With increasing recognition of EMDEs’ vulnerabilities to climate change, increasing attention is being paid to scaling up blended finance options.
COP28 in Dubai will explore climate adaptation investment opportunities for public-private partnerships in emerging markets and developing economies (EMDEs), according to COP27’s UN Climate Change High-Level Champion.
“COP26 emphasized the importance of businesses and the private sector [international climate progress] with the launch of coalitions such as the Glasgow Financial Alliance for Net Zero (GFANZ),” Dr Mahmoud Mohieldin said during a London Stock Exchange Group (LSEG) webinar on 8 November.
“COP27 emphasized this, but also took into account the importance of partnerships with multilateral development banks (MDBs), such as the World Bank, [and]emphasized that EMDEs need financing for climate adaptation.”
The Sharm El Sheikh’s Adjustment Agenda was published at COP27, mapping out an ambitious plan to drive public and private investments towards 30 adaptation outcomes by 2030 across all sectors and highly vulnerable communities.
It also included the introduction of the Loss and damage fund, which aims to help the most climate-sensitive EMDEs cover the costs of the physical impacts of climate change. There have been discussions about how it will work in practice continuous.
In part to make progress in achieving the COP27 agenda, there will be a greater focus on climate transition investment opportunities for blended finance in emerging markets at COP28, Mohieldin said, pointing to the September conference of the COP28 presidency. announcement of a UAE financing initiative – which will contribute $4.5 billion to Africa’s energy transition – as an example of the increased focus on supporting EMDEs.
“About 2% of private sector financing currently goes to investments in climate adaptation – infrastructure resilience, protecting forests, dealing with deforestation, investing in water management – which is of course not enough,” said Mohieldin, also a member of the UN. Special Envoy for Financing the 2030 Agenda for Sustainable Development.
Earlier this month, the UN Environment Program (UNEP) published its ‘2023’Adaptation Gap Report‘, which highlighted that the predicted climate adaptation financing needs of EMDEs are now ten to eighteen times greater than existing international public flows. The financial deficit is between $194 and $366 billion per year, the report said.
According to Mohieldin, it is crucial that COP28 now moves from “talking about general frameworks to going into the details,” he added.
Fulfilling EMDE’s $100 billion per year climate finance commitment stake made by developed countries in 2009 also remains important, Mohieldin said.
“Not because it is a panacea for all our problems, but it is a sign of confidence and could be used to attract private sector financing or support important funds such as the Green Climate Fund (GCF).”
The UN run GCF provides financial support to low- and middle-income countries in the field of climate mitigation and adaptation.
It has a Private Sector Facility (PSF) that serves as a dedicated arm that finances and mobilizes private sector actors, including institutional investors, through concessional instruments such as guarantees, first loss protection and grant-based capacity building programs . There is currently $4.8 billion invested in 54 private sector projects, which have a combined portfolio value of $22.1 billion.
Race against the clock
The financing gaps that are slowing the transition from fossil fuel-intensive energy to renewables in the EMDEs need to be filled urgently, Mohieldin emphasizes.
“We are in a world with 800 million people without access to electricity, 600 million of whom are in Africa,” he said.
According to the International Energy Agency (IEA) 4 trillion dollars investments in renewable energy must be made every year worldwide by 2030 to reach net zero by 2050. 1 trillion dollars of this must be invested annually in EMDEs.
There are plenty of investment opportunities, he noted. According to an International Energy Agency (IEA), Latin America and the Caribbean have one of the cleanest electricity sectors in the world report published this month, noting that renewables generate 60% of the region’s electricity – twice the global average. To deliver on the region’s promises, financing for clean energy projects must reach $150 billion by the end of this decade and increase fivefold by mid-century.
“If we are serious [about addressing climate change]we must now stop using coal and significantly reduce the use of oil and natural gas,” Mohieldin said.
“We need to invest in renewable energy sources – solar, wind, green hydrogen – we need to reduce emissions, and we need to deal with the socio-economic impact on society, especially for those who have been dependent on fossil fuels for years.”
In October, the IEA published a report warning that more policy attention and investment was needed to ensure that electricity grids worldwide can support the climate transition. Annual investments in networks must double to more than $600 billion per year by 2030, the report says.
In a Sept communiquethe leaders of the Group of Twenty (G20) said they will continue and encourage efforts to triple global renewable energy capacity by 2030, recognizing the needs, vulnerabilities and priorities of EMDEs and committing to work towards facilitating cheap financing to support their energy sector. transitions.
“We’re in one race against the clock to reduce emissions by 50% between now and 2030,” Mohieldin said.