Financing a Just Transition – Transforming Funding, Tackling Climate Change

Financing a Just Transition

Transforming Funding, Tackling Climate Change

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Financing a Just Transition

Transforming Funding, Tackling Climate Change

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INTRODUCTION: ACHIEVING ADEQUATE, AMBITIOUS CLIMATE FINANCE

1.1

Countering the greatest crisis of our time

John Kirton, director, Global Governance Program p8

1

ADVOCACY

How can the world save $50 trillion by 2050 in the green energy transition?

Published by: GT Media Group Ltd

CEO and Publisher: Khaled Algaay

Managing Director: Tom Kennedy

Co-editor: John Kirton

Co-editor: Ella Kokotsis

Managing Editor: Madeline Koch

Production Editor: Amanda Simms

Editorial Consultant: Ely Sandler

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Governance Project is a joint initiative between GT Media Group Ltd, a publishing company based in London, the Global Governance Program, based at the University of Toronto. The Global Governance Project provides a vital function for private and public sector organisations in support of their governance responsibilities. As a project it publishes content on how we can all demonstrate better collective governance, via independent platforms, for the world’s largest intergovernmental organisations, governments, NGOs, multilateral and bilateral summits, and the private sector’s leadership. © 2024. The entire contents of this publication are protected by copyright. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher. The views and opinions expressed by independent authors and contributors in this publication are provided in the writers’ personal capacities and are their sole responsibility. Their publication does not imply that they represent the views or opinions of the Global Governance Program, the University of Toronto or GT Media Group and must neither be regarded as constituting advice on any matter whatsoever, nor be interpreted as such. The Financing a Just Transition series is printed using sustainable materials. Our printers conform to the ISO 14001 certification, which helps organisations to use resources more efficiently and reduce their carbon emissions. Please recycle this paper when you have finished reading the content.

1.2

Bridging the gap between ambition and action

Ella Kokotsis, director of climate finance strategy, Global Governance Program p10

1.3 A moment of profound fracture

Simon Stiell, executive secretary, UN Climate Change p12

1.4 A crucial transformation

Narendra Modi, prime minister, India p14

1.5

Taking a global role in the climate crisis

Luiz Inácio Lula da Silva, president, Brazil p18

1.6

Building a sustainable future

Cyril Ramaphosa, president, South Africa p22

Jennifer Steinmann, global sustainability business leader, Deloitte, and Bernhard Lorentz, global consulting sustainability and climate strategy leader, Deloitte p24

1.7

Mobilising UNDP support for climate finance Interview with Achim Steiner, administrator, United Nations Development Programme p26

1.8

Major climate finance initiatives since the Paris Agreement p28

1.9

Tracking climate contributions p30

THE PARIS AGREEMENT PLATFORM

IMPROVING PUBLIC FINANCE

2.1

Bridging the gap: using carbon pricing to finance the energy transition

Ely Sandler, Harvard Kennedy School p34

2.2

The need to scale climate finance provision for a just transition: Morocco’s perspective

Bouzekri Razi, director, Climate Change, Biodiversity and Green Economy, Morocco’s Ministry of Energy Transition and Sustainable Development, and Iskander

Erzini Vernoit, director, IMAL Initiative for Climate and Development p36

2.3

Rwanda’s path to a just and sustainable future: mobilising finance for climate action

Juliet Kabera, director general, Rwanda Environment Management Authority p38

2.4

Balancing development and climate ambitions

Amitabh Kant, India’s G20 sherpa p40

3.1

Working together to fight climate change

Kristalina Georgieva, managing director, International Monetary Fund p44

3.2

The role of the International Monetary Fund in supporting climate action

Ceyla Pazarbasioglu, director, Strategy, Policy and Review Department, International Monetary Fund p46

ADVOCACY

Electrify and decarbonise: GE Vernova’s blueprint for a just energy transition

Scott Strazik, chief executive officer, GE Vernova p48

3.3

Lessons from a journey across the globe

Ajay Banga, World Bank Group president p50

3.4

Trillions needed from the G7 and G20 for the climate emergency

Brittaney Warren, director of compliance and sustainability governance, Global Governance Program p52

3.5 How multilateral development banks can bridge the climate financing gap

Frannie Léautier, former chair, G20 Expert Panel on the Capital Adequacy of the Multilateral Development Banks p54

MOBILISING PRIVATE SECTOR FINANCE

4.1

Financial innovation for climate investment and development

Mark Carney, United Nations special envoy on climate action and finance p58

4.2

Transforming the financial system: an inclusive, peoplecentred approach

Nick Robins, professor in practice – sustainable finance, London School of Economics and Political Science p60

ADVOCACY

Financing the transition: why we need leadership

Lindy Fursman, director of climate and energy policy, Tony Blair Institute for Global Change p62

4.3

Are corporations allocating capital towards climate action?

Shafaq Ashraf and Sangeeth Selvaraju, Grantham Research Institute on Climate Change and the Environment p64

IMPROVING

INTEGRITY FOR PRIVATE SECTOR FINANCE

5.1

How IOSCO is supporting trust in capital markets to drive sustainability

Jean-Paul Servais, board chair, International Organization of Securities Commissions p68

5.2

Best steps now for urgent climate action

Interview with Michael Bloomberg, UN secretarygeneral’s special envoy for climate ambition and solutions p70

ADVOCACY

Minas Gerais

A beacon for global investment p72

5.3

Partnerships to get on the right pathway

Mia Mottley, prime minister, Barbados p74

5.4

Corruption: a roadblock to climate finance

Lida Preyma, founder and CEO, Cēlandaire Capital p76

FRONTIER TECHNOLOGY – FINANCING FITFOR-FUTURE INFRASTRUCTURE

6.1

Growing the pipeline of energy transition investments

Astrid Manroth, head, Global Infrastructure Facility p80

6.2

What will it take to unlock climate finance for just energy transitions?

Angela Wilkinson, secretary general and CEO, World Energy Congress p84

ADVOCACY

Financing a just transition means mobilising the private sector

Leen Alsebai, general manager, RX Middle East, and head, World Future Energy Summit p86

6.3

INNOVATIVE CLIMATE FINANCING

How regenerative agriculture can make climate solutions more resilient

Tania Strauss, head of food and water, World Economic Forum p88

7.1

Addressing the climate finance gap: a path forward for global emissions alignment and ambitious action

Paolo Gentiloni, European Commissioner for Economy p94

7.2

An SDR bond for climate finance

Brad W Setser, Whitney Shepardson senior fellow, Council on Foreign Relations p96

7.3

A public health perspective on climate change and small island developing states: the Caribbean region

Laura-Lee Boodram, Shane Kirton and Lisa Indar, Caribbean Public Health Agency p100

7.4

A closer look at South Africa’s approach

Interview with Elizabeth Sidiropoulos, chief executive, South African Institute of International Affairs p104

From Brazil to the planet: The wealth of the forest preserved.

We export alternatives in renewable energy, food production and new technologies. With products and processes that increasingly respect the natural environment, we promote the development of the country and offer a better life to all Brazilians.

We help foreign companies find their way to prosper in Brazil. ApexBrasil. The Brazilian Trade and Investment Promotion Agency.

It’s from Brazil, it’s sustainable, it’s for the whole world.

Countering the greatest crisis of our time

Time is running out if we are to constrain global temperature rises in line with the Paris Agreement. We urgently need to mobilise finance – from both public and private actors.

John

Kirton,

director, Global Governance Program

Climate change is by far the greatest crisis and challenge of our time. The unprecedented heat and extreme weather events around the world this year are causing significant deaths and damage to people and other living things. They are certain to get worse.

Countering this crisis requires mobilising vast amounts of climate finance for a just transition to a liveable planet for our shared future. It must be done by the public and private sectors working individually and together to raise the ambitious but achievable sums needed to do the job.

Reaching the limit

There is no time to lose. The world’s leaders at the meeting of the Conferences of the Parties to the United Nations Framework Convention on Climate Change in Paris in 2015 agreed – based on the compelling science then – that our planet’s post-industrial temperature increase must be limited to 2°C and ideally 1.5°C. But we are already approaching those limits, and in places exceeding them, in ways that are often difficult or even impossible to reverse. The last 12 months have been the warmest on record. The greenhouse gas emissions that humans continue to produce to pollute the atmosphere relentlessly add to the historically high concentrations already there.

Thus, at the COP29 meeting in Baku on 11–22 November this year, global leaders and stakeholders must take bold, broad actions to mobilise much more badly needed climate finance before it is too late. That is why COP29 host Azerbaijan has made climate finance the top priority and asked countries to submit updated, stronger nationally determined contributions specifying what they will do to contain a crisis that afflicts all.

The finance gap

The size of the climate finance challenge is compellingly clear. Recent economic and political headwinds have caused the climate finance gap to widen in terms of volume, quality and the cost of capital. This includes the funding shortfall for climate mitigation,

adaptation and clean infrastructure in the Global South, as well as the associated capital costs – stemming from the gap between the high returns or interest rates demanded in emerging markets and the borrowers’ capacity to pay.

To remain within the Paris Agreement’s warming targets, trillions of dollars are needed for carbon mitigation, adaptation and resilience. Specific estimates of climate financing needs vary, but current levels are without doubt critically insufficient – and are rising as new, incoming data show global heating, extreme weather events and their resulting damage increase.

The Independent High-Level Expert Group on Climate Finance estimates that emerging markets and developing countries (excluding China) need more than $1 trillion in climate finance each year by 2030, the majority of which is required for mitigation. The International Energy Agency estimates that annual renewable energy investment in emerging and developing economies must increase by more than seven times – from less than $150 billion in 2020 to over $1 trillion by 2030 – to reach netzero emissions by 2050.

Many intergovernmental institutions have started to promise and provide new funds to help meet the need. The major global governance bodies – the UNFCCC COPs, the United Nations Development Programme, the International Monetary Fund, the World Bank, the G20 and the G7 – have done so. So have several national governments from the developed world. Together they have begun

to take action within their respective capacity. But even with a full commitment they cannot do the job alone.

A turning point?

The private sector is thus key to closing the climate finance gap. One estimate suggests that even if all multilateral development banks committed their entire balance sheet to the green transition, it would only provide 4% of the capital needed.

Merely 1.4% of the private sector’s $410 trillion in global financial assets would surpass the highest finance gap estimate. Mobilising private investment is therefore critical. Climate finance will be a trillion-dollar market by 2030. Mobilising this capital is thus both a challenge for policymakers and an opportunity for business.

Public and private sectors must act and work together

Whether driving innovation or addressing the global challenges arising from the triple planetary crisis of climate change, biodiversity loss and pollution, well-crafted policy and regulation can mobilise capital for sustainable development, promote transparency and

JOHN KIRTON

THE LAST 12 MONTHS HAVE BEEN THE WARMEST ON RECORD. THE GREENHOUSE GAS EMISSIONS THAT HUMANS CONTINUE TO PRODUCE TO POLLUTE THE ATMOSPHERE RELENTLESSLY ADD TO THE HISTORICALLY HIGH CONCENTRATIONS ALREADY THERE.

disclosure, provide common language and standards, and foster collaboration among stakeholders.

Without coherent policy, climate finance may not be sufficiently prioritised by governments, the financial sector and its counterparties, leading to missed opportunities for investments to improve the planet’s future.

Working to establish a global and collaborative dialogue and approach will enable leading investors to work with both public and private sectors to catalyse change across the entire finance spectrum and help financial institutions eliminate the financing gap to reach the Sustainable Development Goals.

Every investment initiative is required to deliver real world sustainability outcomes, by engaging regulators to strengthen environmental, social and governance standards and by reimagining business practices that prioritise sustainable impact.

This publication draws on the expertise, experience and commitment of key global leaders from major institutions and sectors to show how finance from capital markets, asset management, corporate finance, international

banking and insurance can lead the urgently needed environmental and energy transition. It showcases insights from existing efforts to close the finance gap, showing how policy innovation has led to credible progress, and how much more can and must be done. Leaders in policy, finance, development and science appraise solutions, giving insight into what has worked, what has failed, and what remains to be done. Their contributors in turn, address:

● Achieving adequate, ambitious, climate finance

● The Paris Agreement platform

● Improving public finance

● Mobilising private sector finance

● Improving integrity for private sector finance

● Frontier technology – financing fitfor-future infrastructure

● Innovative climate financing.

John Kirton is the director of the Global Governance Program, which includes the G20 Research Group, the G7 Research Group, the BRICS Research Group and the Global Health Diplomacy Program, at the University of Toronto, where he is a professor emeritus of political science. He is the co−author, with Ella Kokotsis and Brittaney Warren, of Reconfiguring the Global Governance of Climate Change and, with Ella Kokotsis, The Global Governance of Climate Change: G7, G20 and UN Leadership. He is also co-editor of G20 Brazil: The 2024 Rio Summit as well as a global health series, including the recent Health: A Political Choice – Building Resilience and Trust.

X-TWITTER @jjkirton  www.g7g20.utoronto.ca

Bridging the gap between ambition and action

The challenges are as complex as they are abundant. COP29 presents a critical opportunity to galvanise financial resources from both the public and private sectors – a pivotal moment on the way to a just and sustainable transition.

Ella Kokotsis, director of climate finance strategy, Global Governance Program

ACHIEVING

A JUST TRANSITION IS

COMPLEX. IT REQUIRES

A COMPREHENSIVE APPROACH THAT BALANCES SOCIAL, ECONOMIC AND ENVIRONMENTAL CONSIDERATIONS. THE EQUITABLE DISTRIBUTION OF FINANCIAL RESOURCES MUST ENSURE THAT TARGETED INVESTMENTS REACH THE MOST VULNERABLE.

As the race to cap global temperature increases at 1.5°C above pre-industrial levels intensifies, mobilising substantial climate finance is urgent – particularly for the world’s most vulnerable communities on the front lines of the climate crisis.

Financing a just transition, by empowering the most vulnerable to build climate-resilient communities, is imperative. As Mia Mottley, prime minister of Barbados, warned at the United Nations General Assembly in September 2024, “We have a date with destiny against 1.5 degrees”.

Estimates by the London School of Economics and the Grantham Research Institute on Climate Change and the Environment suggest that the transition to a low-carbon energy future for emerging economies (excluding China) will require total annual investments of $1 trillion by 2025 and $2.4 trillion by 2030.

Critical considerations

Achieving a just transition is complex. It requires a comprehensive approach that balances social, economic and environmental considerations. The equitable distribution of financial resources must ensure that targeted investments reach the most vulnerable and marginalised groups affected by the devastating impacts of a changing climate. Funding mechanisms including concessional loans, grants and loan guarantees must be accessible and affordable. Investments in green energy, renewables, energy efficiency and sustainable agriculture are needed to create green jobs and economic diversification. Reskilling requires providing appropriate training programmes for workers transitioning from carbon-intensive industries to emerging

green sectors. Prioritising gender and social equity is critical, ensuring that women, youth, Indigenous populations and marginalised communities all have equitable access to climaterelated decision-making as well as financial resources. Policy frameworks that encourage private sector investments in low-carbon, climate-resilient infrastructure must underpin this process. The challenge is daunting. Innovative funding mechanisms are key to bridging the growing climate finance gap. Leveraging private sector investments, exploring blended finance options and enhancing the role of multilateral development banks can help. A central challenge is ensuring that finance is distributed equitably, particularly in the world’s most vulnerable communities where adaptation, loss and damage are top priorities.

Climate finance, emphasising the urgent need to mobilise public and private financing from all sources, has emerged at the forefront of the agenda of the meeting of the 29th Conference of the Parties to the United Nations Framework Convention on Climate Change in Baku in November 2024. Leaders there will focus on three key climate finance objectives, as global climate challenges escalate.

The first objective calls for an agreement on the new collective quantified goal on climate finance, ensuring ambitious and deliverable commitments with clear rules to define who will contribute, for what purpose, over what timeframe and how progress will be monitored.

The second objective is to move forward on monitoring and evaluating critical areas where more climate investment is needed to address emissions reductions and adaptation outcomes.

The Baku Global Climate Transparency Platform, launched in September 2024, is crucial for establishing robust indicators, tracking progress and ensuring accountability on climate finance commitments.

The third objective is to raise $1 billion in annual contributions for the Climate Finance Action Fund, introduced by Azerbaijan in July 2024. Those will come from fossil fuel–producing companies and countries producing oil, gas and coal, to capitalise the CFAF either through annual fixed sum contributions or based on their volume of production.

Overcoming the obstacles

But significant challenges remain in scaling up climate finance to the required levels. A complex and fragmented climate funding architecture makes it difficult for emerging markets and developing countries to access mitigation and adaptation climate finance. Public resources for climate investments in EMDCs are often limited due to high borrowing costs and debt burdens. Moreover, a lack of institutional capacity and technical expertise hinders the development of robust adaptation and mitigation strategies.

From an investment perspective, climate projects often struggle to generate sufficient financial returns, diminishing their appeal to profit-driven investors. Payback periods can span decades on small-scale and localised climate initiatives, making

ELLA KOKOTSIS

them less attractive to private investors seeking substantial near-term investment gains.

Weaknesses and gaps in the climate finance information ecosystem can also hamper evidence-based decisionmaking and effective policy development. Without robust climate data and disclosures, it is difficult for investors to determine the potential benefits of their climate-based investments.

Additionally, ongoing global crises and geopolitical tensions divert attention and resources from climate action.

The Russia–Ukraine conflict has shifted global energy markets, with some countries, including Austria, Germany, Italy and the Netherlands, extending the life of coal-fired power facilities in the short term to ensure their energy security.

Yet these challenges also present opportunities. For instance, the Global Innovation Lab for Climate Finance reflects an investor-led initiative, blending public-private capital to accelerate innovation and de-risk climate investments in EMDCs. Sustainability-linked loans and bonds offer flexible funding for green projects with better interest rates for borrowers when they meet their sustainability targets.

Prospects for COP29

As the host of COP29, Azerbaijan has the potential to lead on climate action by example, having pledged to reduce emissions by 40% by 2050 and increase renewable capacity to 30% by 2030. Unlocking the transformative finance action needed to support vulnerable communities in the climate fight, while prioritising women, youth and Indigenous peoples, is key. With strong leadership, inclusive dialogue and a shared commitment to ensuring a just transition, COP29 can mark a turning point in the global response to climate change, with climate finance serving as a powerful tool to drive progress and ensure a just, equitable and sustainable transition.

The transition to a low-carbon energy future for emerging economies (excluding China) will require total annual investments of an estimated $1 trillion by 2025 and $2.4 trillion by 2030.

$1tr

$2.4tr

Ella Kokotsis, PhD, serves as the director of climate finance strategy for the Global Governance Program. With nearly three decades’ experience attending G7 and G20 summits, she is a leading expert in summit compliance and accountability. Her scholarly contributions include numerous publications on summit diplomacy, and she is regularly invited to share her insights as a speaker at international conferences on global governance. Ella is the author of Keeping International Commitments: Compliance, Credibility and the G7 and co-author of The Global Governance of Climate Change: G7, G20 and UN Leadership and Reconfiguring the Global Governance of Climate Change  www.g7g20.utoronto.ca

A moment of profound fracture

To avoid falling into a world of clean energy haves and havenots, we must scale up international climate financing.

Simon Stiell, executive secretary, UN Climate Change

In the past decade we’ve seen some real progress [on climate finance].

Over a trillion dollars was invested in climate action last year globally. Up from a few hundred billion a decade ago.

According to the OECD [Organisation for Economic Co-operation and Development], in 2022 developed countries provided and mobilised more than $100 billion in climate finance to developing countries.

BECAUSE WE CAN ONLY PREVENT THE CLIMATE CRISIS FROM DECIMATING ALL ECONOMIES – INCLUDING THE LARGEST – IF EVERY NATION HAS THE MEANS.

We got this far because first-movers and smart governments – who had the means – seized their chance. They saw the opportunity and grabbed it.

But … this is nowhere near enough.

This year we’ve seen hundreds of billions of dollars of damage to countries rich and poor.

So many have suffered from Hurricane Milton and Helene’s devastating damage. My own home island of Carriacou took a direct hit from Hurricane Beryl only a few months ago.

And even those who’ve avoided direct damages have been hit hard by inflation as supply chains are blocked and broken.

We simply can’t afford a world of clean energy haves and have-nots. In a twospeed global transition, pretty soon everyone loses.

Because we can only prevent the climate crisis from decimating all economies – including the largest – if every nation has the means to slash greenhouse gas pollution and boost climate resilience …

Doing so is a crucial investment to protect the global economy, and will be a fraction of the costs every nation will pay if we allow the climate crisis to keep running rampant, devastating more and more lives and livelihoods every year …

International climate finance must grow up, step up, and scale up, to meet this moment …

Multilateral Development Banks will be at the heart of this transition. Just this week the World Bank announced more concessional lending for climate. And the IMF [International Monetary Fund] is looking at ways to incorporate climate action and risks right across their work. This is good news. But incremental increases won’t lead to an exponential surge of investment and green growth. On climate finance, we have a need for speed, and without much larger scale, all economies will fail.

So many countries are facing debt crises that amount to fiscal straight-jackets, making it nearimpossible to invest in climate action.

… We must see further signals that the World Bank and IMF are committed to ensuring developing countries have funds and fiscal space for climate action and investment, not devastating debts and sky-high costs of capital.

Debt relief and introducing more climate-related debt clauses are a start. So is replenishing the World Bank’s International Development Association.

And it’s not just up to development banks. The G20 countries are their largest shareholders and must fund them properly and demand more, including wider reforms to the international financial architecture, while also working to find new and innovative sources of finance.

Under Brazil’s G20 leadership, climate and finance ministers have finally been brought together. This essential collaboration must continue and be translated into clear outcomes.

Progress on climate finance outside our negotiation process enables breakthroughs within it and vice-versa. If we fail at either, it could be a knock-out blow to crucial parts of the Paris Agreement. So ambitious outcomes … are vital to

enable bolder climate actions that boost economies and strengthen societies everywhere.

At COP29 [meeting of the 29th Conference of the Parties to the United Nations Framework Convention on Climate Change] in Baku all governments must agree a new goal for international climate finance that truly responds to the needs of developing countries.

COP29 must be the stand-and-deliver COP, recognising that climate finance is core business to save the global economy and billions of lives and livelihoods from rampaging climate impacts.

It’s … clear public finance [that] must be at the core.

As much of this finance as possible needs to be grant or concessional, and must be made more accessible to those who need it most. And we must make climate cash count, wherever possible leveraging more private finance and sending signals to financial markets that green

SIMON STIELL

is where the gains are …

It’s also important we put in place mechanisms to track and ensure that promised funds are delivered.

More work also has to be done to rapidly ramp up funding for adaptation and get international carbon markets working for everyone.

We must fund a new generation of national climate plans.

