RISRIS Policy Brief Commonalities andOpportunities SherpaandFinance Tracks: Agreement in 2015,there wasasignificant Development Goals and theParis Climate Track. Afteradoptionofthe UNSustainable namely theSherpa ortheDevelopment dimensiontoG20framework, added anew pillars attheSeoul inthesameyear Plans (MYAP) under the nine development 2010 andtheadoptionofMulti-Year Action Group (DWG) atthe Toronto summitin development issues. the scopeofsummitstoinclude and development issues;hencediversified gradually begantorecognise socio-economic global macro-financial stability. However, G20 centric asdiscussionsfocusedonrestoring Leaders’ Summit wasprimarilyFinance Track- Summit. In theinitialyears, thebusiness ofthe States leadingtoformalisationoftheLeaders’ the membercountriesatlevel ofHeads of the Finance Track andthegovernments of that awiderconnectwasestablishedbetween was only after the 2008 global financial crisis have beenmeetingregularly since1999,it governors ofG20countries(Finance Track) While thefinanceministersandcentralbank during thecourseofpresidency. the government-to-government negotiations priorities forthehostpresidency andsteer contribute toformulationofideasand Track 1pillars. These twotracksactively (Development track)constituteimportant tracks e.g.Finance Track andtheSherpa Track oftheG20Leaders’As part Summit, thetwo Background Prof. Sachin Director nudging andusefulcomments. Chaturvedi, General, RIS fornecessary Professor, Ms Sonal Garg, Research Assistant and Ms Sabhya Rai, Research Assistant. Authors thank This Policy Brief hasbeenprepared by theRISteamcomprisingofDr Priyadarshi Dash, Assistant RIS Policy Briefs are prepared onspecificpolicyissues for thepolicymakers. Setting upoftheDevelopment Working — Research shaping thedevelopment agenda

streams. and Communiques,across different work leaders in the form of Ministers’ Declarations meetings are generallypresented totheG20 Meetings. The outcomedocumentsofthese developed throughfurther several Ministerial Expert Working Groups andtheagendais technical andsubstantive work ofaseries Addis Ababa Action Agenda(AAAA). during ChinesePresidency (2016)andthe Sustainable Development Goals (SDGs) for Sustainable Development including commit itself to implement the 2030 Agenda formulated an ActionG20 further Plan to global interest. In response tothisshift, shift inopinionmobilisationonissuesof coherent internationaldevelopment policies agenda, butwhetherithasbeenformulating created toprioritisetheG20development that theSherpa Track hasbeenexclusively coordination intheirdiscussions.It istrue whether theyhave exhibitedcoherence and prioritised development intheirdialoguesand arises, how successfullythetwotrackshave respective areas But ofexpertise. thequestion policy issuesandsettingprioritiesintheir be strongly committedtodiscussingrelevant development goals. The twotracksappearto outcomes thatithasenvisagedforachieving towards itscommitments anddelivering the contingent onitseffectiveness inworking The issuccess of G20 as a global forum Motivation In general,boththe Tracks rely onthe No.100, December2020 1 in isolation or is doing so in close coordination Role of the Two Tracks with the Finance Track remains unclear. On the other hand, it is also important to examine Sherpa Track the Finance Track’s trajectory to determine Usually, the Sherpas of the member countries whether its functions are confined to hard begin meetings much before the Summit so core macro-financial issues or it has evolved as to settle out any contentious issues among to recognise and include commitments that them and set out priorities for the incumbent resonate with the G20 development agenda. presidency. These pre-summit consultations There appears to be some support for are helpful to bring forward the respective the two tracks to work in tandem instead leaders’ positions such that the overall G20 of operating in silos. Several policy briefs agenda can be determined through consensus prepared for T20 have called for the grouping at the political level. This track focuses on to make its framework more coherent and policy analysis and technical overview of inter-connected than segmented. Chaturvedi a range of issues such as agriculture, anti- (2018) rightly underscores the importance of corruption, climate change, digital economy, plurality, vibrancy and pragmatism in new education, employment, energy, environment, thoughts and ideas in the T20 process under health, tourism, and trade and investment. the framework of realism rather than engaging The aim is to adopt an agenda that fosters in discussion on dormant issues rejected inclusive and sustainable development, along in other forums, and cross-fertilisation of with the objective of economic growth. As a ideas on both macro agenda and sectoral result, the G20 platform now is considered specificities, which applies to the spirit of the as an important global forum as the 20 finance and development tracks as well. In most influential economies work together order to foster policy coherence, it has been to address and find solutions to the pressing suggested to reform the current G20 set up challenges of the time faced by the world. so as to lay emphasis on inter-track structures For instance, under the Riyadh Presidency and increase cooperation and dialogues of 2020, the G20 has actively worked on the between the two tracks and their working most developmental challenges in the wake groups, specifically in relation to 2030 of COVID-19 and provided implementable Agenda. According to Carin (2013), even advice to both advanced and developing though the Development Track is committed economies to successfully emerge out of the to focus on “non-financial issues”, it cannot wear and tear of the pandemic. Various experts overlook the crucial role of the Finance Track from international organisations and officials in the sphere of development. In this regard, it from each member country contribute to the becomes important to review the presence and process. Therefore, the track is responsible for extent of coordination and examine if there upholding the procedural rules of the grouping is room for synergy between the two tracks. and taking it forward in the run up to the G20 Summit. One way of doing this is by analysing the trajectory of these two tracks separately and Finance Track see if they have diversified when it comes to This track particularly refers to the meeting setting priorities that are inter-linked and of the G20 Finance Ministers and Central aligned with G20’s broader development Bank Governors, as well as their Deputies. agenda. It would also help to analyse and The primary business of the Finance Track assess how active and successful the group has centered on fiscal and monetary policy has been in translating its commitments into issues such as restoring financial stability, actions, specifically those that involve cross- infrastructure financing, promoting and cutting or overlapping themes across the two ensuring financial regulation, scaling up tracks. financial inclusion, reform of international financial architecture and foster cooperation

