Policy makers at both national and international levels are increasingly concerned about the impact of climate change on development and poverty reduction. Climate change has the potential to derail the global development agenda and roll back the achievements of the past decade.

While the current global financial crisis had its origins in wealthy countries, it has had a major impact on the developing world. Foreign direct investment fell by over 20% in 2008, and private capital flows to developing countries fell by 50%. Remittances from workers abroad (which account for up to a quarter of GDP in many smaller developing countries) and tourism receipts are well down. Based on experience from previous economic downturns, ODI estimates that, if no corrective measures are taken, net financial flows to developing countries may fall by as much as US$300 billion from 2007 to 2009 – equivalent to a 25% drop.

In 2008, food prices surged, causing a rapid deterioration in food security in the developing world. Global food prices were 75% higher than in 2000, while wheat prices had doubled. The poorest countries faced an extra US$20 billion in the cost of food imports. It is estimated that the food crisis pushed an extra 100 million people into poverty, reversing the gains of the previous decade and leaving close to a billion people living with hunger.

There is widespread consensus that the current international aid architecture – that is, the structures and institutions for supplying development assistance – is not fit for purpose. The system has never had an ‘architect’, and there has been no serious reform since the creation of the International Development Association in 1960. New institutions are often created, but old ones are almost never shut down. As a result, there are now more than 1,000 mechanisms for supplying development finance, with no clear division of labour and widespread incoherence.