four points that were really a reiteration of the statement from the Inter-American Development Bank (IDB). On Rebel News,

Ezra Levant

spoke with Franco Terrazzano of the

CanadianTaxpayersFederation

to try to understand just what Carney was talking about. The two conveyed some perplexity at the liberal use of financial jargon and they were left wondering what it all meant. This post is my modest effort to decode Carney’s remarks for those who are unfamiliar with the broader efforts being made in the space of climate finance and multilateral financial institutions like the World Bank, International Monetary Fund (IMF), the Inter-American Development Bank (IDB), and others. For each point I’ve tried to create a simplified analogy to help make it more understandable. Readers who are better versed in finance and banking-speak, if I’ve got it wrong, please let me know (

Paul Tice

and

The Brawl Street Journal

I’m looking at you!) If anyone has a better explanation, please put it in the comments.

Carney’s first point was about stretching every bit of apparently limited public funding as far as possible. (You’d never know it was limited given how western countries like Canada and those in the EU are spending like the money grows on trees! But I digress.) Carney said, “Catalyzing financial instruments using risk mitigation tools to better allocate risk between the public and private sector.” Translation: Use public funding to “catalyze” or kickstart private investments. This involves complex tools like risk-sharing mechanisms, where public money acts as a safety net to make risky projects in developing countries more appealing to private investors.

Imagine this is like a high-stakes poker game: Public funds are the buy-in stake or ante that covers potential losses (risk mitigation), encouraging players (private investors) to join the table and bet big on green projects in developing nations. Without this, private money stays on the sidelines because developing economies can be unpredictable (a bit of an understatement!). The IDB’s ReInvest+ framework illustrates this by using portfolio insurance to shield against political upheavals or currency fluctuations, turning local loans into ostensibly safer, investment-grade securities that global investors can buy into. At least, that’s the pitch. Although this sounds pretty good and efficient, it overlooks the instability of many developing countries’ economies. If public dollars are used to underwrite risks that private sectors won’t touch—like loans to nations with histories of default or corruption—it could lead to moral hazard, where borrowers take bigger risks knowing someone (ie Taxpayers) will bail them out. Worse, if these mechanisms fail (as seen in past debt crises), taxpayers in donor countries end up footing the bill, while private investors walk away. The G20 framework under South Africa’s presidency, (President Cyril Ramaphosa), emphasizes boosting climate finance flows to these economies, but it doesn’t fully address how to ensure accountability without creating dependency loops. A concern is that this could inflate bubbles in green investments that burst when real-world challenges like political instability hit.

The second point Carney mentioned was the concept that big Multilateral Development Banks (MDBs) could “recycle” their money to free up more lending. Here, Carney pushes for “originate to distribute” models, where big MDBs (like the IMF, IDB, or World Bank) create loans for sustainable projects, then bundle and sell them off to long-term investors once they are “stable.” This “recycles” the banks’ balance sheets, letting them issue new loans without tying up their own capital for a long period of time.

An analogy might be something like a car rental company: They buy vehicles (originate loans), rent them out for a while, and once the cars are paid off a bit, sell them to fleet buyers (institutional investors like pension funds) who keep them long-term. This frees the rental company to buy more cars and keep the cycle going. ReInvest+ from the IDB Group embodies this by starting with “seasoned” (proven) loans from local banks, converting them into securities, and—this is the important part—requiring the proceeds to be reinvested in climate-aligned projects, potentially unlocking trillions globally. Superficially, this too sounds pretty good, bundling these loans into securities for institutional investors; it also sounds familiar.

This is reminiscent of the 2008 financial crisis, where subprime mortgages were packaged and sold as reliable long-term investment funds, leading to massive losses for pensions and savings when defaults mushroomed, amplified, and cascaded to a crash. How reliable are developing nations when it comes to repaying debt? It turns out, they’re not that reliable. Since 1980, emerging economies have accounted for the majority of sovereign defaults globally, with over 70 instances in Latin America and Africa alone, often triggered by commodity price shocks or external debt burdens. There are also ongoing issues of corruption and political risk with the possibility of coups. If emerging markets face economic or political shocks, which does happen with some frequency, these “recycled” assets could go bad, jeopardizing retirees’ and other funds worldwide. The G20 framework calls for lowering borrowing costs for low-income countries, as if that might prevent such a default from happening, but this does not prevent hidden risks from trickling into everyday investors’ portfolios. It would seem that these proposals are about prioritizing volume of investment over quality and could potentially flood global markets with overvalued “green” or SDG-aligned debt that doesn’t actually help improve the environment and puts investment portfolios at risk.