2 RIS Policy Brief # 100 in international taxation. The aim is to take Riyadh 2020 coordinated steps to stabilise the global The Riyadh Summit happened at a time economy, promote growth through structural when the world is facing a major pandemic measures and provide efficient proposals and this has provided a great opportunity for for the international financial system. This G20 member countries to come together and pillar of the Finance Track aims at early and act collectively. The health sector has seen the effective detection of crises and provides contribution of both the Development Track solutions and roadmaps to correct global via the health ministry and the Finance Track financial imbalances. However, over the years, since 2019 as mentioned above. However, there has been significant diversification in the current crisis has fostered a stronger the range of issues taken up by the Finance convergence between the two as can be seen Track. In fact, the Finance Track is discussing from the Joint Statement from the Finance more ‘development finance’ issues in recent & Health Ministers Meeting held on 17 times than ‘core finance’ issues as it was September 2020. As the document states, obsessed with in the initial years. It can be the lack of investment in the health sector attributed to the fact that some issues should has been brought to light and consequently no longer be left only to the Sherpa Track to the lack of a resilient health infrastructure in deal with rather should prominently feature most member countries has exacerbated the in the Finance Track deliberations. In other impact of the virus. Therefore, it is important words, the exclusive identification of both the to recognise how investing in the health system tracks as Finance and Development could be has positive externalities in the form of a strong a misnomer. In contrast, Finance Track can and resilient economy. The two tracks have cover development issues suitably and the rightly focused on resource mobilisation so as Development Track relates its commitments to address the financing needs, particularly of to financing aspects. developing nations. Moreover, it has been seen Coordinated action and coherence that the crisis has had the worst consequences among the two tracks can lead to efficient for the most vulnerable segments of the society implementation of the leaders’ commitments. such as women, youth and the elderly. It is only This shift was brought to notice after the 2017 when joint policy making is done through a Hamburg Summit where the Finance Track process of constructive debate that we can actively engaged in areas related to climate address this disproportionate economic and change and energy transformation under the social impact. The One Health Approach banner of green finance and fuel subsidies. adopted by the members is expected to prepare According to the 2018 Finance Ministers the countries better for such uncertain events and Central Bank Governors Meeting in the future and this clearly shows us how the Communique, technological innovations coming together of the two tracks in such a were emphasised with respect to its impact on scenario can prove to be beneficial to all. people’s lives and societies. Under the ’s Chart 1 shows us how the finance track presidency, the world witnessed that the has included other issues over the years, apart Finance Track taking interest in the ongoing from fiscal and monetary policy: debate of demographic changes and the aging- related issues faced by the member countries as Performance of the Finance Track well as a strong commitment towards shared financing for universal health coverage in in Prioritising Development Goals developing countries. It perhaps signifies the In 2014, the Development Working Group ‘within-track’ and ‘between track’ transitions (DWG) agreed to set up an accountability in the functioning of the two G20 tracks as framework to enhance credibility, transparency discussed above. and effectiveness of G20 development commitments, among G20 members and non-members. In this regard, a Comprehensive

