Private capital to play bigger role in EM climate finance

A new report has highlighted the opportunity for policymakers to accelerate private climate finance ahead of the 2021 UN Climate Change Conference, COP26.

Investors need to play a more meaningful part in fostering the public-private collaboration that is required to close the climate finance gap in emerging markets (EM).

To support this, in addition to bearing in mind key factors when they evaluate investments in sustainable infrastructure projects in EMs, investors also need to bear in mind examples of how different enabling environment mechanisms have succeeded in accelerating the transition across a diverse range of economies.

“Moving to a low-carbon economy will be that much harder until private capital finances far more sustainable infrastructure in emerging markets,” said David M Solomon, chairman and chief executive officer of Goldman Sachs.

This is among the key take-aways from a new report, ‘Unlocking Private Climate Finance in Emerging Markets: Private Sector Considerations for Policymakers’, produced by the Climate Finance Leadership Initiative (CFLI) in partnership with the Association of European Development Finance Institutions (EDFI) and the Global Infrastructure Facility (GIF).

The report also highlights policies that EM governments can advance to attract investment to projects in key areas: clean energy, low-carbon mass transit, climate-friendly water and waste systems, green buildings and sustainable land use.

Putting policy into action

With private capital able to play an important role in continuing to support the creation of robust and lasting low-carbon, climate resilient markets around the world, the CFLI will seek to design, launch and coordinate a series of country pilots. These will be run in collaboration with local governments, along with leading private international and domestic financial institutions.

The first pilots are planned for India and Indonesia, with the goal of replicating this model in other countries in the years ahead, according to the CFLI.

This work will help to mobilise capital to accelerate the energy transition and build on the policy considerations in the CFLI report to further drive policy changes in pilot countries.

This also requires more even progress in deploying transformational climate solutions at scale. “Our challenge now is to work together more effectively to radically increase the deployment of private capital to help emerging market countries reach their ever more ambitious NDCs,” added Shemara Wikramanayake, chief executive officer of Macquarie Group.

Many active asset managers also committed to creating a more sustainable future. “We actively structure financial solutions which combine public and private capital with the aim of combatting real world issues,” explained Tobias C Pross, chief executive officer of Allianz Global Investors.

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