According to Carney’s third point, risk will be mitigated by overhauling the governance of the global financial bodies. How? By setting clear performance targets or Key Performance Indicators (KPIs) linked to the Sustainable Development Goals (SDGs), track actual money moved, and emphasize non-lending help like “technical advice”. These KPIs or metrics are likely to take the form of the EU’s Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) or the International Sustainability Standards Board (ISSB) sustainability and climate-related financial disclosures. In addition to this, Carney highlighted a cross-border carbon market as a game changer, potentially filling one-third of the climate funding gap by 2035 through trading emission credits. For the global carbon market, what it means in practice is developed countries purchasing credits from developing nations that are created from things like forest protection and conservation measures. It’s a good thing China is building out its forests—not only will it be able to offset its own emissions but if they have credits left over they could sell them on the global carbon market.

For an analogy, imagine a venture capital firm evaluating startups. The firm’s partners (shareholders of MDBs like the World Bank) implement a scorecard system (KPIs) that doesn’t just measure business plans or raw deal volume, but rather ties success to broader impacts—like how well a startup advances tech for clean energy (SDG 7) or reduces inequality (SDG 10). This includes tracking actual capital deployed (disclosures), providing mentorship (technical assistance), and perhaps setting up a marketplace for “innovation” credits (cross-border carbon market). The goal is to ensure investments in emerging markets contribute to the SDG framework and lowering global emissions. In this case, profitability is redefined to not just include but to prioritize ESG/SDG outcomes, which will likely overemphasize non-financial KPIs at the expense of viability in emerging markets, where data gaps lead to biased scoring. In this setup, the KPIs Carney advocates for are indeed tools for “discrimination” in the investment sense: Investors and institutions can use them to screen out projects that don’t meet the proscribed ESG metrics (emissions, water use, human labour standards, etc.) under frameworks like the EU’s CSRD (requiring double-materiality reporting on impacts) and CSDDD (enforcing due diligence on supply chains), or ISSB’s standards (focusing on financially material sustainability risks).

Finally, Carney spotlights G7-launched programs, like funding through the Inter-American Development Bank (IADB) and Caribbean Development Bank, plus SCALED (Scaling Capital for Sustainable Development). These pool resources from multiple countries into billions-worth structures that can expand, serving as copyable models or templates to close funding gaps.

An example might be like designing a modular brick set: A few countries build a small tower (initial billions in financing), but the design is simple enough to replicate and stack into a skyscraper worldwide. ReInvest+ aligns here as a template, starting regionally but with global potential, by recycling capital and mitigating risks to draw in private funds for climate projects. Over the past five years, the climate finance space has been filled with talk of a “building blocks approach.” Who doesn’t like building blocks?

These “templates” and “building blocks” might look innovative but often stay as small-scale pilots, failing to scale due to bureaucratic hurdles and red tape or waning political will—as seen in past G7 pledges that underdeliver. There is concern here linked to the potential of risky loans: If scaled, bundling debt from unreliable borrowers could amplify systemic risks, hitting institutional funds hard.

Carney’s parroting of the IDB’s four points on the future of climate finance for emerging markets, has brought into the open and out of the backrooms the proposed restructuring of global multilateral financial institutions. This all may sound progressive and urgent, but it is a recipe for disaster—one that taxpayers, retirees, and global stability cannot afford. By “catalyzing” risky loans with public dollars, recycling debt through opaque securitization schemes, imposing SDG-linked KPIs that prioritize ESG over genuine profitability, and touting scalable templates that often fizzle into bureaucracies’ bottomless pits, these proposals invite a repeat of the 2008 financial meltdown on a planetary scale. Developing nations’ track records of sovereign defaults, currency volatility, corruption, and political upheavals are red flags screaming that bundling their debts into “investment-grade” securities will ravage pension funds and institutional portfolios worldwide. Moral hazard will likely run rampant, with borrowers emboldened to take reckless gambles knowing Western taxpayers will foot the bill for bailouts. If these policies are scaled up without robust safeguards, and honestly, I’m not sure if robust safeguards are even possible with these scenarios, the world could be heading toward a future where green finance—under the guise of “climate progress”—is a catalyst for the next financial crisis. And let’s not delude ourselves: This won’t “close the climate funding gap”—it will inflate green bubbles that burst while siphoning trillions from productive economies into dependency traps. We need to have an open conversation about what is being proposed before endorsing any changes that gamble our future. Perhaps this is an issue that could be thoroughly investigated and debated during America’s upcoming leadership of the G20 next year because the stakes are too high—our financial security hangs in the balance.