To protect the progress we made at COP28, and convert the pledges … – to triple renewable energy, double energy efficiency, boost adaptation and transition away from fossil fuels – into real-world, real-economy results.

And we must get the Loss and Damage Fund working fully, dispersing money to those who need it most.

This is a moment of profound fracture between nations and within them. In times like these, there is a temptation to turn inward. A delusional belief that what happens in my neighbor’s backyard is not my problem or my concern.

If we go down this path, it will soon be

game-over in the world’s climate fight.

So let’s instead choose the gamechanger path ahead – the one that recognises that bigger and better climate finance is entirely in every nation’s interests, and can deliver results everywhere.

Let’s choose the path that focuses on solutions, and ensuring the massive benefits of bolder climate action –stronger growth, more jobs, better health, secure and affordable clean energy – are within all nations’ reach.

That is the only pathway to every nation surviving and thriving.

Brookings Institution’s Global Economy and Development Programme, 17 October 2024

Simon Stiell was appointed executive secretary of the United Nations Framework Convention on Climate Change in 2022. Previously he served as the minister for climate resilience and the environment in the Government of Grenada from 2013 through 2022, and, earlier, minister for education and human resource development, minister of state responsible for human resource development and the environment, and parliamentary secretary in the Ministry of Agriculture, Lands, Forestry and Fisheries. Before joining the government, he held senior executive positions in the technology sector.

X-TWITTER @simonstiell  unfccc.int

Dedicated professionals ensuring a brighter sustainable future through solar energy

A crucial transformation

Aside from its ambitious climate change commitments, India is also looking to drive the uptake and research of green hydrogen.

Narendra Modi, prime minister, India

The world is going through a crucial transformation. There is a growing realisation that climate change is not just a matter of the future. The impact of climate change is being felt here and now. The time for action is also here and now. Energy transition and sustainability have become central to global policy discourse.

CLIMATE CHANGE AND ENERGY TRANSITION ARE GLOBAL CONCERNS. OUR ANSWERS ALSO NEED TO BE GLOBAL IN NATURE.

India is committed [to] creating a cleaner and greener planet. We were the first among G20 nations to fulfill our Paris commitments on green energy. These commitments were fulfilled 9 years ahead of the target of 2030. India’s installed non-fossil fuel capacity increased nearly 300% in the last 10 years. Our solar energy capacity increased over 3,000% in the same period. But we are not resting on these achievements. We remain focused on strengthening existing solutions. We are also looking at new and innovative areas. This is where Green Hydrogen comes into the picture.

Green Hydrogen is emerging as a promising addition to the world’s energy landscape. It can help in decarbonizing industries that are difficult to electrify. Refineries, fertilizers, steel, heavy-duty transportation – many such sectors will benefit. Green Hydrogen can also act as a storage solution for surplus renewable energy. India has already launched the National Green Hydrogen Mission in 2023.

We want to make India a global hub for the production, utilization, and export of Green Hydrogen. The National Green Hydrogen Mission is giving an impetus to innovation, infrastructure, industry, and investment. We are investing in cutting-edge research and development. Partnerships between industry and academia are being formed. Startups and entrepreneurs who are working in this domain are being encouraged. There is also a great potential for a green jobs eco-system to develop. To enable this, we are also working on skill development for our youth in this sector.

Climate change and energy transition are global concerns. Our answers also need to be global in nature. International partnership is critical for promoting Green Hydrogen’s impact on decarbonization. Scaling up production, minimising costs and building infrastructure can happen faster through cooperation. We also need to jointly invest in research and innovation to push technology further. In September 2023, the G20 Summit happened in India. In this Summit, there was a special focus on Green Hydrogen. The New Delhi G-20 Leaders’ declaration adopted five high-level voluntary principles on Hydrogen. These principles are helping us in the creation of a unified roadmap. All of us must remember – the decisions we make now, will decide the life of our future generations.

In such a crucial sector, it is important for domain experts to lead the way and

India’s installed non-fossil fuel capacity increased nearly 300% in the last 10 years. Our solar energy capacity increased over 3,000% in the same period.

300%

3000%

ALL OF US MUST REMEMBER – THE DECISIONS WE MAKE NOW, WILL DECIDE THE LIFE OF OUR FUTURE GENERATIONS.

work together. Particularly, I urge the global scientific community to come together to explore various aspects. Scientists and innovators can suggest changes in public policy to help the Green Hydrogen sector. There are also many questions that the scientific community can look into. Can we improve the efficiency of electrolysers and other components in Green Hydrogen production? Can we explore the use of sea water and municipal wastewater for production? How can we enable the use of Green Hydrogen in public transport, shipping, and inland waterways? Exploring such topics together will greatly help green energy transition across the world ...

Humanity has faced many challenges in the past. Each time, we overcame adversities through solutions that were collective and innovative. It [is] the same spirit of collective and innovative action that will guide us towards a sustainable future. We can achieve anything when we are together. Let us work to accelerate the development and deployment of Green Hydrogen.

Video message for 2nd International Conference on Green Hydrogen, 11 September 2024

In 2015, the ISA [International Solar Alliance] began as a small sapling, it was a moment of hope and aspiration. Today it is growing into [a] giant tree inspiring policy and action. In such a short time, the Membership of ISA [has] reached a milestone of [a] hundred countries. Additionally, 19 more countries are ratifying the framework agreement for attaining full membership. The growth of this organization is important for the vision of ‘One World, One Sun, One Grid.’

In the past few years, India has taken many massive strides in green energy. We were the first G20 Nation to achieve

the Paris commitments in renewable energy. The remarkable growth of solar energy is a key reason in making this possible. Our solar energy capacity has increased 32-fold in the last 10 years. This speed and scale will also help us achieve five hundred (500) gigawatt non-fossil capacity by 2030.

India’s growth in the solar sector is the result of a clear approach. Whether in India or in the world, the mantra to increase solar adoption is awareness, availability and affordability. [We] increased awareness about the need [for] sustainable energy sources by encouraging domestic manufacturing in the solar sector we increase availability. Through specific schemes and incentives, we also made the solar option affordable.

ISA is an ideal platform for exchanging ideas and best practices for solar adoption. India has a lot to share as well. Let me give you an example [of] a recent policy intervention. A few months ago, we launched the PM Surya Ghar Muft Bijli Yojana. We are investing Rupees 750 billion in this scheme. Our target is to help 10 million households to install their own rooftop solar panels. We are transferring financial assistance directly to the people’s bank accounts. Low interest, collateral free loans are also being enabled in case additional finance is needed. Now, these households are generating clean electricity for their needs. Moreover, they will also be able to sell excess power to the grid and earn money. Due to the incentives and potential earnings, this scheme is becoming popular. Solar energy is being seen as an affordable and attractive option. I am sure many nations have similar valuable insights derived from their work on energy transition.

In a short time, the ISA has made a lot of progress. In 44 countries, it has

assisted in developing nearly 10 gigawatts of electricity. The Alliance has also played a role in bringing down the global prices of solar pumps. Private sector investment is being enabled, especially in African member countries. A number of promising solar startups from Africa, Asia-Pacific, and India are being encouraged. This initiative will also be expanded to Latin America and the Caribbean soon. These are noteworthy steps in the right direction.

To ensure an energy transition, the world must collectively discuss some important matters. The imbalance in concentration of green energy investments need to be addressed.

Manufacturing and technology need to be democratised to help developing countries. Empowering Least Developed Countries and Small Island Developing States should be a top priority. Inclusion of marginalised communities, women and youth is crucial ... India is committed to work with the world for a green future. During the G20 last year, we led the creation of the Global Biofuels Alliance. We are also one of the founding members of the International Solar Alliance. Every effort to build an inclusive, clean and green planet will have India’s support. First International Solar Festival, 5 September 2024

Wind turbines in Nagercoil, South India

Taking a global role in the climate crisis

The world’s fight against climate change will be more effective if countries join forces.

Luiz

Inácio Lula da Silva, president, Brazil

The [Pact for Ecological Transformation between the Three Powers of the Brazilian State] … symbolizes the determination of each of us to face the greatest challenges of our time, with the depth and urgency that the climate crisis demands.

The union of the Three Powers around a common proposal is a testament to the strength and maturity of our democracy.

The 1988 Constitution, written under the aegis of hope, enshrines the right to an ecologically balanced environment.

WE NEED TO REMEMBER THAT THE CLIMATE AGENDA IS NOT A COST. IN ADDITION TO BEING ESSENTIAL FOR THE SURVIVAL OF THE PLANET AND HUMANITY, IT GENERATES EMPLOYMENT AND INCOME OPPORTUNITIES.

This Pact, however, is more than the fulfillment of a legal duty. It is a pact of responsibility towards our beloved planet.

The storms that devastated the South and the droughts that punished the Amazon are nature’s warning cries, calling for our attention.

And our actions will be more effective when we join forces, towards a development model that respects human dignity and the integrity of our ecosystems.

We have established a new framework for the country, in which ecological sustainability, economic development and social and climate justice become central pillars of our public policies.

The commitments we have made in this Pact range from prioritizing environmental legislation to accelerating land use planning.

From the transition to a lowcarbon economy to encouraging

economic activities that generate quality employment, while respecting the preservation of our biomes.

This is therefore not just an environmental agenda focused on specific sectors, such as the energy transition that is currently underway.

It is also not an isolated environmental plan, but rather a proposal to reformulate our economic development model, which considers all aspects of the relationship between society and the environment …

This Pact signals that the development we seek is not just a government policy, but a lasting and inclusive State policy … By joining forces around this common goal, we are sending a clear message to the world: Brazil is prepared to take on a global role in tackling the climate crisis.

Protagonism that is reflected in the presidency of the G20, when we chose as our theme the construction of a fair world and a sustainable planet.

A leading role that we demonstrate in each participation in our main global forums, and which we strengthen with the choice of Belém as the host city of COP 30 [Conference of the Parties to the United Nations Framework Convention on Climate Change] in 2025.

Brazil finds itself facing an urgent call: to assume, with courage and determination, the role of guardian of life in all its forms.

We have the largest tropical forest on the planet. We have one of the cleanest energy matrices in the world.

We occupy the privileged position of a powerful producer of biofuels, moving the world with non-polluting products.

Our transport already has the most renewable energy matrix in the world, with more than 21 percent of biofuels.

The signing of this Pact is yet another demonstration of our commitment to tackling the climate emergency …

You have to look not only at the trees, but also at the people who live around them.

THE PLANET NO LONGER WAITS TO HOLD THE NEXT GENERATION ACCOUNTABLE AND IS TIRED OF UNFULFILLED CLIMATE AGREEMENTS. IT IS WEARY OF NEGLECTED CARBON EMISSION REDUCTION TARGETS AND OF FINANCIAL AID TO POOR COUNTRIES THAT NEVER ARRIVES.

This is the path we have chosen to follow. Every action our government takes is committed to reducing inequality.

We need to remember that the climate agenda is not a cost. In addition to being essential for the survival of the planet and humanity, it generates employment and income opportunities.

This comprehensive vision of development is deeply linked to the fundamental role of public investment.

Whether in the sustainable biofuels industry or in the works of the New PAC, which includes at least 20 lowcarbon fuel projects.

Under the competent leadership of Minister Marina [Silva], we launched the National Bioeconomy Strategy, which combines environmental protection with job and income generation, social inclusion and the promotion of science, technology and innovation.

We launched the Green Mobility and Innovation Program – MOVER, which expands the sustainability requirements of the automotive fleet.

While improving the quality of life in large cities, MOVER stimulates the production of new technologies in the areas of mobility.

We want to ensure that the decisions taken here reverberate throughout Brazil, and also abroad, bringing about concrete and lasting changes.

This is a country that has once again developed a national project and a vision for the future.

Speech at the signing of the Pact for Ecological Transformation between the Three Powers of the Brazilian State, 21 August 2024

We are condemned to the interdependence of climate change.

The planet no longer waits to hold the next generation accountable and is tired of unfulfilled climate agreements.

It is weary of neglected carbon emission reduction targets and of financial aid to poor countries that never arrives.

Denialism is succumbing to the evidence of global warming.

The year 2024 is on track to be the hottest year in modern history.

Hurricanes in the Caribbean, typhoons in Asia, droughts and floods in Africa, and torrential rains in Europe are leav-

ing a trail of death and destruction.

In southern Brazil, we have had the worst flooding since 1941.

The Amazon is facing its worst drought in 45 years.

Forest fires have spread across the country and already devoured 5 million hectares in August alone.

My government does not outsource responsibilities or abdicate its sovereignty.

We have already done a lot, but we know that more has to be done.

In addition to facing the challenge of the climate crisis, we are fighting against those who profit from environmental degradation.

We will not make compromises in our fight against environmental crimes, illegal mining, and organized crime.

We have reduced deforestation in the Amazon by 50% in the last year, and we will eradicate it by 2030.

It is no longer acceptable to consider solutions for tropical rainforests without listening to indigenous peoples, traditional communities, and all those who live in them.

Our vision of sustainable development is based on the potential of the bioeconomy.

Brazil is going to host COP30 in 2025, and is convinced that multilateralism is the only way to overcome the climate emergency.

Our Nationally Determined Contribution – NDC – will be presented later this year, in line with the goal of limiting the increase in the planet’s temperature to one and a half degrees.

Brazil is emerging as a source of opportunities in a world that is being revolutionized by the energy transition.

Today, we are one of the countries with the cleanest energy matrix.

Altogether, 90% of our electricity comes from renewable sources such as biomass, hydroelectric, solar, and wind power.

We opted for biofuels 50 years ago, long before the discussion on alternative energy sources gained leverage.

We are at the forefront of other important niches such as the production of green hydrogen.

It is time to address the debate on the slow pace of global decarbonization, and to work towards an economy that is less dependent on fossil fuels.

United Nations General Assembly, 24 September 2024

Wind turbines in north-east Brazil

Building a sustainable future

The extreme effects of climate change are proving a strain on the global economy and damaging countries’ ability to perform essential services.

Cyril Ramaphosa, president, South Africa

This Climate Resilience Symposium is taking place at a time when we are witnessing firsthand our extreme vulnerability to the impacts of a changing climate …

Disruptions caused by climate change increase the cost of doing business, undermine competitiveness and dampen employment growth.

These disruptions result in lower tax revenue and increased expenditure on disaster relief, health care and social support for affected communities …

The resultant strain on public finances then necessitates the reallocation of funds from other essential services.

To manage the higher expenditure and lower revenues government may then need to increase borrowing, leading to higher debt levels and interest payments.

This limits government’s ability to invest in other critical areas …

INDECISION AND SLOW ACTION ARE NOT AN OPTION. WE MUST ACT DECISIVELY AND SWIFTLY TO MITIGATE THE EFFECTS OF CLIMATE CHANGE AND ENSURE A JUST TRANSITION FOR ALL SOUTH AFRICANS.

It is society’s most vulnerable who bear the brunt of climate change because they have limited means to prepare for, cope with, and recover from climate-related adverse events.

Just as it is the countries of the Global South that feel the effects of climate change most, despite being least responsible historically for global emissions.

It is critical that we strengthen systems for adaptation and mitigation, build resilience in communities and accelerate our decarbonisation efforts and the pace of the just energy transition.

The reality we must confront is that the carbon-intensity of our economy is unsustainable.

For decades our reliance on coal was a competitive advantage because it allowed us to produce electricity cheaply. But the world has changed and this dependency has come to pose significant risks.

As the world moves towards greener economies, our trading partners will take measures to ensure that their own climate actions do not undermine their economies.

Instruments like the European Union’s Carbon Border Adjustment Mechanism, which has the potential to cause great damage to developing economies, signal the inevitability of carbon pricing in global trade systems.

Our emissions-intensive energy system is likely to increasingly undermine our competitiveness in global markets … If we act too fast, we risk damaging huge sections of our economy before we have built alternative energy and industrial capabilities.

At the same time, not acting now risks our economic stability.

We must embrace a managed transition to a low-carbon economy, not only to safeguard our people and our environment, but to ensure our

economic resilience and growth.

We are facing a climate emergency.

Indecision and slow action are not an option. We must act decisively and swiftly to mitigate the effects of climate change and ensure a just transition for all South Africans.

We must pursue a green industrial agenda that will create jobs and grow the economy.

Investments in green infrastructure, renewable energy and climate adaptation measures can be costly, requiring careful financial planning and prioritisation.

That is why we have prioritised inclusive growth …

Our strategy involves preparing ourselves to withstand the economic risks posed by climate change while taking full advantage of the opportunities of the energy transition.

This is no easy balance.

South Africa aims to reach net zero

emissions by 2050.

Our revised Nationally Determined Contribution balances our developmental needs and economic realities.

It takes into account the feasibility of undertaking a climate response through a set of just transition pathways.

… It notes [the] carbon tax as a vital component of our mitigation strategy to lower greenhouse gas emissions.

By internalising the cost of carbon emissions, the carbon tax incentivises companies to reduce their carbon footprint and invest in cleaner technologies.

The carbon tax also generates revenue for climate initiatives.

These funds can be reinvested in renewable energy projects, energy efficiency programmes and social support mechanisms.

We have launched a number of other initiatives to meet our emissions targets …

The Just Energy Transition Investment

Plan sets out a quantified investment plan of some $98 billion. This will drive huge investments in the electricity grid, green hydrogen, electric vehicles, economic diversification and skills development, amongst others …

It is crucial that the transition to a low-carbon economy is just and inclusive and that no worker or community is left behind …

Climate finance is crucial for our transition.

We need substantial investments to build sustainable infrastructure, develop green technologies and support social programmes …

We need to think seriously about the urgent financial and policy measures needed to address these shocks …

Mitigation and adaptation financing remains a challenge, and we call on our international partners to fulfil their commitments to finance both.

We have already seen positive steps with the establishment of the Green Climate Fund, the Loss and Damage Fund, and other global mechanisms.

… We need more innovative financing solutions that mobilise private capital and incentivise sustainable practices … International development finance institutions and governments of the Global North that made financial pledges under the Paris Agreement and COP26 [Conference of the Parties to the United Nations Framework Convention on Climate Change] are important sources of cheap and concessional capital.

To access this and other funding, we need a credible project pipeline …

The science of climate change is complex. So too are the economic, technological, social, ecological and political implications.

Nonetheless, climate action is an imperative. We must act now.

This requires collaborative efforts between government, business, labour, civil society, communities and international partners.

If we work together, if we understand the risks and if we appreciate the urgency, we can make our country climate resilient.

And in doing so, we can build a sustainable future for generations to come.

Climate Resilience Symposium 2024, 5 July 2024

HOW CAN THE WORLD SAVE $50 TRILLION BY 2050 IN THE GREEN ENERGY TRANSITION?

Four insights to unlock much-needed capital and accelerate a sustainable future.

Jennifer Steinmann, global sustainability business leader, Deloitte, and Bernhard Lorentz, global consulting sustainability and climate strategy leader, Deloitte

The road to net zero emissions by 2050 demands a monumental shift in economic structures, transitioning away from fossil fuels and embracing a clean energy future. But how the world unlocks the capital needed to facilitate this transition is not clear-cut – fundamentally because risks in this green transition are not homogenous (they are differentiated) and vary based on market and project type. This largely reflects macro and political risks in less familiar investment markets; technology risks because emerging technologies are relatively new; and the financial risks that come from this being a relatively new area of finance. A failure to address these market factors risks a slower, more costly and inequitable transition.

Green technologies are often perceived as risky, hindering the crucial investments needed for a swift and equitable transition. According to Deloitte’s new report, Financing the Green Energy Transition: Innovative Financing for a Just Transition , the energy transition could cost up to $200 trillion by 2050 unless the financing conditions for clean energy investments are improved. But by mobilising de-risking instruments and fostering a new green finance ecosystem of investors, lenders, development finance institutions and policymakers, we can unlock capital, drive economic growth and achieve a cost-effective transition, potentially saving the world $50 trillion by 2050.

Here are the top four insights to unlock much-needed capital and accelerate a sustainable future:

1) Understanding green energy project risks: Key decarbonisation solutions – including large-scale renewable development, electrification of end-uses, green hydrogen uses in hard-to-abate sectors and energy efficiency improvements – are generally highly capital intensive and require significant investment. They also carry higher perceived risks, impacting financing costs. The key risks include:

• macro risks – such as political and regulatory risks;

• market risks – such as revenue, liquidity, missing market, commercial track record and economic competitiveness risks;

• technical risks – including underperformance, missing infrastructure, construction delays and cost overrun risks; and

• financial risks – mainly stemming from the limitations of the current project finance environment and underdeveloped financial markets.

2) Using efficient de-risking instruments: Efficient use of de-risking instruments – such as climate policies, guarantee mechanisms, offtake reliability, the development of domestic capital markets and leveraging blended finance – can make these projects more attractive to investors and reduce financing costs, bringing as much as $40 tril-

lion of savings by 2050. Each of these instruments can vary in effectiveness, cost efficiency and timeliness. For instance, de-risking is more effective in developing countries where policy, market and capacity barriers are greater. Regardless of country or technology, the relevance of instruments changes over time and no single instrument is the silver bullet. The objective is to combine the right instruments to help deliver the maximum effect.

3) Applying financial learning and project refinancing: Through financial learning effects – where investors and lenders improve their risk perception of green projects over time and as markets and regulatory environments mature – the cost of capital can decrease even further. Enabling the refinancing of longterm green projects can also help make the transition more affordable by allowing projects to lower their financing costs as capital markets mature. Refinancing debt and equity can unlock as much as $10 trillion of savings cumulatively through 2050.

4) Working together to help reshape the current project finance environment: Reshaping the current project finance ecosystem to account for the environmental benefits and to facilitate collaboration among policymakers, investors and lenders, development financial institutions, and international organisations is crucial to achieve a cost-effective

A BROAD VIEW OF A CLEAN PROJECT FINANCE ECOSYSTEM WITH KEY ACTORS AND THEIR ACTION LEVERS

Can provide debt Can provide equity

Linked through offtake contract

Source: Deloitte, Financing the green energy transition: A $50 trillion catch (2023); Deloitte, Financing the green energy transition: Innovative financing for a just transition (2024).

Note: DFI = development finance institution; PE/VC = private equity/venture capital.

transition. The window to bring the world on course for net zero targets and for an affordable and just energy transition is closing fast, so public-private partnerships and international cooperation are essential.

Mobilising green finance is expected to continue to be a central theme at COP29 in Baku in November 2024, as it

JENNIFER STEINMANN

was in COP28 last year. Time is of the essence.

By strategically combining derisking instruments, promoting project refinancing and fostering collaboration among stakeholders, non-bankable clean energy projects can be transformed into attractive investments, slashing the cost of achieving net zero and accelerating the creation of a sustainable future.

