Reform of international financial architecture
The global financial system is failing those most affected by climate change and poverty. IIED calls for urgent reform to get finance to local communities, end unfair debt, empower frontline leadership, and ensure nature’s true value is recognised — while also supporting a just energy transition.
In Zambia, local communities face many difficulties due to constant droughts (Photo: UNDP Climate, via Flickr, CC BY-NC 2.0)
The international financial architecture – led by institutions such as the World Bank, International Monetary Fund and multilateral development banks – is meant to support sustainable development and climate action, reverse the loss of nature, and reduce poverty.
In theory, these institutions should help vulnerable countries access resources to build resilience and drive locally-led solutions.
In practice, power is tightly held with those who hold the money, which is entrenching injustices and perpetuating inequality.
In 2025, IIED is actively engaging with partners at key global events – including the Finance in Common Summit, World Bank meetings, the 4th International Conference on Financing for Development (FFD4), and COP30 – which will provide critical moments to push for urgent reforms to international financial architecture.
Reforming global systems
The international financial architecture is failing the countries and communities most affected by climate change and poverty. Less than a third of climate finance includes any support for local action and less than 0.2% specifically targets locally-led outcomes, while climate-vulnerable countries are being pushed further into debt by an unfair credit rating system and loan-based finance.
Least developed countries (LDCs), Small Island Developing States (SIDS) and local communities are being sidelined in decision-making by financial institutions, while disjointed trade, climate and nature policies further block progress.
At the same time, global supply chains for critical minerals — needed for the clean energy transition — are being expanded through disjointed infrastructure and trade deals that often reinforce extractive, short-term models of development. These projects too often bypass public participation, neglect national priorities, and fail to deliver local benefits.
IIED is working with its partners for urgent reform of international financial architecture to benefit people and planet by:
- Getting money where it matters – ensuring finance reaches local communities
- Challenging destructive systems – ending unfair debt and align trade and finance with development priorities
- Championing locally-led action – putting frontline communities in charge, and
- Reframing the value of nature – recognising its full environmental, cultural and economic worth.
Making financial systems fit for purpose
IIED’s podcast, Make Change Happen, released an episode dedicated to discussing the critical to need reform the international financial architecture so it’s fit for purpose and works for everyone.
IIED’s work in this area includes producing high-quality, evidence-based research to inform policymaking and the development of practical, sustainable, joined-up solutions, led by local perspectives.
We are building bridges between those most directly impacted by poverty and climate change and the decision makers, so that the quality as well as quantity of finance are part of the debate.
Contact
Oliver Arnold-Richards ([email protected]), strategic campaigns manager, IIED's Communications Group
Priority resources
Further reading
Blog: How debt for climate and nature swaps can be effective financing instruments, Laura Kelly, Sejal Patel (April 2025)
