Embedded Files
Helpful prior knowledge and learning objectives
Helpful prior knowledge and learning objectives
Helpful prior learning:
Section 1.1.1 The economy and you, which explains what an economy is and how it is relevant to students’ lives
Section 1.1.2 The embedded economy, which explains the relationship between the economy and society and Earth’s systems
Section 5.1.3 State functions, which explains the various roles of the state in providing goods and services, protecting the population, and stabilising and guiding change
Section 6.1.1 Money systems, which describes the parts, relationships and functions of money systems
Section 6.1.3 Modern money creation, which explains how forms of money are created in modern money systems
Section 6.2.1 What is finance?, which defines finance and describes the main tools of finance
Section 6.2.2 Purpose of finance, which distinguishes between regenerative and extractive finance, and between values and financial valuation; and discusses the extent to which profit-oriented finance can support regeneration
Section 6.2.3 Financial power and inequality, which defines financial power and identify key actors and factors that influence where money flows
Section 6.3.1 Why redesign money and finance?, which addresses the questions of who has access to finance, what goals are being financed and what rules shape financing
Section 6.3.7 Global strategies: Redesigning global tools, which discusses how global financial tools are being redesigned to support regenerative social and ecological goals
Section S.1 What are systems?, which explains what a system is, the importance of systems boundaries, the difference between open and closed systems and the importance of systems thinking
Section S.2 Systems thinking patterns, which outlines the core components of systems thinking: distinctions (thing/other), systems (part/whole), relationships (action/reaction), and perspectives (point/view)
Learning objectives:
discuss how global financial rules are being redesigned to support regenerative social and ecological goals
When Cyclone Pam struck Vanuatu in March 2015, winds of more than 250 kilometres an hour tore through the islands, destroying homes, schools, and roads. Tens of thousands were left without shelter or clean water. The damage equaled more than 60 percent of the country’s gross domestic product (GDP).
Even before the storm, Vanuatu had debts that limited public spending. Afterward, aid arrived slowly and often as new loans, so the country still had to repay debts while trying to rebuild.
Vanuatu’s leaders told the world this was unjust. They called for debt cancellation and faster climate finance payments, arguing that those least responsible for global warming are paying the highest price. Their message was clear: the rules of global finance must change to support justice and resilience.
Where do global financial rules come from and why do they matter?
Where do global financial rules come from and why do they matter?
Rules shape who controls the direction, purpose and relationships of global finance. These rules are made through international treaties, trade deals, tax agreements, and the policies of international institutions such as the International Monetary Fund (IMF), World Bank and the World Trade Organization (WTO). These institutions were created to promote stability and economic growth. But wealthy countries and investors have always had disproportionate power to shape the rules the institutions create, or block rules they don’t like. These institutions and their histories are explored further in Topic 7: International Exchanges.
This power imbalance means that poorer countries often face restrictions on how they can spend or invest in healthcare, education, or clean energy. The global rules of finance also make countries more vulnerable to global shocks. Reforms are needed to share risks more fairly and direct finance toward long-term wellbeing.
How can the world make tax rules fair?
How can the world make tax rules fair?
Every year, huge amounts of money leave countries through illegal or hidden financial flows such as tax avoidance through loopholes, hidden accounts in tax havens, and multinational companies shifting profits to low-tax countries. According to the Tax Justice Network, around one-third of multinational company profits are shifted to tax havens each year, costing states hundreds of billions of dollars in lost tax revenue and reducing funds for public goods like schools, hospitals, and transport. The global tax rules (or lack of them) that make this possible have been shaped by and for high-income countries, often through international institutions where lower-income countries have limited influence. Figure 2 shows the countries most responsible for this injustice. This is particularly harmful for low-income countries that need the money the most.
Figure 2. The 20 jurisdictions most responsible for enabling global corporate tax abuse as of October 2024
(Credit: Tax Justice Network)
To fix this, reformers are calling for global rules that make taxation fairer and more transparent:
a global minimum tax on corporate profits to prevent a race to the bottom on tax rates (Section S.9),
automatic sharing of tax data between countries to uncover hidden wealth,
ending profit-shifting by taxing multinational corporations where they actually produce and do business,
public registers showing who owns companies and properties, and
equal participation for all countries in global tax decision-making, which has long been dominated by high-income nations through the Organization for Economic Cooperation and Development (OECD).