Jennifer Steinmann is Deloitte’s global sustainability business leader, providing cross-business leadership to make an impact that matters and drive critical changes around some of the most important challenges organisations face today and in the future. She is a member of Deloitte’s senior leadership team and, for more than 25 years, has held various leadership positions at Deloitte including as the US chief talent officer and US deputy CEO. She has also served on the board of directors for Deloitte Touche Tohmatsu Limited and the Deloitte Foundation.

X-TWITTER @jsteinmann LINKEDIN www.linkedin.com/in/jennifer-steinmann-317565/  deloitte.com/us/en/profiles/JenniferSteinmann.html

Strategic financing tools can fuel innovation and help power an equitable and efficient green energy transition while saving the world $50 trillion by 2050 on its journey to net zero.

PROFESSOR DR BERNHARD LORENTZ

Professor Dr Bernhard Lorentz is a managing partner and the global consulting services sustainability and climate leader. He is the founding chair of the Deloitte Center for Sustainable Progress, which serves as a convener of specialists, industry influencers and thought leaders from around the world and focuses on holistic, data-driven analysis and results-oriented thought leadership to guide organisations through their sustainability journeys.

X-TWITTER @LorentzBernhard LINKEDIN linkedin.com/in/bernhardlorentz/  deloitte.com/global/en/about/people/profiles.bernhardlorentz+16927cd9.html

Mobilising UNDP support for climate finance

The United Nations Development Programme is committed to supporting countries while transitioning their energy systems, but this alone will not be enough. We need concerted action from global actors and to take every opportunity possible.

Interview with Achim Steiner, administrator, United Nations Development Programme

THE BANKS AND INVESTORS POURING MONEY INTO OIL, GAS AND COAL TODAY –THE COMPANIES LEADING THE FOSSIL FUEL SECTOR – ARE ABDICATING THEIR RESPONSIBILITY IN PURSUIT OF SHORT-TERM SHAREHOLDER INTERESTS.

How is the United Nations Development Programme helping to mobilise the support needed for climate finance?

Among United Nations climate conferences, Azerbaijan’s 29th Conference of the Parties to the Framework Convention on Climate Change will likely be remembered as a landmark with finance at its core with a new collective quantified goal that will unlock critical climate finance for developing countries.

This discussion is happening at a time of macroeconomic stress. In highincome countries, there is a tendency to prioritise national interests, often overlooking the fact that averting climate catastrophe is essential to protecting those very interests.

In domestic terms, in the wealthier countries we’re seeing encouraging levels of investment. However, emerging economies are frequently told they must depend on fossil fuels, even at their peril, by a self-serving financial and industrial world of actors who continue as if there is no consequence to their actions. The banks and investors pouring money into oil, gas and coal today – the companies leading the fossil fuel sector – are abdicating their responsibility in pursuit of short-term shareholder interests. It would not be surprising to see these companies face legal consequences to hold them accountable, similar to previous cases where firms were prosecuted for wilfully ignoring or concealing pollution.

We face a challenge in overcoming the divergent choices between the outdated economy that prioritises short-term gains before the inevitable consequences arise – or shifting financing, regulation and incentives to enable

those transformations. Moreover, deliberate polarisation is turning people against cleaner energy and e-mobility. Nobody talks about the price we are paying – and will pay for generations to come – if we don’t act today.

UNDP is committed to helping countries find their own ways to act. This is not just an issue of national planning and budgeting; it is also a strategy where equity, fairness and trust in institutions are critical.

That includes assisting over 120 countries to enhance their climate pledges – or nationally determined contributions – through our Climate Promise initiative. This approach is also prompting them to leverage new sources of finance that can be channelled to vital areas including poverty eradication, job creation and the just energy transition. We hope this work will allow countries to arrive at COP30 in Brazil in 2025 with NDCs that allow at least a remote chance of reaching the 1.5°C target. That’s a precondition for attracting finance, whether it is allocating public investment in energy infrastructure or leveraging significant private capital.

Our work to support Integrated National Financing Frameworks – supporting 86 countries to examine their resource availability including domestic, international, concessional, public and private finance and their strategies for multiplying these resources – is also significant because countries need both public and private capital. There is no way into the future without significant buy-in from financial and capital markets, industry and the corporate sector. The countries that are succeeding have the right mix of regulation and incentives, mobilising support that has proven catalytic and transformative.

What key things should the ministers and leaders at Baku do to help close the gap?

First, agree on a credible quantifiable goal. It will exceed $100 billion, which was the previous floor – now the basement – and we need to reach for the ‘third floor’. They need to identify a pathway to reconciling the need for finance and investment with the need for an accelerated transformation towards net zero. Otherwise, we will not find cooperative ways to work on these issues. It won’t deliver signed cheques the next day – but the pathway and commitments need to be credible and must acknowledge that those who can afford to invest more – in the private sector, the financial sector and capital markets – need to step up.

Second, international financial institutions must enhance their role as multipliers of investment and support. Indeed, for poor, vulnerable and indebted countries, instruments such as the Green Climate Fund and the Global Environment Facility are critical. There is an acute need for more concessional and grant financing. To ask those countries to add to their national debt while trying to address climate change and clean energy access is simply illogical. This will lead to default. We need to accept that there are countries and communities where providing grants is both effective and efficient, and we need to increase that finance.

The wealthiest economies are allocating just 0.37% of their combined gross national income in official development assistance. They’re not only missing an opportunity, but also causing the failure to address today’s great challenges – climate change, biodiversity loss, increasing pollution, growing inequalities driving migration and the emergence of a technological era that could create even more inequalities. If we believe that 0.37% can buy our way out, we are mistaken. We need to recognise our shared interests in that quantifiable

ACHIM STEINER

goal. And we need to pull the levers from multipliers to international financial institutions to grants – and understand that we are all investors in this climate transition.

Kenya, Uruguay, China, India, Costa Rica and Morocco invested their own taxpayers’ money and domestic capital to advance remarkable energy transitions. They are co-investors in this global endeavour, but are largely unrecognised for it. We should look at these global negotiations not just as institution-based multiplying but also as ‘global multiplying’. If the wealthy world invests more, it will release more of the developing world’s resources. Together as coinvestors, we can mobilise the $3 trillion needed to advance this energy transition.

The Pact for the Future, agreed by world leaders, aims to ensure that the long-term consequences of today’s actions are considered. Central to this vision is the long-overdue reform of our international financial architecture, which is not simply about amplifying resources for sustainable development and climate action. It is about ensuring that we do not shift today’s challenges to future generations but instead pass on a ‘torch of choice’, empowering them with the opportunity to shape their own destinies.

The wealthiest economies are allocating just 0.37% of their combined gross national income in official development assistance. 0.37%

Achim Steiner has been the administrator of the United Nations Development Programme since 2017. He is also the vice-chair of the UN Sustainable Development Group, which unites 40 entities of the UN system that work to support sustainable development. Prior to joining UNDP, he was director of the Oxford Martin School and professorial fellow of Balliol College, University of Oxford. He led the United Nations Environment Programme from 2006 to 2016 and was also director-general of the United Nations Office at Nairobi. His other previous notable positions include director general of the International Union for Conservation of Nature and secretary-general of the World Commission on Dams. X-TWITTER @Asteiner  undp.org

Plumes of carbon emissions billowing from a coal power plant

Major climate finance initiatives since the Paris Agreement

Milestones since 2015 in delivering financial support for a just transition to a net zero economy.

COP21 IN PARIS

Paris Agreement, adopted at the meeting of the 21st Conference of the Parties to the United Nations Framework Convention on Climate Change, sets a long-term goal to keep global temperature rise below 2°C, with efforts to limit it to 1.5°C

Developed countries committed to mobilising $100 billion annually by 2020 to help developing countries mitigate and adapt to climate change

COP24 IN KATOWICE

Countries agree on the implementation guidelines of the Paris Agreement, particularly on climate finance transparency, reporting mechanisms, and how to meet the $100 billion target by 2020

Climate investment funds worth $1 billion pledged to climate resilience programmes in low-income countries

GREEN CLIMATE FUND

Green Climate Fund approves first projects, worth $1.3 billion, to support climate action in developing countries

ONE PLANET SUMMIT

Hosted by French president Emmanuel Macron, the One Planet Summit supports the establishment of five public-private partnerships, raising more than $2 billion to fund the transition in developing countries

GLOBAL CLIMATE ACTION SUMMIT

Climate Finance Partnership bring together institutional investors, governments and philanthropies to drive private capital towards climate infrastructure in emerging markets

Net-Zero Asset Owner Alliance of major global asset owners, including insurers and pension funds, commit to align their portfolios with net zero emissions by 2050

EUROPEAN GREEN DEAL INVESTMENT PLAN

European Union launches plan to mobilise €1 trillion in sustainable investments over the next decade to transition to a low-carbon economy

G20 SUSTAINABLE FINANCE REPORT

G20 introduces reforms for multilateral development banks to boost financing for climate action, including leveraging private capital

World Bank and other MDBs announce commitments to direct lending to climate resilience and renewable energy projects

COP28 IN DUBAI

COP28 includes the Global Stocktake to assess progress towards meeting the $100 billion goal and the effectiveness of climate finance mechanisms

Discussions continue on a new post-2025 finance architecture, with a focus on scaling up public and private investment for mitigation and adaptation

COP26 IN GLASGOW

Canada and Germany announce Climate Finance Delivery Plan to meet the $100 billion annual goal by 2023

Over 100 countries join Global Methane Pledge to reduce emissions by 30% by 2030, with finance directed to developing countries

Just Energy Transition Partnership announced with South Africa, with $8.5 billion pledged by the United States, United Kingdom, EU and others to support transition away from coal

COP27 IN SHARM EL-SHEIKH

Loss and Damage Fund created to help vulnerable countries cope with the impacts of climate change

Discussions begin to replenish the Green Climate Fund

New pledges made to the Adaptation Fund, including commitments from Germany and the United States

COP29 IN BAKU

New collective quantified goal on climate finance expected

Tracking climate contributions

A glance at some of the numbers on climate finance provided by developed countries towards the goal of mobilising $100 billion annually for climate action in developing countries by 2025.

Subtotal (1+2) Inflows

Subtotal (1+2+3) Climate-related official supported export credits (3)

THE PARIS AGREEMENT PLATFORM

Bridging the gap: using carbon pricing to finance the energy transition

To make a truly just transition, we must make polluting much more costly at the same time as making access to clean energy more accessible and affordable.

Ely Sandler, research fellow, Harvard Kennedy School

Asingle silver bullet will not finance the energy transition. Transforming our energy system will require thousands of projects, millions of financial decisions and billions of people changing their behaviour. This necessitates a scattergun of political, financial and scientific solutions. Yet all solutions must target two fundamental necessities.

First, polluting must become more costly. In economic terms, firms must internalise the negative externalities of emitting carbon dioxide. This is carbon pricing.

Second, clean energy must become less expensive. A just transition is not simply making fossil fuels more expensive. It means making renewable energy accessible to all. Although clean electricity can often cost less than hydrocarbons, high borrowing rates in the Global South disproportionally burden capital-intensive clean energy projects, raising overall costs Supporting infrastructure including transmission and grid capacity adds to the expense. Consequently, the true cost of renewable energy often surpasses the low headline costs of solar and wind. This is where climate finance is vital.

coal power plant in the Netherlands, which passed a law in 2019 to phase out electricity generation from this fuel source by 2029

Progress is being made on the first of these two necessities. Carbon pricing now covers a quarter of global emissions. With the European Union’s carbon border adjustment mechanism, this is set to expand as more countries are incentivised to adopt their own carbon pricing schemes.

CBAM levels the carbon tax playing field. Although the EU has among the world’s most advanced carbon pricing systems, it also disadvantages European producers compared to foreign exporters who do not pay a carbon price. CBAM addresses this by imposing emissions duties on imports, ensuring foreign producers face the same carbon costs as EU companies.

This represents a seismic shift. Previously, countries with carbon pricing risked increased costs and diminished competitiveness. CBAM changes this by charging the ‘net’ difference between EU and local carbon taxes, creating a financial incentive for carbon pricing. Without taxing carbon, governments are simply forfeiting revenues to foreign governments such as the EU.

However, although CBAM creates an incentive for decarbonisation and carbon pricing, it also exacerbates the challenge of climate finance by imposing additional financial burdens on developing countries. Many emerging economies lack the capital needed to decarbonise, limiting their ability to respond to CBAM’s incentives. Additionally, these countries may not have the resources – or political will – to implement traditional carbon pricing to capture revenues domestically.

So, what can be done? There is no silver bullet, but carbon pricing could provide the financial ammunition needed for climate finance.

Carbon pricing creates ‘carbon tax liabilities’ on firms’ balance sheets, reflecting the cost of their emissions. Firms can settle these liabilities using ‘carbon tax assets’. In emissions trading schemes, carbon tax assets typically

take the form of emissions allowances. Under CBAM, firms can purchase CBAM certificates or provide proof that they have already paid a carbon price in their home country.

To unlock the climate finance potential of CBAM, the EU could recognise emissions reductions from decarbonisation projects in developing countries as carbon tax assets. Foreign firms could purchase these assets to meet their CBAM liabilities, which, once certified, would serve as proof of having paid a carbon price. This would then reduce firms’ CBAM liabilities by the value of the carbon assets tax purchased.

This approach could generate a new stream of climate finance. Exporters to the EU would fund emissions reduction projects in developing countries to obtain carbon tax assets, which they could then use to offset their CBAM liabilities. Developing countries could recognise domestic investments in decarbonisation by their own firms as a form of carbon tax, ensuring that carbon revenues remain within the country, rather than transferred to the EU.

How to successfully get there

For this approach to succeed, robust safeguards are essential.

First, the EU and other jurisdictions must ensure that investments result in genuine emissions reductions. One approach would be to base the system on carbon assets under article 6 of the Paris Agreement. The EU could ‘gold-plate’ article 6 credits with additional requirements, ensuring that the carbon assets used for CBAM reflect real, verifiable and additional emissions reductions. This could help set global standards for carbon markets globally, as the size of the CBAM market would likely lead to its criteria becoming widely adopted.

Second, CBAM deductions should be calculated in monetary terms not tons of carbon dioxide. If a firm invests $100 million in decarbonisation, that amount should be deducted from its carbon lia-

A SINGLE SILVER BULLET WILL NOT FINANCE THE ENERGY

TRANSITION. TRANSFORMING OUR ENERGY SYSTEM WILL REQUIRE THOUSANDS OF PROJECTS, MILLIONS OF FINANCIAL DECISIONS AND BILLIONS OF PEOPLE CHANGING THEIR BEHAVIOUR.

bilities, rather than the number of tons. This would prevent firms from gaming the system by removing the incentive to purchase inexpensive offsets.

Third, carbon tax assets should complement, not replace, traditional carbon pricing. For developing countries, this mechanism is a stopgap to retain revenue while carbon pricing scales up. However, exporters from developed countries with lower carbon prices than those in CBAM jurisdictions could continue to generate tax assets through climate finance indefinitely.

If done right, carbon tax assets from green investments in the Global South could match CBAM liabilities, tackling both necessities of the energy transition. CBAMs offer a huge opportunity for carbon pricing, but success depends on flexible pricing systems that support – and not exacerbate – the challenge of climate finance. This may indeed not be a silver bullet, but it is a first shot at transforming two requirements for the energy transition – carbon pricing and climate finance – into a unified solution.

ELY SANDLER

Ely Sandler is a research fellow in the Belfer Center’s Science, Technology and Public Policy Program at Harvard University. With a background in economics and finance, he has served as a senior consultant to the World Bank, and worked at Morgan Stanley in investment banking, capital markets and senior management. He is a founding board member of 50:50 Startups, the non-profit tech accelerator for Israeli and Palestinian entrepreneurs. He continues to serve as a consultant with E.ON, the World Bank, HomeBiogas and EY, and adviser to two carbon removal startups, Blue Carbon and Bomvento.

X-TWITTER @ely_sandler

The need to scale climate finance provision for a just transition: Morocco’s perspective

As a country that is recognised as particularly vulnerable to climate change, sustainability is a key concern for Morocco. Increased private and public funding, especially from developed countries, will be crucial in supporting developing countries to meet their goals.

Bouzekri Razi, former UNFCCC

National Focal Point, and director, Climate Change, Biodiversity and Green Economy, Morocco’s Ministry of Energy Transition and Sustainable Development; and Iskander Erzini Vernoit, director, IMAL Initiative for Climate and Development

Morocco has long been considered a leader in climate action, ranked among the highest for its ambition. Its recent efforts reflect its longstanding commitment to fighting climate change. Its nationally determined contribution, updated in 2021, outlines a clear roadmap for national efforts on climate change, in mitigation and adaptation, with finance at its heart.

Morocco’s NDC emphasises a commitment to renewable energy and decarbonisation. It aims to achieve 52% of electricity generation from renewable sources by 2030. This is an enhancement of past ambitions. Under the farsighted vision of King Mohamed VI, investment in renewable energy, especially solar and wind, has not only reduced Morocco’s dependence on fossil fuels from foreign sources, but has also created new economic opportunities and improved energy access for rural communities. Morocco’s pioneering efforts on renewable energy have been an inspiration to other countries for over 15 years.

Morocco’s NDC also stresses the imperative of adaptation and improved resilience to growing climate change impacts. Morocco, liable to drought, desertification and flooding, is considered a particularly vulnerable country under the United Nations Framework Convention on Climate Change, and has suffered extreme weather impacts. The NDC outlines a range of adaptation plans, notably regarding agriculture and water resources, and

also in fisheries and aquaculture, forestry, the health sector, housing, and the most vulnerable environments and ecosystems: oases, coastlines and mountains. The NDC notes that, without adaptation, vulnerabilities will hinder Morocco’s achievement of the Sustainable Development Goals.

NDC conditions on scaling finance Finance is a core requirement of any national effort to implement mitigation and adaptation measures – and indeed, finance is a core part of Morocco’s NDC. Morocco’s NDC unconditionally commits to reduce emissions by 18.3% by 2030 relative to a business-as-usual scenario, based on 34 unconditional national measures. It also commits to reduce as much as 45.5% by 2030 depending on international climate finance for a further 27 conditional measures.

The NDC estimates that $38.8 billion will be required to fully achieve its mitigation targets. Of this, $21.5 billion is required as international climate finance for the conditional aims.

National efforts on finance

Since the adoption of the Paris Agreement in 2015, Morocco has worked to strengthen its domestic frameworks for climate finance, in addition to efforts at international levels. A notable milestone was Morocco’s adoption in 2016 of its Roadmap for Aligning the Financial Sector with Sustainable Development Challenges.

In the absence of international

support, Morocco is spending considerable sums of domestic public money on loss and damage from climate change. Recently, in response to the worst drought in decades, Morocco spent approximately $1 billion in public funds, which might otherwise have been deployed for mitigation, adaptation or other ends.

Morocco’s Ministry of Economy and Finance, in collaboration with the Ministry of Energy Transition and Sustainable Development, is undertaking efforts to ensure that budget and fiscal measures integrate climate considerations.

Morocco aims to take the burden off state-led financing by increasing private finance where possible in climate-related areas with investment potential, such as an energy transition, through expanded partnership with the private sector. This approach is reflected in Morocco’s 2021 New Model for Development.

Indeed, Morocco recently launched the new national Strategy for the Devel-

FINANCE

IS A CORE

REQUIREMENT

OF ANY NATIONAL

EFFORT TO IMPLEMENT MITIGATION AND ADAPTATION MEASURES – AND INDEED, FINANCE IS A CORE PART OF MOROCCO’S

NDC.

opment of Climate Finance to catalyse private investments, with strategic axes including, but not limited to, market transparency, awareness raising, investment-oriented solutions for risk sharing, climate-related financial risk management, capacity building, disclosures, public policy and regulation.

Towards an increase in international finance

At the international level, Morocco has benefited from the Green Climate Fund as well as other funds and bilateral financing. This has enabled it to pursue high-impact initiatives in renewable energy and resilience building, such as the Noor Solar Complex and adaptation projects in rural areas.

However, with $21.5 billion required to meet the conditional commitments, Morocco’s NDC highlights the importance of international cooperation in addressing the global climate crisis. Morocco thus continues to advocate for increasing international climate finance from developed countries to developing countries.

Since the Glasgow meeting of the 26th Conference of the Parties, Morocco has consistently and actively engaged in the process to develop the new collective quantified goal on climate finance, to ensure that the new goal responds to the needs and priorities of Morocco and other developing countries, particularly in providing concessional and grant-based public finance for the NDCs.

A turning point at COP29

Whatever the outcome of COP29, it will mark a turning point in the life of the Paris Agreement. Adopted at COP21 in 2015, the Paris Agreement saw a rapid entry into force on the eve of the COP22 meeting in Marrakech in 2016. This swift international action represented a diplomatic victory, reflecting the support for enhanced global action through NDCs.

However, it was understood that timely implementation of these NDCs would necessitate much greater international public finance support from developed countries to developing countries. The reality across many developing countries, including Morocco, is that despite best efforts nationally to mobilise finance from the private sector and other sources, the new provision of international public finance remains required for NDC implementation. The decision on a new finance goal at Baku will therefore be a clear test of the world’s commitment to the Paris Agreement.

Morocco’s NDC unconditionally commits to reduce emissions by 18.3% by 2030 relative to a business-asusual scenario, and by 45.5% by 2030.

18.3%

45.5%

The NDC estimates that $38.8 billion will be required to achieve these targets.

$38.8bn

BOUZEKRI RAZI

Dr Bouzekri Razi works at Morocco’s Ministry of Energy Transition and Sustainable Development, where he is the director of climate change and biodiversity. He served as the National Focal Point for Morocco for the United Nations Framework Convention on Climate Change (2018–2024) and for the Green Climate Fund. He led Morocco’s negotiation team under the UNFCCC and Paris Agreement. He supervised Morocco’s climate strategies, including the National Climate Plan 2030 and Long-Term Low Emission Development Strategy (2050), while directing key projects on climate transparency, biodiversity and ecosystem assessments.

ISKANDER ERZINI VERNOIT

Iskander Erzini Vernoit is a founding director at the Imal Initiative for Climate and Development, a non-profit think-tank based in Morocco. He advises a range of governments, civil society and non-state actors. He began his career as a climate negotiator for Morocco on the COP22 presidency and has held other climate-related roles in academia, advocacy and socially responsible investment.

Rwanda’s path to a just and sustainable future: mobilising finance for climate action

As well as slashing greenhouse emissions and advancing climate resilience, Rwanda is looking to accelerate economic growth.