RIS Policy Brief # 100 3 Chart 1: Finance Track Agenda over Time

COVID-19 health crisis Demographic (2020) changes, Universal Health Climate change, Care (2019) green finance and fuel Mul-Year subsidies (2012- Acon Plan on 2017) Development (2010) & SDGs Hard core (2015) financial issues (2009)

Accountability Report (CAR) gets published incorporating climate financing in their by DWG every three years under the guidance agenda in 2012 and establishing Climate of G20 Sherpas. Besides covering current Finance Study Group to consider ways to status and progress of G20 commitments effectively mobilise resources and support and priority areas, it also evaluates policy the operationalisation process of the Green coherence across G20 tracks and working Climate Fund. In addition to this, Green groups. Likewise, the G20 Research Group Finance Study Group (GFSG) was launched at the University of Toronto and the Centre in 2016 under the Chinese Presidency with the for International Institutions Research aim to identify barriers to green finance and of the Russian Presidential Academy of produce country-specific recommendations to National Economy and Public Administration enhance the functioning of financial systems (RANEPA) jointly brings the Compliance so as to facilitate movement of private capital Report which provides compliance by member towards green investment. This seemed to countries to various commitments made by have produced positive outcomes for the the G20 leaders during past few presidencies. countries concerned. G20 countries have This report monitors and scores G20 member been increasingly active in green finance and countries’ progress in implementing a selected investment (OECD 2019). According to the number of priority commitments. An analysis Climate Bond Initiative Report (2019), Global of these reports may provide some evidence green bond issuance increased by a whopping of convergence in policy discussions between 63 per cent between 2012 and 2018. the two tracks. Yang et al (2017) cover actions taken by It can be seen that Finance Ministers have some of the G20 countries towards reforming expressed their strong commitments towards their financial systems and aligning them various development issues from time to with sustainable development. These include time. Some of these commitments and G20’s introduction of green bond standards and actions on these commitments are discussed green banking regulation by the People’s Bank below in detail: of , introduction of mandatory climate- change-related reporting for institutional Climate, Environment and Energy investors by the French government in 2016, The finance ministers expressed their preparation of Green Finance Roadmap in commitment towards climate change by 2014 by Indonesian financial regulatory

4 RIS Policy Brief # 99 authority, and inclusion of lending to small fund projects that are aimed towards poverty renewable energy projects by the Reserve Bank alleviation. of . The policy brief further proposed for the forum to promote the standardisation Health of green finance practices, adopt public In 2019, G20 finance and health ministers disclosure strategies to enhance transparency jointly committed towards strengthening of information, support green investment health financing for Universal Health Coverage development of global market, and assist (UHC) through a cross-government and whole- developing countries in developing their own of-society approach (OECD, 2019). Owing national green finance framework. to the damage inflicted by the coronavirus As per the Summit Interim pandemic on the health systems, the need for Compliance Report (2019), climate change health financing is being strongly reemphasised commitment on climate financing for under the umbrella of UHC by Saudi Arabian sustainable development, which represents a Presidency. G20 joint finance and health theme of interest for both the tracks performed ministers meeting was held in September this fairly well with a compliance rate of 90 per year to address the financing needs in global cent. Countries that took actions to attract health and the authorities expressed their both public and private resources to promote commitment towards effectively investing in climate change adaptation and mitigation COVID-19 recovery and public health systems were awarded full compliance. Countries to enhance preparedness for future health- that succeeded in mobilising either public or related crises. As such, while serious actions private finance received a partial compliance with respect to health financing are yet to be whereas non-compliance was awarded to the taken and the outcomes remain to be realised, countries that failed to make any effort in this the joint commitment in itself is a significant direction. With the exception of , show of solidarity on the part of two tracks. , Korea and , which were awarded partial compliance, all the other 16 members Infrastructure received a perfect compliance score of +1. In 2019 Osaka CAR, DWG identified However, not all overlapping commitments infrastructure investment as one of the cross- have fared well. According to the 2015 Final cutting high priority commitments, which has Compliance Report, phasing out of fossil fuel received considerable attention from the finance subsidies that has constantly been stressed ministers. According to the report, Japanese upon by both finance ministers and energy Presidency in 2019 contributed to the G20 ministers has received the lowest compliance Principles on Quality Infrastructure Investment rate of 33 per cent. Fuess and Mesner (2016) prepared in the Finance Track by establishing have called the implementation gap on G20’s quality infrastructure as a priority in the commitment to reform fossil fuel subsidies DWG and producing Key Elements of Quality embarrassing. According to Kraemer (2016) Infrastructure for Connectivity Enhancement energy sector issues should be prioritised in towards Sustainable Development. This reflects the Finance Track because of the risks energy presence of synergy between the two tracks. sector transformation and climate change Among the 11 G20 development commitments impose on global financial stability and on infrastructure reviewed in 2019 CAR, three economic development. Lay et al (2017) have proposed for an inclusive carbon pricing in are marked as complete and rest are marked as addition to reducing fossil fuel subsidies in “on track”. In 2019 interim compliance report, order to accelerate the transition to cleaner Quality Infrastructure Investment commitment energy. They further recommended countries received an average compliance rate of 78 per to emphasise on revenue recycling such as cent, representing full compliance by more than channelising the revenues from carbon tax to 50 per cent of the G20 member countries.