Progress is slow because some of the countries that benefit most from the current system, including the United States, the United Kingdom, the Netherlands, Luxembourg, Switzerland, and Singapore, have resisted or weakened global reforms such as the proposed minimum corporate tax. Real change will depend on public pressure and international cooperation to make global tax justice a foundation for regenerative economies.
Who should pay for climate damage?
Who should pay for climate damage?
Countries like Vanuatu, Pakistan, and Mozambique have lost lives and livelihoods to floods, cyclones, and droughts. Yet most greenhouse gas emissions come from wealthy countries and large companies. Many states and campaigners therefore call for climate justice.
One part of climate justice is loss-and-damage finance, money to help countries recover from disasters they did not cause. The Fund for Responding to Loss and Damage, created in 2022 under the United Nations, was meant to provide this support. But progress has been slow. By 2025, countries had pledged less than US $1 billion in total (Figure 3), far below the hundreds of billions that developing nations estimate they need each year to cope with climate impacts. The fund still relies on voluntary contributions, so poorer countries cannot depend on it when disasters strike. Many are calling for predictable, automatic finance linked to historical responsibility for emissions.
Figure 3. As of 2025, less than one billion USD has been pledged for loss and damage.
(Credit: Fund for Loss and Damage)
Another, broader idea is ecological debt. This means that countries that grew wealthy through centuries of extraction, colonisation, and heavy use of fossil fuels owe a debt to those whose lands, peoples, and ecosystems were exploited or polluted in the process. It includes unpaid costs from mining, deforestation, resource trade, and slavery that shaped today’s global inequalities.
Some campaigners call for reparations to address this deeper historical injustice. Reparations could take many forms: cancelling unfair debts, restoring damaged ecosystems, or transferring resources and technologies to support sustainable development. While a few states have begun to discuss these ideas, most current pledges, such as contributions to the Loss and Damage Fund, are far too low to repay ecological debt. Movements such as the Loss and Damage Collaboration, Climate Action Network, and Global Campaign to Demand Climate Justice continue to press for more just global rules that recognise the full ecological debt owed to vulnerable nations and communities.
How should the rules of trade and investment treaties change?
How should the rules of trade and investment treaties change?
Trade and investment treaties set the rules for how goods, services, and money move across borders. These agreements can promote cooperation and help countries access what they need, but many have been written in ways that give greater power to large companies than to states.
Trade rules usually aim to reduce trade barriers so that trade between countries moves more freely. But laws that protect workers, communities, or nature can sometimes be treated as trade barriers, and challenged by other countries. The World Trade Organization (WTO) allows some exceptions for blocking trade for health or environmental protection, but these are narrow and often disputed. For example, in 1989 the European Union banned beef treated with growth hormones to protect consumer health, but the United States and Canada challenged the ban through the World Trade Organization (WTO). Almost ten years later, after a lengthy and expensive battle, the WTO ruled that the EU’s ban counted as a barrier to trade because it was not based on international food-safety standards. Europe chose to keep the ban, which was supported by its population, it had to accept trade penalties in return.
The case shows how rules designed to promote ‘free trade’ can be used to question or punish state policies meant to protect people and nature, especially harming countries with less global power. In general, free trade agreements can make it harder for states to:
support local industries or farmers,
give public contracts to local businesses
ban harmful products like plastic waste or toxic chemicals,
regulate artificial intelligence and digital platforms; or
protect public services such as water, energy, or healthcare.
Many treaties also include Investor-State Dispute Settlement (ISDS) clauses (Section 5.2.4), which let foreign investors sue a state if a new law reduces their profits (Figure 4). These private cases can cost millions and have been used by fossil-fuel companies to challenge climate policies. Because of these pressures, some states hesitate to pass strong environmental or social laws. Others are pushed to privatise public services or open land to foreign investors.
Some states are taking action. The European Union has proposed replacing private investor courts that decide investor-state disputes with a multilateral investment court that includes public hearings, independent judges, and an appeal system. Civil-society groups are calling for a Climate Peace Clause, a global commitment that trade or investment rules will never be used to block climate action.