Juliet Kabera, director general, Rwanda Environment Management Authority

RTO ADDRESS THE FINANCING GAP, RWANDA HAS TAKEN SIGNIFICANT STEPS TO STRENGTHEN ITS CLIMATE FINANCE FRAMEWORK BY ESTABLISHING THE RWANDA GREEN FUND AS A PUBLIC INSTITUTION RESPONSIBLE FOR MOBILISING AND EFFECTIVELY UTILISING CLIMATE FINANCE.

wanda aspires to become a middle-income country by 2035 and a high-income country by 2050. Even with this vision associated with accelerated economic growth, Rwanda still recognises and has showcased its commitment to climate action through ambitious targets and its revised Green Growth and Climate Resilience Strategy. The revised strategy has four thematic areas that consolidate eight programmes of action including one on climate resilient energy networks, green industry and private sector participation.

The country’s updated nationally determined contribution, submitted in 2020, underscores this dedication, with a target of cutting greenhouse gas emissions by 38% by 2030 compared with a business-as-usual scenario. Rwanda’s climate strategy includes both unconditional measures, accounting for 16% of the reduction, and conditional measures, which depend on external financing and make up the remaining 22%.

Achieving these ambitous sustainable development pathways requires significant financial resources, however. Securing the necessary climate finance remains a key challenge, as finance is often seen as the engine driving progress. Yet not all financing leads to sustainable outcomes. That is why financing a just transition as a tool has come at the right moment

to support the greening of the economy in a way that is fair and inclusive. Rwanda is prioritising the creation of decent work opportunities, ensuring that no one is left behind in this green transformation.

The

financial needs of Rwanda’s updated NDC

Rwanda’s updated NDC has a projected cost of $11 billion through 2030. Of this total, 40% is expected to be mobilised internally, and the remaining 60% will require external support. The projected costs are calculated based on sectoral emissions from the greenhouse gas inventory, focusing on the sectors that emit the most and those that require greater focus on climate resilience.

The total budget is divided between mitigation and adaptation measures. Mitigation accounts for $5.7 billion, with 26% of this allocated to soil and water conservation efforts. Adaptation measures total $5.3 billion, with the agriculture sector receiving the largest share of 55%, as it plays a critical role in enhancing food security and resilience against climate shocks.

Building a strong climate finance network

To address the financing gap, Rwanda has taken significant steps to strengthen its climate finance framework by establishing the Rwanda Green Fund as a public institution responsible for

mobilising and effectively utilising climate finance. A notable milestone is the establishment of IREME Invest, a green investment facility for Rwanda’s private sector to support green business growth in the areas of clean energy and smart mobility, among others.

Rwanda has mobilised a substantial amount of domestic and international resources. It has also secured partnerships with multilateral organisations and aligned its development priorities with sustainability objectives.

The government has worked closely with financial institutions on sustainability-linked bonds to ensure financial flows support the country’s climate goals. Through climate finance

JULIET KABERA

tracking mechanisms such as climate budget tagging, starting with 2024/ 2025, the Ministry of Finance and Economic Planning will be able to effectively track and report finance channelled to climate action. Rwanda also launched its ‘Green Taxonomy’ in 2023 to serve as a valuable framework for shaping and defining sustainable economic activities, establishing standards for green bonds and loans, and advancing the government’s climate budget tagging initiative.

Rwanda is committed to further enhancing its institutional capacity for climate finance and action. We look forward to sharing best practices and lessons learned on enhancing climate action and financing a just transition.

Rwanda’s updated nationally determined contribution sets out the goal of cutting greenhouse gas emissions by 38% by 2030 compared with a business-as-usual scenario.

38%

This has a projected cost of $11 billion through 2030: 40% is expected to be mobilised internally and the remaining 60% will require external support.

$11bn

Juliet Kabera has been director general of the Rwanda Environment Management Authority since 2020. She previously held the position of director general of Environment and Climate Change at the Ministry of Environment. She began her career as an environment management officer, and was involved in Rwanda’s policies and enforcement of different laws such as the 2008 law banning plastic bags and the 2019 law banning single use plastics. She also chaired the executive committee of the Multilateral Fund of the Montreal Protocol in 2019/2020.

X-TWITTER @Juliet_Kabera @REMA_Rwanda

Balancing development and climate ambitions

At the same time as addressing climate change, there are myriad opportunities to advance countries’ economic standing, create jobs and reduce poverty levels –but to achieve this, we need a multifaceted approach.

Amitabh Kant, India’s G20 sherpa

India recognises that the pursuit of economic growth is essential to lift millions out of poverty. But we remain cognisant that our developmental gains are not undermined by our inability to address the causes of our changing climate. Despite being home to 17% of the global population, India’s per capita emissions are a third of the global average. A fast-growing country, India’s demand for energy is only likely to grow in the future. However, we have demonstrated our unwavering commitment to mitigate climate change. India, ranked seventh, is the only G20 member to make it to the top 10 in the Climate Change Performance Index. We have been able to achieve an affordable, just and clean energy transition and population scale impact. Our renewable energy capacity has more than doubled in the last decade, and we met our first nationally determined contribution nine years ahead of schedule. Our story shows that

a multi-pronged response aimed at multiple levels works, through supporting policy, mobilising finance and delivering technology, at breakneck speed and deployed at scale.

Addressing the challenge – and the opportunity – necessitates greater cooperation among countries, especially from high-income, high-emitting G20 members. These members must take ambitious actions and also provide financial and technical support to developing countries. Conversely, developing countries need to explore growth models that meet their developmental needs while achieving low-emissions growth. India’s approach during its 2023 G20 presidency exemplified this dual focus, emphasising the importance of integrating climate action across various sectors. The Green Development Pact for a Sustainable Future outlines critical agreements, including the goal of tripling global renewable energy capacity by 2030 and increasing climate finance from billions to trillions.

This recognition of billions to trillions was extremely important, as access to affordable finance is necessary to drive the investments needed for a sustainable transition. The magnitude of this task cannot be understatted. Developing countries will need around $5.9 trillion by 2030 for their NDCs, alongside an annual requirement of $4 trillion for clean energy technologies to meet net zero emissions by 2050. Decarbonising electricity generation, transport and industrial operations necessitates substantial investments, which will require private capital to bridge the financing gap.

To accelerate the deployment of renewable energy, it is critical to de-risk

investments in the sector. Several barriers hinder capital flows into renewable energy projects in developing countries, with credit risk a significant concern. The use of credit risk mitigation instruments, introduced by international institutions and financial intermediaries over the past two decades, remains suboptimal due to high costs, cumbersome processes, inflexibility and slow decision-making. Innovative financial instruments, better project selection and execution capacity in countries, and enhanced financial standards and taxonomies are necessary to align investments with climate goals.

Adapting by innovating Multilateral development banks and international financial institutions must reform to meet these needs and support the Global South in achieving a green transition through effective financing mechanisms and capacity building support. Strengthening and deploying innovative financing mechanisms, such as blended financing, credit enhancements (e.g., guarantees), debt-for-climate swaps, climate policy performance bonds, green bonds and impact investing, are essential to facilitate this transition. Successful examples include the Asian Development Bank’s partial credit guarantee for solar financing and the International Finance Corporation’s local currency financing for low-cost technologies.

Leveraging their expertise, MDBs and IFIs must also partner with developing countries in building project management capabilities and project pipelines, further instilling confidence in markets. MDBs and IFIs should create blended financing structures to improve risk-return profiles at various levels. Currently, for every dollar they lend, MDBs mobilise only $0.60 in private capital; this should increase to at least $1.50, if not $2.00.

The Independent Expert Group on Strengthening MDBs, initiated under India’s G20 presidency, offers transformative recommendations for modernising

AMITABH KANT

OUR STORY SHOWS THAT A MULTI-PRONGED RESPONSE AIMED AT MULTIPLE LEVELS WORKS, THROUGH SUPPORTING POLICY, MOBILISING FINANCE AND DELIVERING TECHNOLOGY, AT BREAKNECK SPEED AND DEPLOYED AT SCALE.

these institutions to better address the changing global development landscape. They include expanding MDBs’ capital base, improving risk management approaches and leveraging private sector capital to amplify development finance. The IEG highlights the urgent need to update the outdated MDB system to address contemporary global challenges more effectively.

Commitments to climate finance have been made in the past, but have not been time-bound and came with cumbersome processes. India calls for developed countries to establish time-bound goals for increasing climate finance, with clear accountability measures and streamlined processes. Although mitigation remains crucial, India emphasises the need for more funding to support adaptation, particularly for vulnerable communities. Building on the progress made by the 27th Conference of the Parties to the United Nations Framework Convention on Climate Change, India will seek stronger commitments to finance loss and damage caused by climate change.

India will also push for enhanced mechanisms to support technology transfer for low-carbon development. Green hydrogen, aimed at tough-to-reform decarbonising sectors, or small modular reactors are considered transitional technologies for achieving net zero emissions. They require countries to collaborate and facilitate technology transfers. Biofuels can be a means to foster rural development, create jobs and reduce import costs in developing countries. Technology is also important in reducing material intensity, encouraging substitution and decreasing dependency on a few supplier countries. Scaling up recycling of minerals and materials is also critical. G20 and COP policymakers can play a key role by incentivising recycling, supporting efficient collection, and funding research and development into new recycling technologies.

Ensuring energy security is key to reducing poverty and promoting sustainable development in developing countries, which require support in their energy transition. There are significant opportunities for economic growth and job creation, but also challenges related to energy security, equity and affordability. Balancing these elements is vital for successfully implementing renewable energy solutions. Because each country has a different starting point, a mix of policy instruments is essential in the fight against climate change.

India stands at a crucial point in its climate finance journey. By pushing for stronger global commitments, simplifying access to funds and fostering private sector involvement, India can secure the resources needed to achieve its climate ambitions while advancing sustainable development.

India is home to 17% of the global population and its carbon emissions are a third of the global average.

17%

Amitabh Kant is India’s G20 sherpa. He served as the chief executive officer of the National Institution for Transforming India (NITI Aayog) from 2016 to 2022 and the secretary of India’s Department for Industrial Policy and Promotion from 2014 to 2016. He has been a key driver of flagship national initiatives such as Startup India, Make in India, Incredible India, Kerala: God’s Own Country and the Aspirational Districts Program. He is author of Made in India and co-author, with Amit Kapoor, of The Elephant Moves: India’s New Place in the World X-TWITTER @amitabhk87

IMPROVING PUBLIC FINANCE

Working together to fight climate change

Amid a series of unprecedented events, the world must also find ways to combat climate change. The International Monetary Fund calls for a frontloaded approach to advance decarbonisation.

Kristalina Georgieva, managing director, International Monetary Fund

We are here in a rather difficult time for the world, in a more shock-prone environment. Since 2020, we have experienced unthinkable events: COVID, then war in Ukraine, a cost-ofliving crisis, and now conflict in this region …

On top of this come geopolitical tensions that cause economic fragmentation, and it is in this context that we also face a climate crisis. So, the question to all of us – here at COP [Conference to the Parties of the United Nations Framework Convention on Climate Change] and beyond – is whether we can address this crisis effectively?

First, carbon pricing. We have seen some progress. Coverage in both national and sub-national jurisdictions is now close to 25 percent of global emissions, up from around 10 percent a decade ago …

We are also seeing an increase in the average carbon price. In the areas covered by a carbon price, it is about $20 per ton. But if you add in the 75 percent of emissions that are not covered, then the global average carbon price is just $5 a ton. Compare that to the average price of at least $85 a ton by 2030 that is needed to stay on track with the goal of the Paris Agreement …

AT THE IMF, WE ARE RAPIDLY INTEGRATING CLIMATE INTO OUR WORK, STARTING WITH OUR POLICY ENGAGEMENT WITH OUR MEMBERS. WE CONSIDER MITIGATION FOR COUNTRIES THAT ARE HIGH POLLUTERS, ADAPTATION FOR THOSE THAT ARE VULNERABLE, AND TRANSITION FOR THOSE THAT HAVE LARGE HYDROCARBON SECTORS.

… When we look at the total of all Nationally Determined Contributions for this decade, they add up to a cut in emissions of just 11 percent, whereas keeping ‘1.5 degrees alive’ would require cuts of between 25 percent and 50 percent.

We are also very concerned that there is inequality within and across countries. Those that are hit harder by shocks ... can lead to a dangerous divergence between those economies that have a stronger capacity, and those that are less able to cope – many of them low-income countries that are especially vulnerable to climate devastation …

At the IMF [International Monetary Fund], we advocate for an approach to accelerate decarbonization based on frontloaded action this decade. We believe that with a strong package of measures – including a carbon price, elimination of harmful subsidies, and policy support to accelerate decarbonization … we can still have the impact we need by 2030.

So let me talk about these three things.

Carbon pricing is a particularly powerful instrument because it is revenue-raising and it is fair. The more emissions you create – through consumption or industry – the more you pay.

It also allows policymakers to address inequality. Revenues from a carbon price can be redirected to compensate the most vulnerable parts of the population … Our assessment shows that 20 percent of revenues can provide support to the poorest 30 percent of the population.

And a carbon price also provides a very strong incentive to shift to low-carbon investments and consumption choices.

We often hear that that carbon pricing is not feasible in many places – but … it can be executed in different ways. It can be a tax – and this is the most efficient and most impactful path …

It can also be implemented as trade – as is the case in Europe with the Emissions Trading Scheme that has generated Euro 175 billion in revenues. And it can also be implemented through regulatory compliance measures such as emissions standards.

Second is the elimination of subsidies. The IMF has calculated that direct

fossil fuel subsidies reached a record $1.3 trillion last year due to support measures introduced to address the cost-of-living crisis. If you add the indirect subsidies – those from environmental and health damage – the total goes up to $7.1 trillion.

Third, we need to direct subsidies and public money where it can make a real difference: areas such as research and development, or infrastructure that facilitates rapid decarbonization. At the IMF, we don’t traditionally support subsidies, but we recognize that the urgency of decarbonization can provide justification.

That takes me to the question of financing.

To reach the necessary level of decarbonization, we need to go from around $900 million a year in mitigation investments to $5 trillion a year … If we consider the sum of $5 trillion in the context of $7.1 trillion in direct and indirect subsidies, or in the context of the world economy of over $100 trillion, then we should be brave and say: yes, it can be done.

KRISTALINA GEORGIEVA

To succeed, we must bring in the private sector – to go faster and further, especially in the developing world where emissions are growing.

We have already seen movement on blended finance – but we need to go faster. Private Money is already 40 percent of total climate finance, but it needs to reach between 80 percent and 90 percent. At the Fund, we are very happy to support these efforts …

We cannot succeed in the fight against climate change unless we work together.

At the IMF, we are rapidly integrating climate into our work, starting with our policy engagement with our members. We consider mitigation for countries that are high polluters, adaptation for those that are vulnerable, and transition for those that have large hydrocarbon sectors. We have integrated climate into our financial sector assessments – so we consider financial sector risks related to climate change and advise our members how to manage these. And we are also very active on data – because good data helps make good decisions.

… The IMF is a financial institution. We have created the $40 billion Resilience and Sustainability Trust, which has already approved programs for 11 countries …

Faced by the climate crisis, we must choose to act with all the force we can muster to change the direction of our societies. We must do what is necessary.

Keynote speech at the COP28 Business and Philanthropy Climate Forum, 2 December 2023

To reach the necessary level of decarbonization, we need to go from around $900 million a year in mitigation investments to $5 trillion a year.

$900m $5tr

Kristalina Georgieva has been managing director of the International Monetary Fund since 2019. She was CEO of the World Bank from 2017 to 2019, including three months as interim president. Previously, Dr Georgieva served as European Commission vice president for budget and human resources, and commissioner for international cooperation, humanitarian aid and crisis response. She began her career in public service as an environmental economist at the World Bank in 1993. She co-chairs the Global Commission on Adaptation and the United Nations Secretary-General’s High-Level Panel on Humanitarian Financing.

X-TWITTER @KGeorgieva  imf.org

The role of the International Monetary Fund in supporting climate action

To adapt to climate change, countries need access to finance – but that’s not the only component involved in driving a successful transition.

Ceyla Pazarbasioglu, director, Strategy, Policy and Review Department, International Monetary Fund

Moving to a global zerocarbon economy requires trillions of dollars of investment each year.

Many developing economies and emerging markets are investing public funds to support the transition. However, most of the needed financing will need to be provided by the private sector. With the cost of renewables falling sharply in recent years, private investments in the clean energy sector have surged. But in most developing economies, significant barriers to investment remain, including high public debt, high cost of capital due to political risks, lack of reliable data, shallow markets and weak legal systems.

this transition in developing countries. In the IMF’s surveillance activities, country teams provide comprehensive analysis of climate challenges and policies to address them. Capacity development to help countries address climate issues has been scaled up. In the last two years, the IMF has also been providing direct long-term, low-cost financing through a new Resilience and Sustainability Facility, in close collaboration with the World Bank and other multilateral development banks.

THE MOST IMPORTANT PREREQUISITE FOR A SUCCESSFUL TRANSITION IS THE IMPLEMENTATION OF STRONG MACROECONOMIC AND CLIMATE POLICIES AT HOME. POLICY REFORMS SHOULD INCLUDE REDUCING AND REPURPOSING ENVIRONMENTALLY HARMFUL SUBSIDIES AND IMPLEMENTING CARBON PRICING.

The most important prerequisite for a successful transition is the implementation of strong macroeconomic and climate policies at home. Policy reforms should include reducing and repurposing environmentally harmful subsidies and implementing carbon pricing. Such actions provide a clear financial incentive to invest in low-carbon alternatives and increase energy efficiency. The fiscal space they provide could be used to compensate those most affected to ensure broad support for the transition and making it more just. Strengthening institutional and legal frameworks will assist in reducing the cost of capital and is critical to mobilising financial resources for the transition. In some cases, innovative financial mechanisms, including finding public-private synergies, could be leveraged to attract investments.

The IMF’s role

International financial and development institutions, including the International Monetary Fund, play a key role in supporting and financing

The goal of the RSF is to help developing countries strengthen resilience to long-term structural challenges including climate change and pandemic preparedness. Its lending operations are financed through the Resilience and Sustainability Trust, which channels resources – through voluntary contributions – from economically stronger members to those with the greatest needs. As of October 2024, 23 countries have pledged over $48 billion. On the receiving side, about two-thirds of IMF members – including all low-income countries – are eligible. RSF lending has longer maturities than traditional IMF financing and has a tiered interest rate structure, with lower interest rates for low-income countries. A total of 20 arrangements have already been approved by the IMF Executive Board since June 2024. These arrangements are specifically focused on climate change initiatives and have benefited from a close collaboration between the IMF and development partners. The IMF and the World Bank recently announced an Enhanced Cooperation Framework to scale up climate action, with Madagascar the first country to benefit from the RSF.

As well as providing climate finance directly, the RSF helps countries

catalyse climate-friendly investment through three key channels. First, it is underpinned by a traditional IMF programme that ensures solid macroeconomic fundamentals and debt sustainability. Second, it signals the authorities’ commitment to enhance climate policies. All disbursements are linked to the successful implementation of high-quality institutional and policy reforms that address climate change. Third, the IMF, World Bank and other partners provide extensive capacity development to help implement the reforms and strengthen domestic institutions. Finally, the RSF often provides impetus for discussions on catalysing additional climate finance between governments, multilateral institutions and private investors.

Supporting change globally

What types of reforms have been implemented so far? Rwanda and Senegal embedded climate considerations into public investment management. Kosovo levelled the playing field for private investment in renewable electricity generation. Jamaica and Barbados introduced incentives for energy efficiency in government build-

 CEYLA PAZARBASIOGLU

ings. Morocco eliminated subsidies on butane gas while expanding cash transfers to affected farmers. Paraguay strengthened the governance framework to reduce deforestation. Costa Rica advanced its financial supervision framework to account for climate risks.

Close collaboration among country authorities, international partners, donors and the private sector is necessary to create a conducive environment for public and private investments. This is especially important for developing countries facing decades-high debt servicing costs. Increasing the financing provided by multilateral institutions is critical, including by increasing the rechannelling of special drawing rights to the RSF to satisfy medium-term demand for the facility. In parallel, work should continue to reduce debt servicing burdens in vulnerable countries, including through debt swaps and debt buybacks with official multilateral or bilateral guarantees.

It is not going to be easy. Financing a just transition is a complex task that requires cooperation, innovation and commitment from all stakeholders. By working together, we can unlock the potential for a greener, more resilient world that benefits everyone.

As of October 2024, 23 countries have pledged over $48 billion to the Resilience and Sustainability Trust

$48bn

Since June 2024 20 arrangements have already been approved by the IMF Executive Board

20

Ceyla Pazarbasioglu is director of the International Monetary Fund’s Strategy, Policy and Review Department. She served at the World Bank Group from 2015 to 2020, including as vice president for equitable growth, finance and institutions. She worked on policy and country issues during two previous tenures at the IMF (1992–1998 and 2003–2015). Previously, she was vice president of Türkiye’s Banking Regulation and Supervision Agency and, in 1998–2001, was chief economist of emerging European markets at ABN AMRO Investment Bank. The views expressed here are those of the author and should not be attributed to the IMF, Executive Board or management.

X-TWITTER @CeylaP_IMF  imf.org

ELECTRIFY AND DECARBONISE: GE VERNOVA’S BLUEPRINT FOR A JUST ENERGY TRANSITION

GWith a mission to electrify and decarbonise the global energy landscape, GE Vernova promotes a just energy transition rooted in sustainable and equitable access to power.

E Vernova’s driving mission is to electrify and decarbonise the world. Our Sustainability framework, rooted in this purpose, is guided by four key pillars that support our vision for a just and sustainable energy future:

● Electrify: Catalyse access to more secure, sustainable, reliable and affordable electricity, and help drive global economic development

● Decarbonise: Invent, deploy and service the technology to decarbonise and electrify the world

● Conserve: Innovate more while using less, safeguarding natural resources.

● Thrive: Advance safe, responsible and equitable working conditions in our operations and across our value chain.

As a newly independent global leader in the power industry, GE Vernova’s technology base helps generate ~25% of the world’s electricity. Through a diverse portfolio of products and solutions, we aim to drive electrification to support large-scale decarbonisation by enhancing energy efficiency, renewable integration, and grid resiliency and reliability. We are committed to a just energy transition, focusing on effective and equitable solutions to provide

Scott Strazik, chief executive officer, GE Vernova

access to lower carbon energy sources for people everywhere. Guided by ‘the energy trilemma’ – the challenge of achieving a more sustainable, reliable and affordable energy transition – GE Vernova is focused on building a sustainable future through strategic investments and collaborations, ensuring an inclusive decarbonisation that empowers communities to thrive and fosters economic growth.

GE Vernova’s role in the Mendoza Collective Action Summit in Argentina in early 2025 illustrates this. The event will seek to have selective participation from public interest, advocacy, public sector, academic and private sector stakeholders, with a focus on emerging economies. Coming out of this summit, we aim to unveil metrics, goals and actionable recommendations to consistently track progress and introduce a strategic plan to address the energy trilemma throughout 2025.

