The first Xingu Finance Talks, held in Bangkok on October 11 and 13, brought climate negotiators, finance ministries and development banks together to discuss aligning global financial flows with climate goals.
Discussions focused on expanding fiscal space for climate investment, reducing the cost of capital and using guarantees and risk-sharing mechanisms to mobilise finance for developing countries.
Developing countries and civil society groups warned that private finance, debt swaps and guarantees cannot replace developed countries’ obligations to provide climate finance under Article 9 of the Paris Agreement.
Questions remain over whether the Xingu Talks have laid the groundwork for sustained financial reforms in the years ahead
On October 11 and 13, on the sidelines of the International Monetary Fund (IMF)-World Bank Annual Meetings in Bangkok, the Presidency of the 30th Conference of the Parties (COP30) to the United Nations Framework Convention on Climate Change (UNFCCC) convened the first Xingu Finance Talks — a workshop on October 11, followed by a high-level roundtable two days later.
The talks build on the Veredas Dialogue on Article 2.1(c) of the Paris Agreement, which began at the Bonn climate talks in June. Article 2.1(c) of the Paris Agreement calls on countries to make financial flows consistent with low-emissions, climate-resilient development.
Workshop on ‘practical solutions’ — fiscal space and the cost of capital
The one-day workshop covered two topics: expanding fiscal space for climate investment, and reducing the cost of capital through risk-sharing and scaling up guarantees. Each session began with expert presentations, followed by breakout discussions.
Speakers framed debt and climate as increasingly “one and the same crisis”, highlighting how climate vulnerability drives debt, debt limits investment, and limited investment deepens vulnerability.
A survey of 59 finance ministries, cited by the Coalition of Finance Ministers for Climate Action, found that all considered climate important, but only about 5 per cent integrated fiscal and transition risks into their macroeconomic frameworks, and just 3 per cent into their budgets.
On the cost of capital, a Harvard Kennedy School researcher noted that there is still no transaction-level data and insufficient project-level data to explain why financing costs remain high in emerging markets. Macroeconomic variables, the researcher said, correlate only weakly with borrowing costs.
In other words, borrowing costs are not entirely explained by macroeconomic conditions, but are also shaped by perceptions of risk in certain markets. Investors with less experience of lending in a market may rely on conventional risk assumptions and charge higher premiums. Repeated deals and established lending relationships, however, can help investors assess risk more accurately and potentially reduce those premiums — an “investor confidence effect”.
Attendance at the talks was skewed towards civil society and a few multilateral development banks, with fewer countries (Parties) in the room than one might expect for a UNFCCC process.
The workshop co-chairs produced a short summary of the main messages to feed into the high-level roundtable.
Inside the breakouts
The fiscal space breakout discussions were sceptical of the standard toolkit. Participants noted that debt pause clauses do not create additional fiscal space, and that discussions of climate-integrated debt sustainability analyses (DSA) rarely extended to actual debt relief or cancellation.
In its latest reforms, the IMF-led process has introduced better consideration of “long-term challenges”, including those arising from climate adaptation and development needs.
Several participants argued for distinguishing countries facing short-term liquidity problems from those facing long-term insolvency. Debt relief would be more applicable to the latter, while temporary instruments could help the former.
Others warned that even climate-adjusted DSAs may not actually lower borrowing costs, since financial instruments are often designed for mature markets.
Ideas that gained traction included better implementation of the UN tax convention, improving country platforms, bringing actors such as credit rating agencies to the table, and supporting tiered reporting so that small island developing states (SIDS) and least developed countries (LDC) are not penalised for disclosing data gaps or climate vulnerabilities.
“The overriding sense was that the types of instruments that have been widely discussed are not designed to unlock meaningful fiscal space over the long-term. There was also a clear sense of the need for ambition from the largest shareholders of Multilateral Development Bank (MDB) as well as members of the G7 and G20 for the political push required to ensure that efforts to improve fiscal space match the severity of the macroeconomic challenges faced by countries around the world," pointed out Rishikesh Ram Bhandary, research director, task force on climate, development and the International Financial Architecture at the BU Global Development Policy Center, who was one of the moderators at the event.
The second topic for breakout discussions was what prevents guarantees from being deployed at scale. One notable explanation from a former MDB employee was institutional habit; development bank risk officers are often simply more comfortable with familiar loans or debt instruments than with guarantees, whose mechanisms are relatively less familiar to them.
Participants from least developed countries, including The Gambia, pointed out that blended finance rarely reaches countries without investment-grade ratings. As a result, countries that most need cheaper capital are often the least likely to benefit.
The high-level roundtable
The roundtable brought finance ministers, multilateral development banks and negotiating blocs together.
A refrain carried over from the Bonn talks was that Article 2.1(c) of the Paris Agreement must not substitute for Article 9, which obliges developed countries to provide climate finance – a position supported largely by developing countries and civil society groups.