Meanwhile, many experts point out that the World Trade Organization (WTO) already allows countries to defend health and environmental measures, but the exceptions are narrow and difficult to use. Because of this, many states and campaigners want to rewrite WTO trade rules to make sure climate protection and human rights always take priority.
A regenerative approach to trade and investment would place people and planet before profit. It would protect each country’s right to strengthen its communities, restore ecosystems, and meet climate goals while still cooperating globally.
How should debt rules change?
How should debt rules change?
Debt crises often begin when countries borrow in foreign currencies or face rising global interest rates on their loans. Falling export earnings, where US dollars or other hard currencies are earned, or a weaker currency can make repayments impossible. To secure new loans, states often accept harsh conditions from lenders such as the IMF or private commercial banks. To prioritise debt repayments, they cut public spending, privatise (sell) state assets, or weaken labour laws (Subtopic 5.2). These policies can deepen poverty and weaken social and economic resilience.
Reformers are calling for a debt system that helps countries recover instead of trapping them in cycles of repayment. Ideas include:
a global debt tribunal to resolve disputes fairly
debt cancellation for nations hit by climate shocks
climate-resilient clauses in loan contracts that pause repayments after disasters
debt-for-nature (Section 6.3.8) or debt-for-social spending swaps that reduce debt in exchange for increasing a country’s environmental or social spending.
Figure 5. Countries, international organisations and debt campaigners are exploring ways to reduce the debt burden on vulnerable countries.
(Credit: M-SUR, licensed from Adobe Stock)
To conclude, climate-vulnerable countries and international organisations are pressing for new global rules that distribute power more evenly, share risk, and allow all nations to invest in regeneration. Many economists argue that global finance must shift from managing crises after they happen to building systems with rules and relationships that prevent crises and serve collective wellbeing.
6.3.9 Activity
6.3.9 Activity
Concept: Systems, regeneration
Skills: Thinking skills (transfer)
Time: 30 minutes
Type: Individual, pairs, and/or group
Note: Here is a link to a worksheet for this activity
Every global rule for tax, trade, debt, or climate finance affects how money, power, and care flow between countries. In this activity, you will look closely at one or more examples of new global rules or reforms from this section and determine why they might be considered regenerative.
Individually, in pairs or a small group:
Choose a rule: Pick one idea/rule for reforming global rules from this section, such as: the global minimum corporate tax, funding loss and damage, the multilateral investment court, or another one.
Review regenerative concepts: Read each concept in the table (for example, care, needs-first, distribution, reciprocity). Each concept has a short question to help you think about how that idea might connect to your chosen rule/idea.
Apply the concepts: In the final column, write short notes or examples to show how your rule might express each concept. You don’t need to fill the whole table, because not every concept will apply.
Reflect and discuss: When you finish, compare your responses with classmates. Discuss:
Which regenerative ideas are most visible in the rules/ideas you chose?
Which are missing?
What design changes could make these rules even more regenerative (look at the concepts and consider how they could be applied)?
Table 1. Considering how new rules might be regenerative
Click the arrow if you would like to see an example response for the ‘rule’ of automatic sharing of tax data between countries to uncover hidden wealth.
Checking for understanding
Checking for understanding
Further exploration
Further exploration
The Global Financial System - a ca. 3 minute video by Financial Justice Ireland explaining the role of global institutions and rules in financial injustice. Difficulty level: easy
Keynote at UN HL debate on debt sustainability and economic equality for all - In this 12min speech PM Motley of Barbados makes a powerful case for ending the inequitable impacts of the current international finance and debt regime. Difficulty level: medium
What is tax justice? - the website of Financial Justice Ireland that explains what tax justice is and the strategies we need to make our tax systems more equitable. Difficulty level: easy
Tax Justice Network Country Profiles - an interactive map from the Tax Justice Network where you can find out how each country ranks in terms of amount of tax revenue lost from tax havens and/or how much in tax losses each country inflicts on other countries (for example by being a tax haven, or helping people and firms to avoid taxes). Difficulty level: easy
What is loss & damage? - explainers on loss and damage from The Loss & Damage Collaboration. Difficulty level: medium
ISDS 101: Investor-state dispute settlement explained: A short animated video about ISDS from a Canadian perspective. Difficulty level: easy
ISDS: Fear of Billion-Dollar Lawsuits Stops Countries Phasing Out Fossil Fuels – A news article from The Guardian on how ISDS lawsuits are discouraging governments from enforcing environmental policies, with real-world examples of fossil fuel companies suing states over climate action. Difficulty level: easy.