To advance a just transition, GE Vernova has developed a comprehensive method to assess progress in emission reduction, supporting our Conserve pillar. We have committed to achieving net zero in our Scope 1 and 2 emissions by 2030 through both absolute carbon emissions reductions, and the potential use of high-quality carbon offset and removal credits in the future. For Scope 3, we aim to reach net zero by 2050 for emissions from use of our sold products, supported by global collaboration, proactive policies and advanced technology. Meeting this target will require

continued investment in breakthrough technologies, large-scale deployment across our sold products and infrastructure development.

Accelerating decarbonisation and achieving electrification goals require new power generation to lower carbon intensity, avoid carbon emissions and deploy adaptable technologies for future carbon reductions. These nearterm targets aim to impact the climate trajectory and pave the way for achieving long-term goals. With that in mind, we intend to report on all our Scope 1, 2 and 3 emissions, with three core metrics guiding our Scope 3 efforts: carbon intensity, avoided carbon and carbon capability. This standardisation is intended to improve transparency and highlight collaboration opportunities to drive systemic change. We thus aim to enhance lower carbon energy access and foster a more sustainable future where people can thrive. Achieving deep decarbonisation in the coming decades will require scaling emerging technologies, investing in innovation and leveraging publicprivate partnerships to align policies and infrastructure with technology advances.

Reinforcing this approach, GE Vernova is dedicated to modernising energy transmission infrastructure to integrate renewable energy sources and improve grid resilience. By advancing smart grids and AI-optimised networks, we aim to enhance reliability and support global electrification.

Investments in energy storage, including advanced battery storage and hydro pumped storage, aim to provide stable energy supplies, particularly for vulnerable populations reliant on variable resources. These efforts should foster social equity and resilience in addressing climate change, conserving resources and ensuring fair access to reliable energy throughout the energy transition to help these communities thrive.

Securing adequate capital is also crucial for a more sustainable transition. Innovative financing strategies, including co-development funding, public-private partnerships, government funding and technology incentives, are key for supporting energy infrastructure and lower-carbon projects. The €1 billion export finance cooperation agreement between GE Vernova’s Financial Services business and KUKE, Poland’s Export Credit

SCOTT STRAZIK

programmes, partnering with local communities, universities and institutions to cultivate a diverse and skilled workforce. This empowering strategy aims to ensure inclusive growth and active participation in the energy transition. The 3.6GW Dogger Bank Offshore Wind Farm in Northeast England highlights this approach, through the Dogger Bank Community Fund which aims to uplift local communities facing social and economic challenges. The fund is investing £1 million in STEM programmes for schools and has secured an additional £25 million from collaborators to enhance education and energy skills. The fund provides £1,000 grants to grassroots initiatives and has supported over 2,000 jobs in the UK.

GE Vernova’s four pillars for a just and sustainable future

Agency, illustrates how strategic collaborations can facilitate impactful investments. This agreement supports GE Vernova’s global energy customers in decarbonising and increasing electrification, while helping KUKE secure debt insurance on agreed transactions. It facilitates significant capital investment and enables renewable and gas power projects through Polish exports and supply chains.

A just energy transition ultimately entails building local capacities. Investing in knowledge and rewarding innovation support people manage emerging technologies and thrive in the evolving energy landscape. GE Vernova emphasises science, technology, engineering and mathematics (STEM) education and workforce development

GE Vernova is committed to a just energy transition, addressing the energy trilemma by modernising energy transmission and facilitating equitable access to energy. Through innovative financing, strategic partnerships and local capacity building, we mobilise resources for underserved areas and cultivate a diverse workforce. By setting benchmarks for decarbonisation, we plan to accelerate a systemic energy transition and focus on electrifying energy systems, decarbonising operations, conserving resources and ensuring that communities thrive. We aim to create a future where everyone can contribute and benefit from more sustainable solutions, fostering resilience and opportunities for all.

This post contains forward-looking statements. Forward-looking statements provide current expectations of future events based on certain assumptions. Words such as ‘aims,’ ‘expects,’ ‘intends,’ ‘plans’ and similar expressions may identify such forward-looking statements. Except as required by law, we disclaim any obligation to update any forward-looking statements.

Scott Strazik is chief executive officer of GE Vernova, a purpose-built company focused on accelerating the energy transition and advancing sustainability. Under Scott’s leadership, GE Vernova is working alongside customers to electrify and decarbonise the electric power sector while delivering reliable, affordable and sustainable electricity to the world.

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Lessons from a journey across the globe

The world is facing intertwined challenges, but each country faces a different reality in dealing with them. To support them, the World Bank Group is delivering a comprehensive action plan and strategic reforms.

Ajay Banga, World Bank Group president

This moment marks the culmination of a journey that began over a year ago – when I first started at the World Bank and promised to visit every region where we operate. It’s a journey that has taken me across the globe, from Latin America to Africa, Asia, the Middle East, and now to the Pacific. This tour was about much more than just visiting countries; it was about listening, learning, and reimagining how the World Bank can serve a world in profound need of change. Our mission was to write a new playbook for the World Bank Group – one that is fit for today’s challenges and the uncertainties of tomorrow …

Over the past year, we have advanced a set of reforms – many informed by the G20 Expert Group – aimed at making the World Bank Group better, bigger, and more effective. Pulling from the exceptional people across this institution to deliver quality assistance in all its forms – knowledge, capacity building, policy dialogue, and finance – targeting the World Bank’s mission, operational model (speed and simplicity), and financing capacity. We are advancing this evolution at the fastest pace we can.

WE’VE EXPANDED OUR MISSION AND VISION: TO CREATE A WORLD FREE OF POVERTY ON A LIVABLE PLANET.

At the World Bank, we see these global challenges as intertwined – climate change, inequality, and fragility … Between my first trip to Peru on to this final visit to Tuvalu, I have visited 27 countries on six continents, and met with leaders of developed and developing economies alike. I was able to speak with civil society stakeholders, business leaders, experts in climate, development, and finance. Most importantly I had the privilege to see first-hand how people are benefiting from the work of the World Bank.

Each stop has reaffirmed several truths. Though aspirations of people around the world are universal, we live in a world of greater polarization and extremes. While countries are facing a shared set of intertwined challenges, they are experiencing them differently. And though countries appreciate the work the World Bank has contributed to their development goals, they need more and require us to be faster, simpler, and more impact oriented.

… We’ve expanded our mission and vision: To create a world free of poverty on a livable planet. Shortened our project-approval process by three months, and we aim to shorten it by many more. Integrated operations as “One World Bank” in 20 pilot countries to remove bureaucracy, break down silos, free up client capacity, and approach challenges collectively. Found new ways to stretch our existing balance sheet further, leading to $120 billion of additional lending over the next 10 years. Overhauled our Knowledge Bank structure – anchored in five verticals – people, planet, prosperity, infrastructure, and digital. Each with clearly defined expertise. Bringing knowledge experts to the forefront of our country driven model –and Country Partnership Frameworks. Creating bankable projects and implementing them. And providing capacity to client governments when needed – a change that is welcomed by Pacific leaders. We’ve worked to rebuild a focused corporate scorecard – moving from 150 items to 22 – driving the institution toward impact … We also give shareholders, clients, and taxpayers the

ability to clearly see the impact we are delivering. As a direct result of these reforms, the World Bank Group is on a path to deliver greater scale and greater impact.

… We’ve committed to deploy 45% of World Bank Group funds toward climate, with half of development finance for mitigation and half for adaptation, by 2025. In the Pacific region 97 percent of our climate financing goes to adaptation. We’ve set a target to provide quality, affordable health care to 1.5 billion people by 2030.

We’re executing an action plan to bring cleaner, stable, and affordable energy to 300 million Africans by 2030 … 250 million from the Bank and 50 million from the African Development Bank. And expanding social protection programs – with partners – to alleviate hunger for half a billion people by 2030 – aiming for

half of these beneficiaries to be women. We are excited about what we can deliver with these changes in place. But we are clear-eyed about the scale of our challenges. This is why we are working to secure a significant replenishment of [the] International Development Association …

Many shareholders … are making hard budget decisions and tradeoffs over the next few months … We know that the World Bank alone won’t be enough to provide the trillions required annually for climate, fragility, education, hunger alleviation, health care, and inequality …

That is why we need all shoulders at the wheel – governments, philanthropies, and multilateral development banks working together. But to close the financing and jobs gap, we also need the private sector. We

require their ingenuity, speed, and resources to create the demand for investment by generating bankable projects.

That is why we recruited 15 leading CEOs – including Shemara at Macquarie, Noel at HSBC, Hironori at Mitsubishi, Chandra at Tata, and Dilhan at Temasek – to help us find solutions to dramatically increase private sector investing in renewable energy in emerging markets and began implementing their feedback …

For us, this is just the beginning. We have additional reforms underway and greater ambition on the horizon. Ultimately, the World Bank is an instrument that reflects the ambition of those on whose generosity it relies, and the progress we aspire to achieve demands more.

Lowy Institute, 10 September 2024



AJAY BANGA

Ajay Banga began his five-year term as World Bank Group president in June 2023. He most recently served as vice chair at General Atlantic. Previously, he was president and CEO of Mastercard. He was honorary chair of the International Chamber of Commerce, serving as chair from 2020 to 2022. He became an adviser to General Atlantic’s climate-focused fund, BeyondNetZero, at its inception in 2021. He is co-founder of The Cyber Readiness Institute and was vice chair of the Economic Club of New York.

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In Manila, Philippines, a squatter colony contrasts with the modern skyline

Trillions needed from the G7 and G20 for the climate emergency

As we can only manage what we measure, it is vital to explore how these groupings are complying with their commitments to sustainability and financing.

Brittaney Warren, director of compliance and sustainability governance, Global Governance Program

The world must rapidly raise trillions of dollars for a just clean energy transition and nature conservation amid the current climate change crisis. In parallel, it must also begin the long overdue careful planning and action needed to end all financial investments and infrastructure in fossil fuels.

Here the G7 and G20 members play a central role, accounting for about 45% and 80% of global gross domestic product, respectively. The supply chains of these clubs’ energy and extractive industries have tentacles that span the world; their members’ historical and projected emissions have systemic significance for destabilising the climate system that cannot be understated in terms of its impacts on human, animal and plant health and well-being. The G20 – which includes all G7 members – accounts for nearly 80% of all global emissions.

A closer look at their compliance

Despite this wildly disproportionate contribution – just 19 countries and the multinational fossil fuel companies headquartered in them, throwing an entire planetary system out of equilibrium – the G20’s compliance with its climate finance commitments is underwhelming, averaging only 66%.

The G7 performs better with its own such commitments, with 73% compliance. These percentages reflect the clubs’ compliance with commitments

to increase climate financing, including through contributing to recognised international climate funds such as the Green Climate Fund, providing adaptation financing or unlocking private sector climate investments. That compliance also includes G7 and G20 efforts to meet their oft-repeated commitment to raise $100 billion annually for developing countries by 2020, a deadline later extended to 2025. The G20 Research Group’s research does show steady progress towards this goal. On average, the G7’s compliance with this commitment, from the four years tracked, stands at 77%. However, the G20’s compliance, tracked over two years, is a meagre 46%. These numbers are corroborated by Oxfam, which found the G20 members are failing to do their fair share to respond to the climate emergency. Still, according to the Organisation for Economic Co-operation and Development , as of spring 2024, developed countries did finally meet and surpass their $100 billion goal. This pledge is long overdue, but much more is needed now.

Eradicating subsidies

To respond effectively to the climate emergency, in addition to increasing climate finance, countries must also decrease fossil fuel subsidies. Since the G20’s 2009 Pittsburgh Summit, its members have committed “to phaseout and rationalize over the medium term inefficient fossil fuel subsidies

while providing targeted support for the poorest”. The term ‘inefficient’ provides the biggest loophole for selective interpretation by each member, and presents a challenge for monitoring. The G20 Research Group tracked progress towards this commitment from 2009 to 2016 and again in 2020, and found compliance averaged a low 55%. Moreover, the G20 members continue to provide record amounts of financial incentives and subsidies to fossil fuel companies, allocating a staggering $1.4 trillion in 2022, citing geopolitical and health crises as justification.

In 2021, the G7 and G20 both committed to advance the transition away from coal by ending the provision of international public financing for new unabated coal power generation by the end of that year, including through official development assistance, export finance, investment, and financial trade and promotion support. The G20 had very low compliance with this commitment, with 33%. As subsets, G7 countries had higher compliance, with 69%, and the BRICS members of Brazil, Russia, India, China and South Africa made little to no progress at all. Overall, from 1975 to 2024, the G7 has given an average of 458 words to climate finance at each of its annual summits, and its commitments on the subject have taken an average of 2% of the total of all subjects. Despite being a younger institution, the G20 mirrors the G7. The G20, at its annual summits from 2008 to 2023, averages almost the same per summit with 452 words, and its climate finance commitments also take an average of 2%.

Catalysing the change

There are many actions the G7 and G20 members should take to further boost climate financing and catalyse a decrease in fossil fuel funding. Experts around the world have made numerous recommendations to the G7 and G20 on how to advance these mission-critical goals. These wealthy clubs have access to the best and the

BRITTANEY WARREN

G20 PERFORMANCE ON CLIMATE FINANCE, 2009–2023

G7 PERFORMANCE ON CLIMATE FINANCE, 1991–2024

brightest minds and control the world’s most powerful financial institutions and government coffers. Leaders have heard the recommendations time and again, and control the resources to execute them. If they do not implement

these recommendations, it is due to political factors rather than practical ones. Various estimates put the need for climate finance between $5.8 trillion and $13.6 trillion. The G7 and G20 must stop making excuses and lead here.

Brittaney Warren, MES, is the director of compliance and sustainability governance for the Global Governance Program, which includes the G20 Research Group, G7 Research Group, BRICS Research Group and the Global Health Diplomacy Program, based at the University of Toronto. She is co-author of Reconfiguring the Global Governance of Climate Change and has published on accountability measures in summit commitments and on the G20’s governance of climate change, nature-based solutions and health. She has published 21st Century Garden of Eden: A Climate Change Colouring Book, a YA creative project to counter post-apocalyptic climate narratives, which is available at www.lulu.com.

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How multilateral development banks can bridge the climate financing gap

MDBs are proving a powerful force in the fight against climate change. However, their potential is not fully realised yet.

Frannie Léautier, former chair, G20 Expert Panel on the Capital Adequacy of the Multilateral Development Banks

PMULTILATERAL DEVELOPMENT BANKS PLAY A

CRITICAL ROLE IN PROVIDING AFFORDABLE, FLEXIBLE AND RAPID FINANCING TO SUPPORT ECONOMIC RECOVERY AND MEET ONGOING DEVELOPMENT NEEDS.

olicymakers, investors and politicians face the significant challenge of financing the investments necessary to keep global temperatures within the Paris Agreement’s target of limiting the rise to below 2°C. This challenge is particularly acute for developing countries, which must simultaneously generate jobs for their burgeoning youth populations, manage increasing debt burdens and secure affordable capital in an environment marked by high interest rates and currency risks. This task is further complicated by the lingering impacts of the Covid-19 pandemic, the escalating consequences of climate change and the global economic disruptions stemming from conflicts such as those in Ukraine and the Middle East.

Globally, economies have been severely affected by these crises, with external financing needs for developing countries estimated to have surged by $700 billion annually due to the pandemic alone. This is in addition to the $2.5 trillion per year required to support the Sustainable Development Goals and the $100 billion committed to climate finance. The need for unprecedented investment is clear if we are to improve livelihoods, mitigate and adapt to climate risks, and prepare for a sustainable future beyond the mid-21st century.

Focus on Africa

Africa currently receives only 4% of global climate finance, despite being one of the regions most vulnerable to

the impacts of climate change. The continent faces steep challenges in securing investment for critical areas such as low-carbon energy grids, transformed transport and logistics networks, carbon absorption and trading alternatives, and sustainable manufacturing practices. Without substantial investment in these sectors, achieving the dual goals of job creation and climate stabilisation will remain out of reach.

Africa’s youth population is expected to grow by 42% by 2050, making it imperative to create millions of jobs annually. However, the continent’s share of global foreign direct investment remains low, and public debt in sub-Saharan Africa has surged to 64% of gross domestic product in 2024, exacerbating the difficulty of financing essential infrastructure and climate initiatives. The need for targeted climate finance that addresses these unique challenges is more urgent than ever.

Proven track record

Multilateral development banks play a critical role in providing affordable, flexible and rapid financing to support economic recovery and meet ongoing development needs. Their track record in responding to crises – whether climate-related disasters or the Covid19 pandemic – positions them well to drive investment in sustainable development. MDBs have demonstrated the capability to focus on long-term development issues and mobilise the necessary resources to address these

challenges over extended periods. By leveraging shareholders’ capital contributions through private sector bond markets, they can provide significant financing with efficiency and scale.

Central to the role of MDBs in climate finance is their unique and powerful financial model. MDBs raise most of their resources by issuing bonds on international capital markets, which they then lend for development projects at below-market rates. These projects – often related to climate action such as renewable energy, low-carbon transport or green infrastructure – typically generate limited financial returns. However, due to the strong repayment track record of borrowing countries, MDBs maintain excellent financial performance, supported by conservative capital leverage and the backing of shareholder countries.

MDBs have issued more than $1.5 trillion in bonds over the past decade, significantly contributing to global development finance. The International Bank for Reconstruction and Development, the World Bank’s main lending arm, has raised over $800 billion in capital since its inception. Despite the challenges posed by recent global crises, MDBs have continued to offer financing on favourable terms, helping developing countries navigate economic recovery and climate adaptation.

Could MDBs do more?

Although MDBs have performed well historically, the growing scale and complexity of climate challenges necessitate a rethinking of their role. The depth and variety of climate-resilient pathways have stretched their capital adequacy, prompting calls for MDBs to expand their impact. This expansion could involve innovating their financial models to mobilise more private sec-



FRANNIE LÉAUTIER

tor investment and streamline business procedures to reduce barriers for borrowers. MDBs could enhance their efforts by collaborating more closely with other stakeholders and developing countries to build a robust pipeline of investable climate projects.

The potential for private sector investment in climate-related projects is vast, yet significant gaps remain. To bridge these gaps, MDBs must explore strategies to enhance their capacity to attract and manage private financing. Initiatives such as the World Bank’s International

Development Association going to market, the M300 initiative, and the Asian Infrastructure Investment Bank’s nature-based infrastructure solutions exemplify the innovative approaches needed to meet the growing demand for climate finance.

MDBs must continue evolving, by leveraging their financial models to catalyse greater private sector participation in climate finance. In doing so, they can play a pivotal role in addressing the global climate crisis and ensuring the world remains on a path towards sustainable development.

Dr Frannie Léautier is senior partner and CEO of SouthBridge Investments and chair of the investment committee of the Global Energy Alliance for People and Planet. She chaired the G20 Expert Panel on the Capital Adequacy of the Multilateral Development Banks. She was previously vice president of the African Development Bank and chief operating officer of the Trade and Development Bank, and served 15 years in senior roles at the World Bank, including as infrastructure director, vice president and chief of staff to the president. She also was executive secretary of the African Capacity Building Foundation.

MOBILISING PRIVATE SECTOR FINANCE

Financial innovation for climate investment and development

The world’s institutions must find new ways to support nature positive solutions in developing countries – reducing emissions is a collective concern that requires collective answers.

Mark Carney, United Nations special envoy on climate action and finance

The rapid growth of cleanenergy investment must continue. Global clean energy investment has grown over 40% since 2020, to $1.8 trillion, [and] is now almost twice the level of fossil fuel investment. This pace must be sustained so that clean energy investment reaches $4.5 trillion a year in the 2030s … Over the past two decades, wind and solar are the fastest growing sources of electricity in history. And battery deployment has been growing even faster over the last eight years.

FINANCING

NATURE

POSITIVE SOLUTIONS

MUST BECOME A MAJOR FOCUS OF CLIMATE FINANCE INNOVATION.

At COP28 [the 28th Conference of the Parties to the United Nations Framework Convention on Climate Change] countries agreed to “transition away from fossil fuels” and committed to triple global renewable energy capacity and double annual energy efficiency by 2030 … The world won’t get to net zero unless heavy emitting industries also make their contributions. These industries generate a third of global emissions, and based on current trajectories those emissions will rise by over 30% by 2050 – putting the world’s climate goals out of reach. The challenges to decarbonising heavy-emitting industries are legion. They are hard to electrify. Reducing emissions requires building new low-carbon manufacturing facilities, developing sustainable fuels and green hydrogen, and pursuing carboncapture and storage …

Reducing emissions requires building new low carbon manufacturing facilities, developing sustainable fuels and green hydrogen, and pursuing carbon-capture and storage. For all this, heavy emitters need finance – a lot of it. To tackle these challenges, the UAE [United Arab Emirates] COP Presidency and UN launched the Industrial Transition Accelerator (ITA), which I co-chair with Mike Bloomberg, Sultan Al-Jaber and Simon Steill. Already, 1,300 companies, representing almost 20% of global [emissions], are members of ITA partner organisations. The ITA will spring the transition traps for high-emitting sectors by bringing together the leadership across industry, finance, and governments to overcome the challenges of decarbonisation in six sectors – aluminium, cement, chemicals, steel, aviation, and shipping – and their energy supply chain. We will focus on green demand, value chain orchestration, integrating new energy sources, and driving green industrial policies to attract transition finance on the huge scale required. To invest in a truly global transition, we need radical reform of the international financial system …

To support the transition in the emerging world, the UAE launched the innovative $30 billion catalytic climate fund ALTÉRRA, with an ambition to mobilize $250 billion by 2030 from private and institutional investors. With its unique capped return

structure, ALTÉRRA challenges all of us – MDBs [multilateral development banks], philanthropies and private capital – to maximise total climate financing to emerging markets by creatively combining first loss structures, guarantees, FX [foreign exchange] hedging and securitisation. This starts with getting incentives right. MDBs should use all their capacities – operational, financial, and technical – to maximise total financing to address climate change. G20 countries as the main shareholders should adopt as their Key Performance Indicators the total impact of MDB actions rather than narrow measures of balance sheet exposures. Maximising total impact will require much greater and more effective use of guarantees, insurance, and blended finance …

MDBs can help address barriers to scaling private investment such as inadequate country-level investment roadmaps, and the uncertainties around whether investments can be considered transition-aligned … The decommissioning of (new) coal plants in Asia will not be feasible without the combination of blended finance, and critically, Energy Transition Credits centred in high integrity VCMs [voluntary carbon markets]. That is the brutal math of what it takes to address over $4 trillion of stranded assets. And it will be the reality if we want to address nature-based solutions at scale. That’s why now is the time for the G20 to grasp the nettle to create global [VCMs].