RIS Policy Brief # 100 5 Financial Inclusion and Domestic Chaturvedi, Sachin. (2018). T20 Must Rediscover Before Becoming Irrelevant. German Development Institute Resource Mobilisation Blog, October 2. Two more areas that link Finance Track to the Climate Finance Study Group. (2015). Report to the development agenda are financial inclusion Finance Ministers. Development Working Group (2014). G20 Development and domestic resource mobilisation. While Working Group Accountability Framework, 2014, the former provides a framework to strengthen September 5. financial inclusion (Financial Inclusion Action Fues, T., and Messner, D. (2016). G20: Concert of Great Powers or Guardian of Global Well-being? . Briefing Plan) and remittance flows in developing Paper, No. 9. countries the latter focuses on protecting tax G20 Japan (2019). Osaka Comprehensive Accountability revenues from tax avoidance and tax evasion Report on G20 Development Commitments. in developing countries. All the four financial G20 China (2016). Hangzhou Comprehensive Accountability Report on G20 Development inclusion commitments have been marked Commitments. as complete in 2019 CAR. In the case of G20 (2013). Saint Petersburg Accountability Report domestic resource mobilisation, two out of six on G20 Development Commitments. St. Petersburg, commitments are marked as complete whereas Russia Govt. of India (2012). Note on The Group of Twenty - rest four are left as on track. G20, Ministry of External Affairs. Kraemer, R. A. (2016). Energy in the G20 Finance Track. Conclusion G20 Energy Transformation during the German As the above examples indicate, development Presidency (Vol. 86). Waterloo, ON: Center for International Governance Innovation (CIGI). as an agenda has not been neglected by the Lay, J., Brandi, C., Das, R. U., Klein, R., Thiele, R., Finance Track. There is visible diversification Alexander, N., & Scholz, I. (2017). Coherent G20 of its pool of issues over the years and both policies towards the 2030 Agenda for Sustainable Development. . tracks are constantly finding innovative and G20 Insights Lesage, D. (2017). From Washington to Hangzhou: Does practical solutions to various developmental the G20 Live up to its Potential? issues. However, we cannot say with confidence Lopez,S., and Popova, I. (2019). G20 Osaka Summit whether the two tracks are coordinating Interim Compliance Report. G20 Research Group at the University of Toronto and the Center for with each other in implementing the cross- International Institutions Research of the Russian cutting commitments of G20. There also Presidential Academy of National Economy and remains ambiguity over whether a stronger Public Administration (RANEPA). OECD and UNDP (2019). G20 Contribution to the convergence between the operations of the two 2030 Agenda. tracks will lead to any significant improvement Scott, S., Wang, AX., & Rakhmangulov M. (2015). G20 in results. Therefore, it becomes important to Antalya Summit Final Compliance Report. G20 conduct further research to conclude whether Research Group at Trinity College at the Munk School of Global Affairs in the University of Toronto. convergence between the tracks is necessary SIF (2020). Retrieved from G20 Finance Track. when both the tracks in their independent International Secretariat for International Finance. functioning do justice to their mandates. Climate Bonds Initiative. (2018). Green Bond Market Highlights References Yang, Q., Huifang, T., Schindler, H., Alloisio, I., Bak, C., Berensmann, K., ... & Volz, U. Fostering sustainable Carin, B. (2013). The G20 and Development. Think 20 global growth through green finance–what role for Papers 2014: Policy Recommendations for the Brisbane the G20? G20 Summit. G20. (2020). Joint Statement: G20 Joint Finance and Health Ministers Meeting. — Policy research to shape the international development agenda —

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