Investor-State Dispute Settlement (ISDS) - A Primer – A short guide from Columbia University’s Center on Sustainable Investment explaining how ISDS allows multinational corporations to sue governments when regulations impact their profits. Includes case examples and key concerns about state sovereignty. Difficulty level: medium.
Debt Justice - Debt Data Portal - An interactive map revealing which countries are in debt crisis or at risk, and the type of debt (public or private). A great resource for spotting global patterns and sparking systems thinking. Difficulty level: medium
Fund for Loss and Damage finance pledges - the website for the loss and damage financing for low-income countries’ mitigation and adaptation to climate change. The link takes you to the funding pledges, where you can see how much countries have contributed. Difficulty level: easy
Sources
Sources
Columbia Center on Sustainable Investment. (2022). A primer on international investment treaties and investor-state dispute settlement (ISDS). Columbia University. https://ccsi.columbia.edu/content/primer-international-investment-treaties-and-investor-state-dispute-settlement
Centre for Climate Engagement (n.d.). Trade law and climate change. Hughes Hall University of Cambridge. https://climatehughes.org/law-and-climate-atlas/trade-law-and-climate-change
Darnal, A. (2024). Moving from unequal to win-win partnerships. Stimson Center.https://www.stimson.org/2024/moving-from-unequal-to-win-win-partnerships
European Commission. (n.d.). Multilateral Investment Court project. Retrieved from https://policy.trade.ec.europa.eu/enforcement-and-protection/multilateral-investment-court-project_en
Fund for Responding to Loss and Damage (n.d.). https://www.frld.org/
Loss and Damage Collaboration. (n.d.). What is loss and damage? https://www.lossanddamagecollaboration.org/whatislossanddamage
NatureFinance. (2025, April). Innovative financing structures as game changers for nature and climate [Report]. https://www.naturefinance.net/wp-content/uploads/2025/04/InnovativeFinancingStructuresasGameChangersforNatureandClimate-1.pdf
Reuters. (2022, November 8). COP27: Which countries have offered “loss and damage” funds? Reuters. https://www.reuters.com/business/cop/cop27-which-countries-have-offered-loss-damage-funds-2022-11-08/
Tax Justice Network. (2024, November). State of tax justice 2024. https://taxjustice.net/wp-content/uploads/2024/11/State-of-Tax-Justice-2024-English-Tax-Justice-Network.pdf
Trade Justice Education Fund. (2022, November 29). The case for and design of a climate peace clause. https://tradejusticeedfund.org/wp-content/uploads/ClimatePeaceClausePaper.pdf
Weston, P. & Greenfield, P. (2025, March 6). ISDS: Fear of billion-dollar lawsuits stops countries phasing out fossil fuels. The Guardian. https://www.theguardian.com/environment/2025/mar/06/isds-fear-of-billion-dollar-lawsuits-stops-countries-phasing-out-fossil-fuels-aoe?CMP=Share_iOSApp_Other
World Trade Organization. (n.d.). DS26: EC — measures concerning meat and meat-products (hormones). https://www.wto.org/English/tratop_e/dispu_e/cases_e/ds26_e.htm
Terminology
Terminology
gross domestic product (GDP): the total value of all goods and services produced in an economy in a time period
loan: a sum of money that an individual or group borrows from banks or other financial institutions
debt: an amount of money owed to an individual or organisation
debt cancellation: a decision or agreement that permanently removes some or all of what a borrower owes, so it no longer has to be repaid
climate finance: a form of finance that supports mitigation of climate change and adaptation to its impacts
global warming: the rise in the average temperature of Earth's air and oceans (due to human activities)
resilient: able to recover after a disturbance
finance: to provide funding for a person or organisation
treaty: a formal agreement between countries
trade: to exchange something for something else
tax: payment from individuals or organisations to the government, used to provide public infrastructure and services
International Monetary Fund (IMF): an agency of the United Nations responsible for the financial stability of the global monetary system
World Bank: an international financial institution that provides loans and grants to the governments of low- and middle-income countries with the goal of reducing poverty
World Trade Organization (WTO): an international organisation where countries agree on trade rules and resolve disputes about how trade is conducted
economic growth: an increase in the total value of goods and services produced in a period of time
investor: an individual that puts money into an entity such as a business for a financial return
power: the ability to influence events or the behaviour of other people