… VCMs can provide hundreds of billions of dollars of annual cross border capital flows to emerging markets. Most companies making net-zero commitments are in advanced economies, and the most efficient emission reduction projects will be in emerging and developing economies. VCMs can play important roles in retiring high emitting assets and preventing new coal generation. And voluntary carbon

markets can create significant financing for biodiversity and indigenous peoples … Authorities must establish standards for end-to-end integrity in carbon credits … The World Bank and the IDB [Inter-American Development Bank] can help monitor social integrity … This points to the next frontier of innovation in transition finance: addressing the nature climate intersection. Climate change is becoming the dominant cause of nature and biodiversity loss. Conversely, agriculture, forestry, and land use currently account for a fifth of GHG [greenhouse gas] emissions, they represent the sole sink for almost 60% of human-generated carbon emissions, and they could be the most cost-effective form of emissions reductions …

Financing nature positive solutions must become a major focus of climate finance innovation. No emerging or developing economy can shoulder the entire burden of financing their transitions … Finance must move as readily across borders as emissions. This requires public catalytic capital that can accelerate and amplify private flows, high integrity carbon markets, and the pooling of global demand for new green products to scale financing for heavy emitting sectors. Finally, we need innovation in finance that recognises that we are part of nature not apart – or separate – from it.

Financial Innovation for Climate Investment and Development, Inter-American Development Bank, 28 February 2024

Global clean energy investment has grown over 40% since 2020 and stands at $1.8 trillion. That is almost double the amount for fossil fuels.

40% $1.8tr

MARK CARNEY

Mark Carney is the United Nations Special Envoy on Climate Action and Finance, chair of Brookfield Asset Management and head of transition investing at Brookfield Corporation. He also co-chairs the Global Financial Alliance for Net Zero. He was governor of the Bank of England from 2013 to 2020 and the Bank of Canada from 2008 to 2013. He chaired the Financial Stability Board (2011–2018) and the Global Economy Meeting and Economic Consultative Committee of the Bank for International Settlements (2018–2020), and served as first vice chair of the European Systemic Risk Board (2013–2020).

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Transforming the financial system: an inclusive, peoplecentred approach

Achieving a just transition means putting people at the centre of all action – and, while awareness is building of the need to act, finance needs to be mobilised and approached differently.

Nick Robins, professor in practice –sustainable finance, London School of Economics and Political Science

From presidents to grassroots activists, workers to investors, the just transition is increasingly recognised as essential for accelerating climate action. The task is how to reallocate financial flows so that climate goals are achieved alongside positive social outcomes, particularly through additional investment in the Global South. The meeting of the 29th Conference of the Parties to the United Nations Framework Convention on Climate Change must make breakthroughs on international goals and mechanisms, national frameworks and transition planning for business and financial institutions.

country and every sector, the transition will not happen on time unless it is fair. Awareness of the just transition has been building across the $450 trillion in assets sitting within the global financial system. Some finance ministries with fiscal space are linking fiscal incentives to good jobs and community benefit (as in the United States). A handful of pioneering just energy transition partnerships have been agreed in South Africa, Indonesia, Vietnam and Senegal, but the roll-out of actual public and private finance from developed countries has been slow.

IN EVERY COUNTRY AND EVERY SECTOR, THE TRANSITION WILL NOT HAPPEN ON TIME UNLESS IT IS FAIR.

The just transition puts people at the heart of building a net zero and resilient economy. A top priority is to maximise the opportunities of climate action to cut inequality and end poverty, by expanding clean energy jobs, ensuring they come with decent working conditions and bringing universal energy access in all parts of the world. It also means anticipating and addressing the social risks of the transition, such as avoiding stranded workers and communities as fossil fuels are phased out, and ensuring the race for critical minerals respects human rights and brings genuine local development.

Inclusion is essential

The centrality of participation is crucial. Those affected must be meaningfully involved in decision-making, through social dialogue in the workplace, broad stakeholder engagement along global value chains, and free prior and informed consent by Indigenous peoples. In every

Institutional investors with tens of trillions in investments have made support for the just transition a core net zero expectation of the companies they invest in. But at the end of 2023, only 3% of the most carbon polluting companies held by these investors had released plans involving stakeholders. A recent assessment of nearly 40 major banks found that although some had started, none had explicitly committed to decarbonise in line with just transition principles. In the developing world, international flows of public and private investment are going in the wrong direction, with mounting debt often crushing the ability to turn aspirations for a just transition into reality. A transformational approach is required, one that confronts the structural inequalities that prevent the just transition from taking off, not least in Africa.

Getting on the right track

A systemic solution is needed that shows how the full spectrum of finance from public through blended to private

finance can implement the just transition. This will involve finance ministries, central banks and financial institutions, multilateral and national development banks, and commercial financial institutions as well as business, trade unions and citizens. Many decisions need to be taken beyond COP29, but the UNFCCC is perhaps the best opportunity for focused attention, following the approval of the world’s first dedicated work programme in 2023. Three priorities stand out.

First, the primary goal of this year’s COP is the agreement of the new collective quantified goal to provide adequate, accessible and affordable finance to achieve net zero, build resilience and pay for loss and damage in emerging markets and developing countries. The Independent High Level Expert Group on Climate Finance estimates that those countries, excluding China, will need $1 trillion in external financing every year by 2030 for climate and nature action, a considerable jump from the existing $100 billion climate finance goal.

Around $600 billion of this needs to come as international private finance, more than 15 times higher than current levels. Much will require partnerships with multilateral development banks and other development finance institutions to reduce risks, for example through co-investments and guarantees. The full $1 trillion must be invested in line with just transition principles, including ensuring respect for human rights, along with the provision of dedicated funds for specific priorities in EMDCs (such as phasing out fossil fuels, sustainable transport and ending deforestation).

Second, COP29 should clearly signal to governments that the next round of contributions needs the just transition at their heart. At the end of 2023, only 31% of NDCs referenced the just transition to varying degrees. The deadline for the updated NDCs is February 2025, and COP29 could show what ambitious and effective just transition policy looks like, with clear fiscal policies to support industrial, regional and labour market policies, including skills development and social protection, as well as rules and incentives to mobilise private capital. The NDCs need to be supplemented by comprehensive national transition plans with justice considerations integrated throughout, which could be the basis for issuing sovereign bonds.

Third, COP29 needs to boost mainstreaming the just transition into the routine practices of business and finance institutions. Supporting the transition is necessary to build public trust and develop the human and social capital needed

NICK ROBINS

for a successful shift to a net zero and resilient economy.

From fragmentation to cooperation

One way to do this is to integrate the social dimension into the climate transition plans that companies and financial institutions are both voluntarily and increasingly required to produce. In the United Kingdom and the European Union, the publication of climate transition plans is becoming mandatory. As part of the UK’s Transition Plan Taskforce, advice was produced on how to embed just transition principles across the five pillars of a good climate plan: foundations, implementation, engagement (with value chains, government and stakeholders), as well as metrics and governance. The G20’s Sustainable Finance Working Group is also pooling best practices on how to move ahead with “credible, robust and just transition plans”, which COP29 could support and bring to universal attention. These plans can be the basis for raising capital to implement the just transition, for example, through sustainability-linked bonds and loans. Market rules for the broader arena of transition finance must also incorporate the implications for people as workers, communities, suppliers and consumers.

At this time of global fragmentation, getting global cooperation on financing the just transition could be viewed as a hopeless quest. But another way of looking at this would be to view financing the just transition as the glue needed to put climate action in the service of burning social needs.

At the end of 2023, only 31% of NDCs referenced the just transition to varying degrees.

Nick Robins is a professor in practice for sustainable finance at the London School of Economics and Political Science and executive director of the LSE’s Just Transition Finance Lab. Prior to joining the LSE in 2018, Nick was co-director of the UN Environment’s Inquiry into a Sustainable Finance System, the head of HSBC’s Climate Change Centre of Excellence and head of sustainable and responsible investment at Henderson Global Investors. He has also worked at the European Commission and the Business Council for Sustainable Development. He is the co-founder of Planet Tracker and Carbon Tracker.

X-TWITTER @NVJRobins1  justtransitionfinance.org

FINANCING THE TRANSITION: WHY WE NEED LEADERSHIP

We already know what we need to do to solve climate change, but for that, the right financial levers and leadership are needed first.

Lindy Fursman, director of climate and energy policy, Tony Blair Institute for Global Change

Under the Paris Agreement, countries have set ambitious 2030 emission reduction targets. And by February 2025, new nationally determined contributions for the period through to 2035 will be announced by each party to the agreement.

However, regardless of ambition, the Global Stocktake in 2023 showed that current plans and action on reducing emissions are far from enough: the current trajectory of global emissions is not consistent with limiting the global temperature rise to 1.5°C, even if all plans to meet the NDCs were implemented.

For many countries, meeting a target that represents their “highest possible ambition” will be difficult. But decarbonisation will be especially difficult for countries that need significant investment in order to meet the clean energy needs of their growing populations, as well as to decarbonise existing energy assets.

Sources of emissions have changed radically over the past 20 years, moving from developed to developing countries. And history shows that energy demand in developing economies increases rapidly as development accelerates and populations move into higher income bands, resulting in large increases in per capita emissions.

Because of this, in addition to progressing their own domestic transitions, countries like the United Kingdom and

the United States must lead global efforts to support the use of clean technologies and facilitate the allocation of finance and investment to support this deployment in developing economies. Otherwise we risk seeing significant spikes in global emissions in the future.   The world already has most of the solutions needed for global decarbonisation, and technologies –both new and existing – continue to develop. The cost of producing electricity using solar and of batteries have both fallen rapidly and are costcompetitive with coal and natural gas plants in India and China respectively. More than $1 billion is being spent every day on solar deployment. There are also new solutions being developed for a number of other challenges, and further innovation may make these more widely deployable. For example, powered by artificial intelligence, scientists are even making huge strides in accelerating the development of fusion.

However, in Africa and South-East Asia, private investment in clean power is actually declining. While global finance flows are increasing, they remain small in the context of the scale of investment needed to limit temperature rises to less than 2°C while allowing sustainable development. Moreover, the gap between the costs of deploying clean energy in the Global North and South is wide, and further action is needed to bridge the divide. Finally, investment into activ-

ities driven by fossil fuels remains consistently high, especially when subsidies for fossil fuel use are included.

To address this, the climate strategies of countries like the UK should emphasise both domestic execution and accelerating the global transition through technology and investment in regions such as Africa and SouthEast Asia.

In these regions, the challenge is not only securing unprecedented levels of investment but doing so at terms that households and businesses can afford. Many of these countries are competing internationally for business and investment to drive economic growth and create jobs. To do so, the cost of their energy matters. Recent international efforts to drive investment have tended to take a project-centric view with a focus on headline investment numbers. What is needed is a focus on creating markets that can drive investment at greater scale but that can also deliver lower costs.

The UK is uniquely placed to drive this change. It is a global financial centre and has led the way in areas such as regulation and market creation (for example, the offshore wind regime). It also has an influential voice in development through its in-country presence, influence with the multilateral development banks and its world-leading development finance institute. These assets can be leveraged to deliver key changes, including to drive a shift

from international partners supporting individual projects to the creation of markets into which capital can flow at scale.

Brokering partnerships between developing and emerging economies, MDBs and institutional investors, countries like the UK need to lay the foundations for capital to truly flow. These foundations include policy, regulation and market creation in emerging markets, policy and regulatory changes in the Global North (using the City of London as an exemplar), and changes to MDBs and DFIs so they take the risks the private sector will not.

These efforts need to complement and catalyse private capital rather than

competing and crowding it out.   Country leaders also need to put in place the demand side for green energy and products that will drive investment. Much of the energy consumption in emerging and developing economies is to service exporters, and, as a result, well-designed trade policy such as the EU’s carbon border adjustment mechanism (albeit with some tweaks such as supporting countries to advance the investments needed to comply) can support this market development.   Finally, countries need to accelerate international carbon markets, using new technologies to restore faith in transparency and integrity. This will be critical for Article 6, which

has significant potential to channel finance to the Global South while maximising least-cost decarbonisation options that benefit the climate globally.

The solutions lie with the power of technology, and the investment needed to deploy it. Countries that lead the way in driving this investment could secure a share of the trade in clean technologies in the years to come – so it’s a win-win for countries as well as for the climate.



LINDY FURSMAN

Lindy Fursman is an expert in all aspects of climate change mitigation and adaptation. Prior to joining the Tony Blair Institute for Global Change, Fursman spent two years working alongside New Zealand’s minister for climate change. For five years, she was the chief adviser for climate change in the New Zealand Ministry for the Environment, and she spent seven years advising on climate change and economic policy, including in the New Zealand Treasury and as economic counsellor to the Organisation for Economic Co-operation and Development.

X-TWITTER @ LindyFursman  institute.global/

Are corporations allocating capital towards climate action?

When we talk about carbon emissions, we must talk about the root cause: corporations. Creating transparency with data can lead to accountability.

Shafaq Ashraf and Sangeeth Selvaraju, Grantham Research Institute on Climate Change and the Environment

To meet our climate targets globally, large polluting corporations play a key role in reducing greenhouse gas emissions. The top 150 polluting companies in the world contribute to over 80% of the world’s emissions, so their transition to cleaner and greener technologies and processes is critical to meet net zero by 2050. For this transition to be successful, it should protect vulnerable populations, provide new employment opportunities, and avoid deepening social inequalities as industries invest in and adapt to sustainable practices. Corporations have to align climate goals and investments with social responsibility, ensuring that both environmental and societal challenges are addressed. Since 2023, certain trends have developed in what some of the world’s most polluting companies are disclosing and allocating in their efforts to become green.

The investor-led initiative Climate Action 100+ publishes annual updates on the climate performance of 150 of the world’s largest corporate greenhouse gas emitters through its Net Zero Company Benchmark. The latest results, from 2023, indicate that corporate action on the just transition is still in its early stages – despite growing expectations from investors that companies decarbonise while managing the social risks and opportunities of their transition strategies. The initiative also reports on capital allocations made by the same corporations. The indicator on capital allocation covers the alignment of corporate capital expenditure towards climate and green activities and is divided into three parts:

1. Brown investments: This metric examines whether a company discloses the amount of its capital expenditure allocated to unabated carbon-intensive assets or products. Unabated carbon-intensive assets refer to assets or products with a high carbon footprint relative to their output and do not use any carbon removal technologies, namely brown assets.

2. Green investments: This metric assesses whether a company reports the value of its capital expenditure directed towards climate solutions during the most recent reporting period. Companies should clearly define these solutions, ideally referencing a formal taxonomy or classification system.

3. Future green investments: This is a forward-looking metric that assesses whether a company discloses its planned capital expenditure allocated toward future climate solutions.

Among the 150 companies, only 28 disclosed their capital expenditure towards unabated carbon-intensive assets, 44 reported their 2023 capital expenditure allocated to green investments, and 48 disclosed their future plans for green investments. These disclosures are illustrated in Figure 1. Figure 2 further explores the detailed capital allocation of companies that have provided actual figures.

The results indicate that capital expenditure disclosure remains limited, with very few companies being transparent about their current invest-

ments in carbon-intensive (brown) assets. Although the number of companies reporting investments in climate solutions increases by 16 when considering current capital expenditure, and rises even further for future green expenditure, these figures represent only disclosure. The data reveals a general lack of transparency on sustainable capital allocation and highlights the need for more comprehensive and consistent reporting across the companies evaluated.

When examining the percentage of total capital expenditure allocated to green or climate-related investments, as illustrated in Figure 2, we observe that some companies are significantly ahead of others in their 2023 spending. Some of the key factors contributing to these differences are the sectors in which these companies operate, their geographical location and the regulatory requirements they face. Companies based in Europe tend to disclose more readily, partly due to regulations such as the Corporate Sustainability Reporting Directive, which requires companies to report how their activities align with the EU Taxonomy. Importantly, this analysis only considers current capital allocations and the companies’ existing assets, without delving into future investments or broader sustainability corporate strategies. By considering only current expenditures, companies may appear to be doing less than they plan for in terms of their transition to sustainability. However, the success of reaching net zero emissions hinges not only on present actions but on sustained and planned future investments in clean energy, climate solutions and decarbonisation technologies.

Data shows that while some companies have made progress in green

investments, the overall level of transparency and action remains insufficient to meet global climate targets. Differences in capital expenditure reporting across sectors and regions highlight the need for consistent, long-term commitments. Achieving net zero by 2050 will require not only increased current investments but also clearer future strategies. By ensuring that transparent, future-oriented capital allocations support climate goals, firms can contribute significantly to the transition towards a low-carbon economy.



SHAFAQ ASHRAF

Shafaq Ashraf is a policy fellow at the Transition Pathway Initiative Centre based at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science, where she leads the Climate Action 100+ project. She has worked on various projects with the Asian Development Bank and Oxfam GB focused on environmental sustainability in urban, rural and agricultural contexts.

SANGEETH SELVARAJU

Sangeeth Selvaraju is a policy analyst in sustainable finance with the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science working on industrial decarbonisation in India’s steel industry. He was previously a research associate in the climate policy department at the German Institute for Economic Research working on industrial decarbonisation and climate finance. He has also held roles at the Mercator Research Institute on Global Commons and Climate Change, the Apricum Cleantech Advisory in Berlin, and the Council on Energy, Environment and Water in New Delhi.

FIGURE 1: COMPANIES DISCLOSING CLIMATERELATED

FIGURE 2: TOTAL CAPITAL EXPENDITURES REPORTED FOR GREEN OR CLIMATE-RELATED EXPENDITURE

IMPROVING INTEGRITY FOR PRIVATE SECTOR FINANCE

Jean-Paul Servais

How IOSCO is supporting trust in capital markets to drive sustainability

Through supporting our members, ensuring the continued soundness of capital markets and a range of other actions, the International Organization of Securities Commissions hopes to help pave the way to a lowcarbon future.

Jean-Paul Servais, board chair, International Organization of Securities Commissions

THE POWER OF CAPITAL MARKETS AND THE FINANCIAL RESOURCES THEY CONVENE COULD PLAY AN IMPORTANT PART IN FINDING THE GLOBAL FINANCE NEEDED FOR A SOUND TRANSITION WHILE ALSO SPURRING INNOVATION AND CATALYSING CHANGE.

Like so many times in modern history and the history of financial markets, we are living through a truly challenging set of circumstances. However, unlike many times so far, we have a clear idea of what needs to be done to make them better, and a recognition that any potential progress requires global dialogue, systemic solutions and rapid action.

There are clear objectives ahead for the global community. The financial sector is helping the transition to a more equitable low-carbon future work in a just, trustworthy and timely way.

The International Organization of Security Commissions takes the responsibility for action from our unique position as the international standard setter for capital markets where, together with the G20 and the Financial Stability Board, we set the global regulatory reform agenda for financial markets.

In our own domain, trust is a key consideration in ensuring markets work with integrity, investors are safe from harm and the overall financial system is both stable and able to respond to emerging and evolving risks. Trust sits at the core of every initiative, every global policy proposal and every implementation effort, regardless of whether we are thinking about large or retail investors, financial power or the geographic location of our members.

Sustainable finance is no exception. The power of capital markets and the financial resources they convene could play an important part in finding the

global finance needed for a sound transition while also spurring innovation and catalysing change.

Our members jointly oversee approximately 95% of the world’s capital markets. Many are based in emerging markets – those at most risk when it comes to climate change and that require the most assistance along the way.

Led by the priorities of our members, we have spent recent years working to ensure the continued soundness of capital markets as they seek to embed sustainability-related considerations throughout.

Our work in sustainable finance was built on our core objectives and aims to bring sufficient trust and integrity into the market so investors can make informed decisions about their capital allocation, all while knowing the chances of being subject to greenwashing or other mispractices are mitigated.

We focus on several key aspects: data and transparency, practices for those who process, repackage or use this data to create products and sell them to others, or, more foundationally, market structures where all the trading takes place.

To ensure that sound frameworks and practices exist in each, we engage on all fronts, from corporate reporting (sustainability-related disclosure, assurance and ethics and disclosure of transition plans, where they exist) to environmental, social and governance ratings and data providers, over asset management to carbon markets and innovation in financial products and benchmarks.

Having access to reliable, timely and publicly available information is critical to well-functioning capital markets and transparency is a key category for investors. Securities regulators are central to setting corporate reporting and disclosure requirements in capital markets.

Accordingly, at IOSCO we aim to work on an ecosystem that will set out in record time a global framework for sustainability-related disclosures and overarching assurance frameworks and ethics principles, bringing investoruseful information to global capital markets.

On disclosure, IOSCO supported the establishment of a sustainability standards board under the International Financial Reporting Standards Foundation that will continue the work on this topic in the public interest. Subsequently, we endorsed the first two standards of the International Sustainability Standards Board in July 2023 as fit for purpose for capital markets. This endorsement has driven more than 20 jurisdictions to take steps to integrate these standards in their regulatory regimes within the first year. Together, these jurisdictions represent over 40% of global market capitalisation and more than 50% of global gross domestic product. Over time, some 130,000 companies are expected to publish ISSB-aligned disclosures.

To date, the commitment to a global framework remains strong, proof that we are on the right path. However, for the global ecosystem to work in an aligned fashion, frameworks need to exist in ways that promote consistent and comparable climate-related and other sustainability-related disclosures for investors.

The alignment of sustainabilityrelated disclosure standards needs to be supported by common data

JEAN-PAUL SERVAIS

approaches, digital taxonomies and tagging, provided they are built on solid ground. This is why, for example, we support the work of the IFRS Foundation on digital tagging for accounting and sustainability standards.

To enhance trust in the information disclosed to the market, we also called for a robust and profession-agnostic assurance and ethics framework to be established as soon as possible and encourage the work of the global standard setters in this field. We have been impressed by the response. Both the International Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants will be ready this year.

We are now ensuring our members are equipped and prepared to implement such ecosystems and minimise divergencies as we progress – and, in this regard, implementation and capacity building are our key focus. Encouraged by early adopters setting the tone for others, we are maintaining open dialogue with national regulators and partnering with others to provide technical support and guidance to members to minimise fragmentation due to local adaptations.

We hope to see continued global efforts to act urgently in the public interest and minimise fragmentation without any loss of quality in reporting. A united front of international players is essential for delivery and IOSCO will ensure global securities regulators are doing their part.

The International Organization of Securities Commissions’ members oversee about 95% of the world’s capital markets.

95%

20 jurisdictions have taken steps to integrate the ISSB’s sustainability standards in their regulatory regimes within the first year. They represent over 40% of global market capitalisation and more than 50% of global GDP.