Eswatini's finance minister, speaking for a continent “hit by a fiscal crisis it did not cause”, set the tone. Africa’s cost of capital is up to 12 times higher, 93 per cent of African countries are rated below investment grade, and around $90 billion a year goes towards debt servicing, exceeding climate finance inflows. Article 2.1(c), the minister said, must not deepen debt or create new conditionalities.
Development banks and guarantee providers in the room, by contrast, focused on delivery. The World Bank Group's vice-president for climate said public finance would always be limited and that investment would not happen unless it was commercially viable, stressing private capital mobilisation – unsurprisingly, a “mantra” echoed by the World Bank Group throughout the meetings.
He called for debt sustainability analyses to treat climate investment as risk reduction rather than an additional burden, alongside greater use of climate-resilient debt clauses.
The Asian Infrastructure Investment Bank also pointed to risk-sharing, guarantees and infrastructure-backed securities as tools for mobilising private capital – instruments that, as noted earlier, many participants in the workshop had deemed insufficient to address the current climate finance crisis.
The European Investment Bank said data from the GEMS database showed that default rates on development bank lending were far lower than investors assumed, and that rating agencies and private investors should make greater use of these findings.
Highlights from the latest GEMS database, published earlier this year, were also presented at the workshop. They provide important evidence in the growing debate over real versus perceived risks affecting the cost of capital for developing countries.
The Green Guarantee Group, founded by Germany and Nigeria and launched at COP28, argued that guarantees must not substitute for public investment. It then stressed the need for more transparent risk data, a directory of guarantee instruments and scaled-up local currency solutions.
Two interventions pushed back on how far some of these tools could go. UN Trade and Development or UNCTAD noted that action must go beyond systemic reform to secure concessional finance. It argued that private finance had underperformed and deserved an honest assessment, while also urging that implementation of Article 2.1(c) give adaptation as much weight as mitigation.
The Bridgetown Initiative also added nuance to instruments that others had praised. Climate-resilient debt clauses are valuable, it said, but countries such as Nepal cannot access them, and not every country can issue bonds with pause clauses at favourable rates, as Barbados did.
Debt swaps, it argued, deliver savings only with a large guarantee. In one World Bank-backed case, a 60 per cent guarantee yielded an interest rate of 6 per cent, while an 80 per cent guarantee would have brought it down to 4.5 per cent.
Its closing message was that countries “cannot swap [their] way to survival”, and that grants remain central to the moral case for climate finance.
Civil society constituencies pressed for grants, debt cancellation and transparency over who bears the risk in guarantee and debt-swap structures.
“We welcome the first edition of the Xingu Finance Talks as an important milestone to better connect the multilateral climate regime to international financial architecture. However, we hope that it will be the beginning of a healthy relationship between two spaces that need a more robust and structured way of engaging. Principles from the [UNFCCC] Convention and the Paris Agreement must be the compass and existing obligations should not be left out,” highlighted Rebecca Thissen, global lead, multilateral processes, Climate Action Network International, who represented Environmental NGOs at the High-Level Roundtable.
What next on the road to Antalya?
The Xingu Talks were framed as a bridge to finance actors beyond the UNFCCC, meaning ministries, central banks, regulators and development banks, which is why they were held alongside the Annual Meetings, the co-chairs of the UNFCCC Article 2.1c dialogues reiterated (South Africa and the Netherlands).
The talks are voluntary and non-negotiating. The COP30 Presidency (Brazil) said success would be measured by whether those with the power to act take the ideas up, and promised to hand over “a process with momentum.” The Veredas co-chairs called Bangkok “a good start” while acknowledging that some groups went unheard.
The incoming COP31 Presidency of Türkiye, which will host talks in Antalya in November, echoed the diagnosis — the cost of capital is highest where investment needs are greatest, and resilience spending rarely brings commercial returns. Its main offer is a “Climate Implementation Bridge” (part of the Action Agenda put forth earlier this year) that would build on existing institutions to tackle fragmented project preparation and pipelines.
By COP31, a summary report consolidating the workshop and roundtable inputs; a bridge-building exercise through the implementation mechanism; and a set of voluntary actions on finance rather than negotiated outcomes are expected as immediate next steps. While questions of what the implications of another report might really be, the data, guarantee and rating-methodology inputs discussed in Bangkok were quite concrete.
But it is worth noting that the process is also unfolding in a difficult global geopolitical backdrop. With the US pushing against climate on the whole, the very word has all but vanished from the Bretton Woods agenda (evidenced by the lack of climate discussions at the Annuals, replaced by the Bank's push for its new priority — jobs).
This is problematic not just because climate needs to be central to discussion given the latest confirmation of global 1.5°C overshoot and mounting losses and damages on poorer countries, but also because these actors are partly the audience the talks hoped to reach. Some developing countries also left Bangkok wary that “practical solutions” could displace binding obligations under Article 9. Broader implications and possible impacts of the talks will depend on what the Presidencies carry into Antalya in November.