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The global community faces a number of critical challenges ranging from climate change to crossborder health risks to natural-resource scarcities. Many of these so-called global commons problems carry grave risks to economic growth in the developing world and to the livelihoods and welfare of their people. Climate change is the classic example. Despite the risks involved, donor governments have funded programs addressing global challenges such as climate change at far lower levels than traditional programs of country-based development assistance. The prospects for dealing with such global challenges will depend at least in part on new collective financing mechanisms.
In this paper, Nancy Birdsall and Benjamin Leo recommend that willing governments utilize a modest portion of their existing SDR allocations to capitalize a third-party financing entity. This entity would offer bonds on international capital markets backed by its SDR reserves. The proceeds would back private investment in climate-mitigation projects in developing countries that might otherwise lack adequate financing. This approach could mobilize up to $75 billion at little or no budgetary cost for contributing governments. Any limited budgetary costs could be offset by using excess proceeds from recent IMF gold sales.