Jean-Paul Servais is chair of the Belgian Financial Services and Markets Authority and chair of the board of the International Organization of Security Commissions, as well as the IOSCO European Regional Committee. He is also a board member of several international supervisory bodies for the financial sector including the European Securities and Markets Authority and the European Systemic Risk Board. He is a professor at the Université Libre de Bruxelles, where he teaches international tax law, and an author or coauthor of numerous publications.

iosco.org

Best steps now for urgent climate action

Michael Bloomberg is a business leader, the former three-time mayor of New York City and the UN Secretary-General’s Special Envoy for climate ambition and solutions. He is also a champion of combatting climate change.

THERE’S NO SHORTAGE OF AMBITION –MORE AND MORE BUSINESSES HAVE SET AMBITIOUS GOALS – BUT ACTION IS WHAT REALLY MATTERS.

On  World Environment Day, marked annually on 5 June, [Michael Bloomberg] joined a clarion call for climate action alongside the UN chief, who made an impassioned  special address from the American Museum of Natural History.

Recognised globally for his investment in cutting carbon emissions, Mr. Bloomberg supports the Beyond Coal movement, which helped to catalyse momentum towards the clean energy transition in the United States and other countries.

He also co-launched America’s Pledge, an initiative to quantify and report the actions of US states, cities, businesses and organizations to drive down greenhouse gas emissions in line with the legal binding 2015 Paris Agreement on climate change.

In an interview with UN News, Mr. Bloomberg explained how leaders can make the switch to clean energy alongside growing the economy and fighting climate change.

UN News: If you could ask successful businesspeople such as yourself to make one commitment to climate action, what would that be?

Michael Bloomberg: Business leaders know that there are enormous risks and opportunities associated with climate change and that taking action is in their companies’ best interest. There’s no shortage of ambition – more and more businesses have set ambitious goals – but action is what really matters.

The more we do to knock down barriers that stand in their way, the faster the private sector can act to turn pledges into real progress. That includes ensuring businesses and investors have the data they need to identify risks and find opportunities to cut emissions and working with leaders at every level of government to fix policies that tilt markets towards fossil fuels.

UN News: At a time when housing and food costs are spiking, for many people climate change takes a back seat. How do you change that?

Michael Bloomberg: People all around the world are already experiencing the effects of climate change. They recognise that nothing poses a greater risk to their families and communities. They want to breathe clean air and drink clean water, and they want access to clean, affordable power.

They also understand that we don’t have to choose between growing the economy and fighting climate change because they go hand in hand. The most important thing is to make our voices heard by voting for leaders who will help to lead the way.

UN News: To make a clean energy transition, what are the most important actions needed?

Michael Bloomberg: Ending coal use is the single most important thing we can do. The Secretary-General has called for ending coal power in wealthy countries by 2030, and we can reach that goal.

More than 70 per cent of US coal plants have committed to closing or have already switched to clean energy. In Europe, it’s

MICHAEL BLOOMBERG

more than half.

But, hundreds of millions of dollars in subsidies still prop up fossil fuels around the world. That needs to end.

At the same time, much more cleanenergy investment needs to flow to developing countries with growing economies, which is an all-hands-ondeck mission. Multinational banks can use more of their capital to draw in private investment.

Governments and business leaders can work together to identify potential projects and create new financing arrangements that reduce risks to investors. Philanthropy can help build partnerships and provide technical assistance to identify investable projects and make the economic case for clean energy.

UN News: What’s the number one thing cities can do to combat climate change or the main thing cities should be thinking about in a 1.5 degree-future?

Michael Bloomberg: The same steps that cut carbon emissions also make cities better, healthier places to live. There are many steps cities can take on their own to cut emissions and clean the air, like setting rules for energy efficiency and investing in mass transit and bike lanes.

The more countries do to support and empower those kinds of local action –and the more local leaders support each other by sharing great ideas – the faster we’ll make global progress.

It’s also important that cities’ potential to cut emissions is fully recognised as national governments make new commitments, as they’re required to do next year under the Paris Agreement.

Cities and other subnational groups had an official role for the first time in the history of international climate talks at last year’s COP28. It’s an important step forward, and the Secretary-General deserves a lot of credit for making it happen.

Originally published in UN News, 5 June 2024

Michael Bloomberg is co-chair of the Glasgow Financial Alliance on Net Zero and the United Nations SecretaryGeneral’s Special Envoy on Climate Ambition and Solutions, and chair of the Task Force on Climate-related Financial Disclosures. He serves as president of the board of the C40 Cities Climate Leadership Group and co-chairs the Global Covenant of Mayors for Climate and Energy and the America Is All In coalition. He served three terms as the mayor of New York City. He is the founder of Bloomberg Philanthropies and has given more than $1 billion to the global climate fight. X-TWITTER @MikeBloomberg

MINAS GERAIS: A BEACON FOR GLOBAL INVESTMENT

Record-breaking investments and sustainable development are driving prosperity in Minas Gerais.

The state of Minas Gerais has been breaking record after record in attracting private investments from many different countries around the world. One of the factors behind this success is the management model adopted by the state government, which is focused on responsible development and guided by serious and effective administration, and good ESG practices, with the ultimate goal of prosperity and improvement in the quality of life of its inhabitants. In recent years, Minas Gerais has attracted, on average, investments of around R$80 billion annually (US$14.66 billion). These are record amounts that demonstrate an ever-increasing interest in a place that has so much to offer.

One of its main policies that has contributed to this is the incentive for clean energy sources. The state currently has the largest reserve of niobium in the world and the largest reserve of lithium in Brazil, which is why the successful Vale do Lítio (Lithium Valley) project was created. This project has been

attracting billions’ worth of investments, which boost not only Minas Gerais’ revenue, benefiting the state’s most needy regions, but also its economic development.

It is also worthwhile to highlight the state’s intense work in the photovoltaic solar sector, led by the Sol de Minas (Minas Gerais Sun) project. With its implementation, Minas Gerais has become a leader in the sector and a national reference in adopting solar energy systems that power homes, businesses, industries and rural premises. Today, 100% of the 853 municipalities in Minas Gerais have at least one photovoltaic solar energy generation unit. The goal is to achieve zero net greenhouse gas emissions by 2050.

With such great effort and planning for responsible development, Minas Gerais has reached almost 10GW in solar energy generation, surpassing more than 150 countries. Furthermore, 99.5% of the electricity produced in the state comes from renewable sources. And Companhia Energética de Minas

Gerais (Minas Gerais Energy Company) has also been doing its part, by investing more than R$50 billion (US$9.16 billion) in 10 years (2019–2028).

The work of the Minas Gerais government in making the state increasingly attractive and economically diversified does not stop there. Minas Gerais is the country’s leader in coffee, milk and potato production, and the state government, in partnership with Banco de Desenvolvimento de Minas Gerais (Minas Gerais Development Bank), has given a further boost by announcing R$1.4 billion (US$256.7 million) in credit for cooperatives, producers and companies in Minas Gerais agribusiness. This has allowed the sector to

Minas Gerais has reached almost 10GW of installed solar energy capacity and surpasses more than 150 countries in solar energy

increase its efficiency in the field, further diversifying production and, at the same time, encouraging the creation of new companies able to add value to agricultural products. Just to provide an idea of all this potential, agribusiness is already responsible for 22% of Minas Gerais’ gross domestic product.

To further leverage economic development, Minas Gerais invests in other sectors. One of them is Local Productive Arrangements: clusters of companies with the same production specialisation in a given municipality or region. They enable the expansion of production capacity for new technologies across several sectors, thereby increasing business opportunities throughout the state. There are already 70 LPAs in 339 municipalities in Minas Gerais, with more than 96,000 companies. In addition to the LPAs, the Minas Livre Para Crescer (Minas Gerais Free to Grow) programme has been streamlining the business environment to facilitate the creation of new companies. There are currently 462 municipalities with pro–economic freedom legislation, benefitting more than 11 million Minas Gerais residents and creating tax incentives for industry, foreign trade and wholesale trade, among others.

These efforts to modernise the economy, besides attracting a record number of investments, have shown concrete results in improving the quality of life of the people of Minas Gerais. In recent years, more than 924,000 direct formal jobs have been created in the state, which is a historic milestone.

Another point worth highlighting regarding socioeconomic development is the creation of Minas Reurb – Programa Mineiro de Integração e Regularização Territorial (Minas Gerais Programme for Territorial Integration and Regularisation). This programme aims to deliver property titles for urban settlements to

thousands of Minas Gerais residents. Since its creation, more than 12,000 property titles have been delivered and another 57,951 premises have been made available for regularisation in the coming years. With the formalisation of premises, citizens now have access to basic sanitation, water and electricity.

With a vibrant economy and increasingly growing socio-economic development, Minas Gerais is being consolidated as a place with a friendly business environment, which is highly attractive to those looking to invest. And the state also has some very important advantages. Its location is privileged: it is in the economic centre of the country. Its population is 21 million inhabitants, which favours the acquisition of domestic consumers. And its logistics are excellent: Minas Gerais has the largest road network and the second-largest rail network, and is

within a one-hour’s flight of 70% of the country’s gross domestic product. All of this is complemented by an increasing number of higher education institutions and educational institutions focusing on technical courses. This education network will produce new technologies, innovate and connect a qualified workforce to the demands of companies and the market as a whole. If you are looking to invest in a place with legal security and increasing investments in economic and social development and infrastructure, this is the place for you. Invest in Minas Gerais. Learn more at www.youtube.com/ watch?v=FU8gwkrQ7n4.

From top: Minas Gerais is investing in the next generation of researchers within the state

Irrigation boosts productivity in crop generation in Minas Gerais

Partnerships to get on the right pathway

With access to finance, countries in the Caribbean can move faster on reaching their climate goals while creating jobs and other opportunities.

FMia Mottley, prime minister, Barbados

MY FEAR IS THAT WE SAY THE SAME THING YEAR AFTER YEAR AFTER YEAR, BUT THE ONLY DIFFERENCE IS THAT THE TEMPERATURE KEEPS GETTING HIGHER AND HIGHER AND THE CONSEQUENCES OF OUR FAILURE TO ACT WITH SPEED BECOME REAL IN SO MANY PARTS OF THE WORLD THAT HAVE NOT YET HITHERTO BEEN EXPOSED TO IT.

ossil fuel subsidies receive 10 times that which exists for renewable energy. Equally, in small states, we face the reality that the cost of renewable energy supply and electricity to our citizens will probably be higher than the traditional use of fossil fuels …

Permitting is critical. But most small states don’t have the level of skills necessary to create that regulatory framework easily. So while we speak to the urgent need for financing as we continue to do with the Bridgetown Initiative, and while we push for greater amounts to be applied there, not just of public money, but of other money and public-private approaches, we have to also come to grips with the reality that there are some non-financial issues that can also undermine our ability to reach this target …

The reality is that in the Caribbean, there are certain countries that would like to move faster, but we have the opportunity for significant capacity in solar, wind, geothermal, and a number of other renewables. Bottom line is, however, that each investment will probably not attract any attention from you, Mike [Bloomberg], because it’s probably too small.

But if we take the investments and pool them collectively and look for collective offtake agreements, then perhaps we can begin to catapult the level of speed that we need in order to reach 2030 … If we are serious about reaching the … targets for 2030, then we have to be practical with respect to these other issues …

While we accept that there has to be far greater utilization of domestic financing than has been discussed thus far, the reality is that it is the part-

nership between foreign and domestic capital that is going to get us there.

Most of our countries are borrowing at rates that are just not sustainable. And that is why the Jet-B projects … really have not gotten off the ground with the pace that we expected it to. I want to salute President [Ajay] Banga from the World Bank for agreeing to introduce more 50-year loans for climate-vulnerable countries to be able to help us get part of the way.

I want to salute Kristalina [Georgieva] for introducing the Resilience and Sustainability Trust, which allows many of us to be able to start to plan out our way. But even then, it is limited. And in our own case in Barbados, we’ve used a significant portion of those funds to partner with the Latin American Development Bank, the Green Climate Fund, the United States USAID, and indeed Guyana and Bahamas to be able to establish for the first time a bluegreen investment bank in the Eastern and Southern Caribbean that will be a market maker to help close the gap with respect to some of the financing.

But … we’re not moving with sufficient speed.

And we are not moving on a broad enough front. Sultan [Al Jaber], you have been able to add significantly to the global financing with the establishment of ALTÉRRA …

My fear is that we say the same thing year after year after year, but the only difference is that the temperature keeps getting higher and higher and the consequences of our failure to act with speed become real in so many parts of the world that have not yet hitherto been exposed to it. We have a moral obligation to get the financing

right … Bridgetown 3.0 … sets clearly … the ambitions that we must reach if we are going to be serious about enabling persons to reach the targets for the global renewable summits, while at the same time not forgetting that the broad sustainable development goals must be our target because we are not one issue people. We might end up saving ourselves from doom from the planet, but then dying from something else like chronic noncommunicable diseases that have overtaken our populations … Settling and solving the finance will not cause our citizens to be able to benefit from renewable energy tomorrow because there is still a project preparation and a project execution capacity that Ursula [von der Leyen] referred to so appropriately. I hope, Mike, that this ability to bring us together … will mean that small island states will not

be omitted from the preparation and the investment that can take place. We are often ignored because our scale is simply too small … I am here because I have confidence in the fact that this pathway creates jobs, creates opportunities, and ultimately secures hope at the very time when the world needs hope more than ever … If we don’t find mechanisms as well to tap into the domestic capital … we will turn people who live as proud independent citizens into tenants in their own land again. We have not set on this journey to recolonize our people, but in fact to liberate them from a planet that is effectively in great crisis. Let us, therefore, do the right thing, but see people and hear people so that they can be part and parcel of the solution the world over.

Global Renewables Summit, 24 September 2024

Fossil fuel subsidies receive 10 times the amount that renewable energy does.

10x

Corruption: a roadblock to climate finance

Corruption erodes trust. It degrades the quality of climate adaption projects, and may put lives at risk. A multilayered approach that includes international collaboration, strict governance and intelligent uses of technology can help to fight against this.

Lida Preyma, founder and CEO, Cēlandaire Capital

DEVELOPING

COUNTRIES OFTEN DECRY THE HIGH COST OF CAPITAL AS A MAJOR BARRIER TO PROGRESS, YET SCARCELY SPOKEN ABOUT IS ONE VERY COSTLY ELEMENT THAT ONLY GOVERNMENTS CAN TACKLE: CORRUPTION.

Among the biggest obstacles to achieving the just transition and tackling climate change is the lack of private capital. While the volume of private investment remains a challenge in the developed world, the scarcity of funds flowing into the developing world is stark. Developing countries often decry the high cost of capital as a major barrier to progress, yet scarcely spoken about is one very costly element that only governments can tackle: corruption. That remains a major factor in geopolitical, project and financing risk.

Corruption can significantly undermine the fairness and effectiveness of climate finance allocation, particularly in the regions most vulnerable to climate change, by distorting how funds are distributed, thereby reducing the effectiveness of the intended flows.

This not only erodes trust, which is key to attracting private capital, but can also result in low-quality climate adaptation and mitigation projects if capital is siphoned off or misappropriated to corrupt or inadequately qualified suppliers. Additionally, projects may be undertaken where political cronies have influence, rather than executed where the need is greatest. Poorly implemented projects with substandard materials may put human lives at risk. Corruption also significantly reduces the likelihood of effectively addressing climate emergencies when they arise.

Combatting corruption

To address this, it is essential to improve transparency, accountability and governance in allocating and managing climate funds. Also essential is a com-

bination of mechanisms and regulatory frameworks across all stages of climate finance, from disbursement to fulfilment to monitoring and reporting.

Technology plays an outsized role in combatting corruption. At minimum, every country should enact a publicly accessible corporate beneficial ownership registry so that civil society and donor organisations can identify the actors behind the recipient corporations. Open-access data and reporting databases should be established with relevant information regarding capital recipients and their partners, whether they be national governments, nongovernmental organisations or private companies. All elements, including project details, plans, allocations and budgets, should be included for ease of monitoring and tracking. Blockchain and distributed ledger technology can ensure that data is trackable and kept secure on immutable ledgers. The use of artificial intelligence can help spot financial anomalies. Public procurement should be digitised to enhance transparency. Satellite imagery can be used to monitor progress and validity. Removing the human element from the process decreases the likelihood of fraud and corruption.

Governance structures that include anti-corruption legislation and robust enforcement mechanisms are also integral to the process. Penalties for non-compliance need to be substantially punitive so they are not simply considered a cost of doing business. Without strong enforcement mechanisms, legal and regulatory frameworks become inconsequential. Consider, for example, red light traffic behaviour. When the risk of detection is low, drivers are more likely to disregard

red lights. However, if an intersection is equipped with a red-light camera guaranteeing penalty enforcement, incidents of violation dramatically decrease. When only a small chance of getting caught exists, a person will likely run a red light whenever it suits them; but if there is a red-light camera at the intersection and a 100% certainty that a fine will be issued, only drivers who do not know the camera is there will run the red light. Real deterrence is key, as legal frameworks are ineffective unless enforcement mechanisms are sufficiently rigorous and incorruptible.

Project certification and implementation process accreditation, such as those deployed by the Green Climate Fund and the Green Environment Facility, ensure that funding goes to trustworthy and capable organisations that meet anti-corruption, transparency and environmental standards. Similarly, countries that are signatories to the United Nations Convention against Corruption are more attractive to investors.

Collaboration for integrity

Multistakeholder engagement is also crucial for eliminating corruption in climate projects. By including civil society, local communities and Indigenous groups in decision-making, monitoring and reporting, the overall level of integrity in the allocation of funds is elevated.

Given over-stretched balance sheets, blended finance has become a crucial component in the anti-corruption toolbox to unlock private capital and advance the just transition. Collaboration with multilateral development banks provides donor countries and the private sector greater likelihood that climate projects will be managed with integrity, because MDBs

have developed sophisticated anticorruption frameworks and maintain high levels of transparency and accountability. They carry out rigorous due diligence, are credible and experienced in emerging markets, and use public capital to mitigate risks, offer concessional loans and even technical assistance, which are all attractive to private capital. Blended finance can also contribute to the development of local capital markets in emerging economies, particularly for green bonds and other climate-related financial instruments.

The carbon credit markets are likewise an integral financing tool for climate-related projects. The voluntary carbon markets, however, are

underdeveloped, unregulated and susceptible to fraud, corruption and greenwashing. Brazil serves as an example, where, in August 2024, police uncovered an alleged fraudulent scheme that involved carbon credits being sold from projects that were located on stolen land in the Amazon. This underscores the criticality of project validation and certification by reputable third parties to ensure carbon credits are linked to high-quality, high-integrity projects. Tackling corruption through a multilayered approach that includes transparency, technological innovation, community engagement and legal frameworks is necessary to close the climate finance gap and to achieve a just transition.

LIDA PREYMA

Lida Preyma is the founder and CEO of Cēlandaire Capital. Previously, she was co-lead for capital markets and head of global anti-money laundering risk management for a major Canadian bank. She was also part of the management team that built Canada’s first alternative trading platform and stock exchange, and managing director of corporate citizenship at a multinational auto parts manufacturer. She has served on B20 taskforces including anti-corruption, finance and infrastructure, energy transition, and climate. She is a member of the board for Transparency International (Canada) and a mentor for Creative Destruction Labs’ Paris Climate stream.  celandairecapital.com

FRONTIER TECHNOLOGY –FINANCING FIT-FOR-FUTURE INFRASTRUCTURE

Growing the pipeline of energy transition investments

Decarbonising infrastructure

will be key to achieving the Paris Agreement, and for that to happen, there needs to be a shovel-ready pipeline. The Global Infrastructure Facility, a G20 initiative, aims to support and transform the process for private investors.

Astrid Manroth, head, Global Infrastructure Facility

KEEPING THE GLOBAL TEMPERATURE RISE TO 1.5°C IN LINE WITH THE PARIS AGREEMENT REQUIRES ACCELERATED ACTION, AMBITIOUS POLICY IMPLEMENTATION AND EXPONENTIAL INVESTMENT.

Global efforts to address climate change are off track. Without a significant, immediate course correction, the Paris Agreement goal of limiting the average global temperature rise to below 2°C above pre-industrial levels will not be reached. Decarbonising infrastructure is key to achieving these objectives, as existing infrastructure accounts for about 80% of greenhouse gas emissions and 90% of adaptation costs. The pledge made at the 28th Conference of the Parties to the United Nations Framework Convention on Climate Change to triple the global renewable power capacity and double the annual rate of energy efficiency improvement by 2030 demonstrates governments’ commitment to a sustainable energy transition. Transforming the global energy system will create new jobs, enhance lives and livelihoods, empower people, and foster resilient communities.

Keeping the global temperature rise to 1.5°C in line with the Paris Agreement requires accelerated action, ambitious policy implementation and exponential investment. To achieve universal access to electricity and ensure energy security and affordability, financing the energy transition – shifting from fossil fuels to cleaner energy sources such as wind, solar, hydropower and new technologies such as green hydrogen – requires strategic partnerships and transformational investment, including using innovative financial instruments. The International Energy Agency estimates that low- and middle-income countries need to mobilise $1.9 trillion annually by 2030 to achieve their clean energy goals. This is a sevenfold

increase from the current annual $260 billion.

Barriers to investment

Given the scale of financing needs, two-thirds of the capital needed is expected to come from the private sector. However, there remain significant barriers to private investment in energy transition. There is no shortage of private capital, yet attracting private investment in emerging markets and developing economies is often constrained by the slow pace of utility and market reform. This has led to restricted fiscal space to make catalytic investments, limited consumer affordability and inadequate access to affordable capital. The actual and perceived risks associated with energy transition investments directly increase the cost of capital, in turn raising the overall cost of the energy transition. Mobilising private resources at the pace and scale required to meet the investment needs and broader Sustainable Development Goals in EMDEs requires a systemic shift in approach.

Private finance for the energy transition starts with the availability of a shovel-ready investment pipeline. A significant obstacle in EMDEs is the scarcity of bankable climate-smart infrastructure projects and programmes, as governments in these regions often need more expertise to identify, plan, prepare, structure and negotiate such projects effectively. Upstream, EMDE governments require capacity building and support in developing their plans to achieve their national determined contributions, creating the enabling investment climate and sector regulatory frameworks, and developing local

capital markets to mobilise local investors. Midstream, they need support in identifying and preparing project pipelines, including transaction advisory services for feasibility studies, the preparation of bidding and contractual documents, and negotiations of commercial and financing documents.

Midstream project and programme development is the riskiest part, requiring a concerted effort to scale up resources dedicated to ‘the missing middle’, enabling transformative development by translating reforms in the upstream enabling environment into bankable project pipelines for downstream investment.