invest: dedicating money, time, or effort into something with the expectation of future financial returns or a positive outcome
tax avoidance: using legal methods to pay less tax, often by moving money or profits to where taxes are lower
tax haven: a country or territory where taxes are very low or secret, attracting people and companies who want to avoid paying higher taxes elsewhere
multinational company: a company that operates in its home country and at least one other country
profit: total revenue minus total cost
tax revenue: money collected by a government from individuals and organisations used for public spending and investment
income: money received from work or investments
global minimum tax: an international agreement that sets a lowest legal tax rate to limit tax avoidance
tax rate: the percentage of income or profit paid as tax
wealth: the total value (stock) of someone’s assets such as money, house, or investments
profit-shifting: moving profits across borders to avoid tax
Organization for Economic Cooperation and Development (OECD): an international organisation of mainly high-income countries that produces research, data, and policy guidance on economic, social, and environmental issues
regenerative economy: an economic system that meets human needs in a way that strengthens social and ecological systems
drought: a long period without enough rain, causing water shortages and crop failures
greenhouse gas: gases in Earth's atmosphere trap the Sun's heat, warming the planet
state: a system that provides essential public services, and also governs and regulates other economic institutions
climate justice: the idea that responses to climate change should be fair, especially to those least responsible but most affected
loss-and-damage finance: a form of finance that supports countries to pay for the loss and damage they face from climate change
ecological debt: environmental harm caused by wealthy countries that others must bear
extraction: taking something away from somewhere else, especially using effort or force
colonisation: a process of establishing foreign control over a land area and/or peoples for the purpose of resource use and extraction
fossil fuel: a non renewable energy source including coal, oil, and natural gas, formed over millions of years in the Earth's crust from decomposed plants and animals
debt: an amount of money owed to an individual or organisation
ecosystem: the interaction of groups of organisms with each other and their physical environment
pollution: the presence of a substance that has harmful effects on the environment
deforestation: removing a wide area of trees, often for farming, mining, or urbanisation
reparation: payments or actions to repair historical harm
sustainable development: development that meets present needs without harming future generations
investment: money spent for the enhancement of human or physical capabilities
trade barrier: any rule, tax, or restriction that makes it harder or more costly to trade between countries
waste: unwanted or unusable materials
energy: the ability to do work or cause change
Investor-State Dispute Settlement (ISDS): a system in some international trade and investment treaties that lets foreign companies sue governments if they believe a new law or policy hurts their profits.
profit: total revenue minus total cost
fossil fuel: a non renewable energy source including coal, oil, and natural gas, formed over millions of years in the Earth's crust from decomposed plants and animals
privatisation: when services or industries owned by the state are sold to private companies
multilateral investment court: a proposed international court designed to hear disputes between states and investors in a transparent and consistent way, replacing one-off private arbitration panels
appeal system: a system that allows decisions to be reviewed or challenged
regeneration: restoring and revitalising something
debt crisis: a situation where a country is unable to keep up with debt repayments, leading to economic, social, and political disruption
interest rate: the price a borrower pays to borrow a sum of money
export: send products to another country for sale
hard currency: a widely trusted currency used in global trade
currency: a system of money in general use in an area
loan: a sum of money that an individual or group borrows from banks or other financial institutions
commercial bank: a private bank that creates most new money by issuing loans and manages accounts for people and businesses
labour law: a law relating to the rights and responsibilities of workers
poverty: the state of being poor
resilient: able to recover after a disturbance
system: a set of interdependent parts that organise to create a functional whole
debt tribunal: a proposed independent body to judge debt disputes fairly
Page updated
Google Sites
Report abuse