Downstream, innovative publicprivate financing solutions such as guarantees, blended finance or patient development capital can help meet the risk-return requirements of private investors. Multilateral development banks have provided longstanding support to EMDE governments to create the enabling investment climate

and regulatory frameworks to facilitate private investment and have also anchored project preparation support for private capital mobilisation. However, more work is required to translate these efforts into private investment from ‘billions to trillions’. At the same time, the project preparation ecosystem is rapidly evolving, including philanthropy, investor alliances, impact funds or dedicated partnerships providing additional models of support. A comprehensive and collaborative effort by all public, private, philanthropic, academic and civil society actors and initiatives at the global and country levels is needed to achieve exponential growth in pipeline creation.

Since 2014, the Global Infrastructure Facility has supported governments in EMDEs in preparing sustainable, climate-smart infrastructure projects for private investment. As the only global multilateral public-private collaboration platform dedicated to preparing sustainable, low-carbon, resilient and inclusive infrastructure projects and programmes, it supports EMDE governments in preparing for private investment at national and sub-national levels. The GIF provides its transaction advisory services through 11 MDBs and works in structured collaboration with the private sector through its advisory council members, which manage over $18 trillion in assets. The GIF has supported 178 activities in 70 countries across a diversified portfolio of infrastructure sectors and EMDE geographies.

Existing infrastructure accounts for about 80% of greenhouse gas emissions and 90% of adaptation costs

80%

90%

The International Energy Agency estimates that lowand middle-income countries need to mobilise $1.9 trillion annually by 2030 to achieve their clean energy goals. This is a sevenfold increase from the current annual $260 billion.

$1.9tr

Every $1 provided in GIF project preparation support has mobilised over $100 in actual private investment and 94% of supported projects over the past 36 months are climate smart.

The Global Infrastructure Facility has supported 178 activities in 70 countries.

Every $1 provided in GIF project preparation support has mobilised over $100 in actual private investment –a highly efficient use of public funds – and 94% of supported projects over the past 36 months are climate smart. GIF-supported projects include climate change mitigation projects in renewable energy, energy efficiency, low-carbon transport or energy efficient social infrastructure, as well as climate change adaptation projects in sectors such as water management, and projects with strong adaptation and resilience components, such as hydropower or port sectors.

The GIF has created and supported innovative delivery mechanisms. The

delivery approach for pipeline development needs to evolve from single projects to programmes to increase bankable investment opportunities for the private sector. Preparing programmes instead of stand-alone projects enables countries to overcome barriers to scale that can systematically and increasingly attract private capital. For instance, the GIF’s support of the Energy Efficient Street Lighting Program in Brazil through a comprehensive partnership with the International Finance Corporation, the World Bank and the Brazilian government led to structuring transactions in 12 municipalities with a standardised approach to attract private sector solu-

tions – a replicable blueprint for adding in multiple municipalities.

The challenge also lies in rapidly mobilising funds via new avenues of private capital and for less mature low-carbon technologies, which struggle to attract private investment due to unfavourable risk-return profiles. Carbon markets are part of the solution by boosting the efficiency of energy transitions and raising money for clean energy projects, especially in the developing world. The GIF has provided technical and funding support in preparing projects to enable EMDEs to access voluntary carbon markets. At COP28, it supported the launch of the Carbon Action Forum, which connects potential buyers and sellers in identifying the challenges in carbon markets and collaborating on solutions to scale these markets.

Country platforms are useful for translating opportunities into action for the energy transition. The GIF has partnered with EMDE governments and investors in collaborative trilateral country platforms dedicated to identifying and maturing climate investment at scale. Bringing together government officials, international and national development banks, and local and foreign private investors to mature policy and regulatory frameworks and co-create public-private partnerships and investment solutions unlocks access to local and international private finance at scale.

As a G20 initiative, the GIF can act as an honest broker for transformative private investment in the energy transition in collaboration with the broader ecosystem. Its unique position and updated strategy provide a gateway to scale for private investment in climate-smart infrastructure in EMDEs via several strategic approaches:

1. With its global reach and sectoral breadth, the GIF can develop diversified climate investment portfolios across regions and infrastructure sectors, catering to the needs of private investors looking for scale and risk diversification.

2. The GIF has extensive experience in moving from preparing infrastructure projects to developing investment programmes based on standardisation, replication and learning across geographies, sectors and partners. It can scale up its country platform approaches to convene all relevant ecosystem partners at the country level to accelerate the development of bankable investment opportunities.

3. The GIF can broaden its technical partner base to leverage all ecosystem channels for investment pipeline creation, including regional and national development banks.

4. Through the G20 Infrastructure Working Group and as a collaborative public-private platform, the GIF contributes to knowledge exchange on critical topics of sustainable infrastructure finance, such as addressing foreign exchange risk in infrastructure.

As a public-private collaboration platform, the GIF can anchor a systemic ecosystem approach to transforming pipeline development and accelerate the creation of diversified global infrastructure portfolios for private investors. The G20’s Independent Expert Group 2023 report recognised it as a gateway to scale for private capital mobilisation and called for its role to be revamped and expanded.

A COMPREHENSIVE

AND COLLABORATIVE

EFFORT OF ALL PUBLIC, PRIVATE,

PHILANTHROPIC,

ACADEMIC AND CIVIL SOCIETY

ACTORS

AND INITIATIVES AT THE GLOBAL AND COUNTRY LEVELS IS NEEDED TO ACHIEVE EXPONENTIAL GROWTH IN PIPELINE CREATION.

ASTRID MANROTH

Astrid Manroth is head of the Global Infrastructure Facility, a G20 initiative advising governments in emerging markets in the preparation of bankable infrastructure projects for private investment. She brings 26 years of global experience in policy reforms and climate finance at multilateral development banks and in the private sector. She has led complex investments in sustainable infrastructure and developed blended finance solutions.

 www.globalinfrafacility.org

What will it take to unlock climate finance for just energy transitions?

To successfully pave the way for financing the just transition, we must take a holistic approach and implement a socially transformative agenda. The World Energy Congress is committed to facilitating global action towards this end.

Angela Wilkinson, secretary general and CEO, World Energy Congress

THE COUNCIL PROMOTES A HUMANISING ENERGY ACTION AGENDA AND IS PIVOTAL IN FACILITATING FASTER, FAIRER AND MORE FAR-REACHING

ENERGY TRANSITIONS IN ALL REGIONS

At the 100th World Energy Congress earlier this year, over 4,000 energy transition leaders and investors from 118 countries convened to work on redesigning energy for people and planet. In this urgent work, climate finance is essential, and the need for it is growing. The congress concluded with a powerful call to action: how we got here will not get us to where we need to be. Recognising this is key to unlocking finance for just energy transitions.

Although investment in clean energy has nearly doubled over the past decade, the rate of increase falls far short of the levels required to meet global climate targets. Climate finance needs to increase at least fivefold by 2030 to mitigate greenhouse gas emissions from energy systems.

Taking stock of the situation

Private sector investment is growing, but not fast enough. Public finance remains essential, and new solutions including green bonds and blended finance need to be more widely adopted.

Meanwhile, regional energy transition narratives, pathways and financing are diverging. The capital allocated to financing transitions is highly unbalanced: 99% flows to the Global North, 1% to the Global South, according to the International Solar Association. Climate adaptation financing – estimated at $4.3 trillion – is needed now, especially in developing economies.

An ‘all green, electric dream’ ideology and simplistic ‘plug-and-play’ narratives contribute to gridlock and

blame-gaming. Yes, there is ‘no transition without transmission’ – nor without shipping, storage, climate adaptation and better livelihoods. Not all energy uses can or will be electrified by 2050. Recent experiences with green-only energy solutions and hydrogen hierarchies highlight the risks of premature policy prescription, adding unnecessary costs and delays. Swapping old for new power generation assets is not enough. The desire for development cannot be denied –emerging and developing economies will need more energy for sustainable development for decades to come –but neither can the realities of significant energy project delays and cost overruns.

System-wide infrastructure action planning is essential to secure investment in maintaining, repurposing and decommissioning existing systems, and building new power systems and value chains. We need to talk about productive energy access and less wasteful behaviour, as well as project management and energy efficiencies. There is no shortage of technology or money, but the necessary combination of financial and energy literacy is rare. Success depends on a more holistic approach and a socially transformative energy transition agenda. South Africa recently learned the hard way that inadequate social participation can derail plans to exit early from coal, despite the World Bank mobilising $497 million. The societal scars from the transition from coal to gas in the United Kingdom remain evident and continue to shape the national discourse.

How is the World Energy Council helping?

The council promotes a humanising energy action agenda and is pivotal in facilitating faster, fairer and more far-reaching energy transitions in all regions. Initiatives include the following.

Building holistic dialogue to unlock finance for just energy transitions. Most new energy projects fail due to country and project risk. Last year’s United Nations climate conference failed to reach agreement on mechanisms for pricing carbon. De-risking the private capital needed for the energy transition in developing countries and new risk allocation mechanisms are vital in unlocking finance for a wider set of energy transition solutions.

The World Energy Council is convening global finance – including listed, private and sovereign sources of capital, insurance and banks on all continents – with an equivalent diversity of energy transition leaders, to forge new catalytic partnerships, as it prepares for its next congress, hosted by Saudi Arabia in October 2026.

Measuring performance improvements, which can be help reset yardsticks for environmental, social and corporate gov-

ANGELA WILKINSON

ernance. The lack of a globally recognised environmental, social and governance taxonomy and disclosure standards hinders efforts to scale up the necessary finance. For over two decades, the council has been measuring progress in energy for sustainable development and helping to improve performance, leading to best practices through the World Energy Trilemma Index and Framework.

The Covid-19 crisis reminded us that energy systems’ resilience extends beyond assets to people and communities. Modern energy systems need to be resilient to climate change impacts and new energy shocks, such as extreme weather events, demand destruction and digital disruptions. We are promoting a new approach to dynamic resilience and new World Energy Scenario foundations to stress test combinations of policies, incentives and collaboration choices.

Looking beyond ‘green jobs’ to elevate more inclusive and intergenerational approaches to capability developments.

Assumptions of ‘old for new’ job equivalence are questionable, with unclear implications for wages, affordability and decent livelihoods. Politics and number games need to be put aside to address the wider capabilities and skills transitions essential to securing any return on investment.

For 40 years, the council has persisted in building vibrant Future Energy Leaders programmes, including Women in Energy and Kids in Energy, and enabling start-up energy transition entrepreneurs to acquire the attention they need in all regions. We are actively invested in developing the intergenerational skills and wider capabilities needed to make faster, fairer and more far-reaching energy transitions happen. The World Energy Council is committed to helping the world work together to build momentum in making better energy transitions happen.

The share of capital allocated to financing transitions stands at: 99% to the Global North and 1% to the Global South.

99%

1%

The total needed for climate adaptation financing is estimated at $4.3 trillion.

$4.3tr

Dr Angela Wilkinson has been secretary general and CEO of the World Energy Council since 2019. She has over 35 years of experience in leading national and international multistakeholder transformation initiatives on a wide range of global energy, climate and sustainable development related challenges. Previous roles include board-level and senior executive responsibilities in the public, private, academic and civic sectors. She is also a published author.

X-TWITTER @WECouncil  www.worldenergy.org

FINANCING A JUST TRANSITION MEANS MOBILISING THE PRIVATE SECTOR

The World Future Energy Summit is working with public and private actors to drive progress on climate action globally.

Leen Alsebai, general manager, RX Middle East, and head, World Future Energy Summit

Politicians may determine climate policy; regulators may set new industrial standards; but it’s private capital that will ultimately prove decisive in financing a just transition to a sustainable global economy and environment.

With the buy-in of the private sector (both in terms of tacit support and literal investment of capital), it will be possible to mobilise enough resources to close the yawning climate financing gap. Without it, any chance of meeting the ambitions set by individual nations and global institutions will melt away.

A roadmap to mobilise capital towards sustainable development

As the 29th Conference of the Parties to the United Nations Framework Convention on Climate Change takes place, all eyes will be on Baku, Azerbaijan. The world’s most influential leaders and thinkers will engage in an intense series of talks designed to keep

our collective response to climate change on track. As ever, COP29 has also encouraged a whole host of further climate-based events and initiatives on its side lines, looking to build on the momentum of the main effort.

A question of scale – private capital is essential to timely climate financing

While the debate regarding the feasibility of the Paris Agreement 1.5°C target continues, climate action (and new climate goals) must be based on unfolding realities in our shared global environment and economy.

Research shows that emerging markets and developing countries (excluding China) will need more than $1 trillion in climate finance per year by 2030, alongside a sevenfold increase in current renewable energy investments. Overall, the climate transition is expected to cost $125 trillion by 2050. However, with various current international climate funding efforts being measured in single billions

or merely hundreds of millions, rather than trillions of dollars, it’s clear that the gap cannot be closed with such instruments alone.

A key estimate from the research shows that even if every multilateral development bank dedicated every scrap of its available budget to climate financing, collectively they would only be able to cobble together around 4% of the total capital needed. On the other hand, there are $410 trillion of global financial assets held in private hands; committing just 1.4% of this total would be more than enough to close the climate financing gap by even the most conservative estimates.

Mechanisms

that can encourage sustainable investment

Climate financing efforts have produced mixed results in 2024 so far due in part to underinvestment by central banks. For example, the United States is the world’s largest economy but the Federal Reserve only ranks 17th on the latest Green Central Banking Scorecard, which indicates its progress in the development of green central banking.

This is a clear case of mixed messaging; private investors are being told repeatedly that the green revolution is coming, and that they must invest more fulsomely to support it, yet at the same time they see the biggest central banks and public financing institutions flagging in their own efforts. Insufficient clarity inevitably leads to a lowering of investor confidence. The reverse is also true; with a clearer indication of climate financing policy, regulations

Delegates attend the most recent World Future Energy Summit in April 2024

The World Future Energy Summit brings the global clean-tech and sustainability community together to network and do business

and specific mechanisms, private sector confidence will grow.

Critical areas of focus will address this current lack of clarity, and will seek to provide policy recommendations that can answer the most pressing ques tions that private investors are asking, such as:

● How will carbon pricing be addressed equitably, and how will it deliver on the long-held promise of viable carbon markets?

● How will emerging technology help finance fit-for-future infrastructure?

● How will this affect diverse investment portfolios and where will the best future investment opportunities be found?

LEEN ALSEBAI

● What is the future direction of environmental, social and governance standards and reporting? And how will this translate into greater clarity on whether an investment is truly green or not?

● How can private sector entities take leadership on climate finance and action? Where do they fit into the public sector’s strategies?

● How can public-private partnerships and blended finance accelerate a coordinated and just financial transition?

In each case, cooperation and coordination of efforts will both be essential for finding an equitable

Leen Alsebai is the general manager of RX Middle East and head of the World Future Energy Summit in Abu Dhabi. She has served as both a board member of Reed Exhibitions in the United Arab Emirates and as their chief financial officer.

X-TWITTER @WFES  worldfutureenergysummit.com

path forward. Both sectors need to inform and support one another’s long-term strategies for climate transition; pursuing such efforts in a piecemeal manner has, so far, led to a catalogue of missed opportunities and an ever-growing climate financing gap.

The World Future Energy Summit will continue to work alongside both private and public sector entities globally to accelerate climate action at every level. With buy-in from a diverse range of motivated climate actors, these sugges tions may spur further progress by forging that collaborative spirit just at the time it is needed most.

How regenerative agriculture can make climate solutions more resilient

Improving carbon sequestration through restoring soil could provide a substantial boost to achieving the Paris Agreement, but this is a largely overlooked and underfunded concern.

Tania Strauss, head of food and water, World Economic Forum

The global food system is at a critical juncture, contributing to and suffering from the impacts of climate change.

A key driver, agriculture is responsible for 37% of global greenhouse gas emissions and uses 70% of the world’s water resources

Regenerative agriculture’s impact

By adopting no-till farming, agroforestry, crop rotation and cover cropping, farmers can help restore soil health, sequester carbon and increase biodiversity.

DESPITE BEING HIGHLY VULNERABLE TO RESOURCE DEGRADATION, SOIL EROSION AND WATER VARIABILITY –WHICH CAN LEAD TO FLOODS, DROUGHTS AND POLLUTION –AGRICULTURE CAN BE PART OF THE SOLUTION.

Soils are being depleted at an alarming rate, with around 12 million hectares turning to desert each year – an area the size of Iceland. This land degradation lowers agricultural productivity and releases stored carbon, worsening climate change.

The United Nations Convention to Combat Desertification warns that, unchecked, 90% of the world’s soils could be degraded by 2050, further destabilising food systems as well as increasing poverty and hunger. To reverse this, we must urgently finance a just transition that restores soil health, captures carbon, and strengthens water and climate resilience.

Despite being highly vulnerable to resource degradation, soil erosion and water variability – which can lead to floods, droughts and pollution – agriculture can be part of the solution. Regenerative practices can sequester carbon, improve water retention and boost biodiversity.

The upcoming Conferences of the Parties to the conventions on biodiversity, climate change and desertification in late 2024 are opportunities to promote regenerative agriculture globally and unite actors across the value chain to support farmers.

According to the Intergovernmental Panel on Climate Change, enhancing soil carbon sequestration through regenerative agriculture could sequester up to 23 gigatons of carbon dioxide by 2050, a substantial portion of the mitigation required to limit global warming to 1.5°C.

Regenerative agriculture also builds resilience to climate impacts by improving water retention, increasing biodiversity and creating healthier ecosystems.

Where climate change is already wreaking havoc on agriculture, as in sub-Saharan Africa, Latin America and South Asia, regenerative practices can help farmers increase yields, reduce dependency on expensive inputs such as synthetic fertilisers, and protect their livelihoods from extreme weather events.

Studies from the Rodale Institute show that by improving soil health and water retention, farmers practising regenerative agriculture can increase productivity under drought conditions, compared to conventional methods.

Addressing the climate finance gap

Over the past decade, climate finance has nearly doubled. However, funding at the project level for the agrifood

system remains low, constituting only 3% of total global climate finance for both mitigation and adaptation. Mitigation finance for the agrifood sector was just $14.4 billion during 2019–2020 – a mere 2.2% of total climate finance and 2.4% of overall mitigation finance. By contrast , the renewable energy sector garners 51% of climate financing, while low-carbon transportation receives 26%.

To reduce emissions from food systems by half by 2030, annual investments in agrifood emissions must increase to $260 billion. Additionally, the International Food Policy Research Institute suggests that an annual investment of up to $350 billion will be required by 2030 to transform global food systems, align with climate goals, enhance adaptation and fulfil other Sustainable Development Goals. This financial investment is critical to implementing the necessary changes in the food sector to tackle both environmental sustainability and social equity challenges

One solution is to develop innovative financial instruments to support regenerative agriculture. Naturebased climate bonds and blended finance models can mobilise largescale investments by linking financial returns to verified sustainability outcomes. To accelerate sustainable food system transformation, the finance sector must develop and scale innovative financial products that provide capital access and mitigate the risks associated with the shift to climate-smart and equitable practices throughout the food value chain.

Blended finance leverages public, philanthropic and private capital to de-risk investments, making it easier to fund projects otherwise considered too risky or unprofitable. This approach helps restore degraded lands and support sustainable agricultural practices.

The 100 Million Farmers: Breakthrough Models for Financing a Sustainability Transition report proposes a capital stack that combines

innovative and blended finance mechanisms with cross-value chain support to help 100 million farmers adopt regenerative practices, enhancing productivity while reducing environmental impacts. By fostering partnerships between governments, financial institutions and agricultural stakeholders, these models provide farmers with access to the capital, knowledge and resources needed to implement sustainable practices.

Such initiatives, backed by targeted investments and risk mitigation strategies, aim to create a tipping point for sustainable food systems by 2030, delivering long-term benefits for soil health, biodiversity, water conservation and farmers’ livelihoods.

Partnerships for systemic change

Achieving a just transition requires

Agriculture is responsible for 37% of global greenhouse gas emissions and uses 70% of the world’s water resources.

37%

70%

DESPITE BEING HIGHLY VULNERABLE TO RESOURCE DEGRADATION, SOIL EROSION AND WATER VARIABILITY –WHICH CAN LEAD TO FLOODS, DROUGHTS AND POLLUTION –AGRICULTURE CAN BE PART OF THE SOLUTION.

coordinated efforts across sectors. Public-private partnerships, like those led by the Food Action Alliance, align governments, businesses and civil society to drive systemic change. The alliance supports 30 flagship initiatives across Africa, Asia and Latin America, demonstrating effective food value chain models.

These partnerships are already yielding results. Financial institutions are offering tailored products – such as low-interest loans, crop insurance and credits for ecosystem services – reducing financial risks for farmers adopting regenerative practices.

Meanwhile, businesses commit to sustainable sourcing, encouraging shifts to methods that improve soil health, sequester carbon and enhance biodiversity. Governments play a key role by supporting the transition with policies and subsidies.

Philanthropic and multilateral support is crucial for de-risking investments and scaling pilots. Philanthropy has funded regenerative agriculture programmes in sub-Saharan Africa, where smallholder farmers are most vulnerable to climate impacts

These initiatives enhance productivity and resilience and ensure climate finance reaches the most affected communities.

The fight against desertification and soil degradation

The UNCCD COP has placed soil health and land restoration at the heart of the global climate agenda.

Rapid desertification severely threatens global food security and climate resilience as degraded soils lose their ability to store carbon and support life.

At the upcoming COP in Riyadh, the

international community will discuss how to scale up land restoration efforts, including integrating regenerative agriculture into national climate action plans.

By ensuring that agriculture is recognised as a key pillar of climate adaptation and mitigation, the desertification COP can drive more significant commitments from governments and financial institutions to support the transition to sustainable farming systems.

For a just transition

Financing a just transition to regenerative agriculture is a moral and economic necessity. As climate change accelerates, the degradation of the world’s soils threatens the very foundation of our food systems.

Without immediate action, we risk deepening the climate crisis, increasing food insecurity and driving more people into poverty.

But there is hope. Investing in regenerative agriculture can restore degraded lands, sequester carbon and build resilient farming systems that feed a growing global population.

The 100 Million Farmers Initiative and the Food Action Alliance offer blueprints for mobilising capital and resources to empower farmers as agents of change.

As we approach the climate change and desertification COPs, we must prioritise agriculture in climate finance strategies and ensure that farmers are at the centre of these efforts.

Investing in regenerative agriculture can create a sustainable food system that mitigates climate change and provides a pathway to a more equitable and resilient future.

Around 12 million hectares of soil is turning to desert each year.

12m

TANIA STRAUSS

Tania Strauss is head of Food and Water for the World Economic Forum, working to advance a sustainable and inclusive transition to healthy, resilient food and water systems, through finance, technology, policy and inclusion. She has over 20 years of experience in managing global initiatives in development economics and inclusive growth across Asia, Africa and the Americas, engaging employers such as USAID, World Bank, the United Nations Development Programme and the Government of Pakistan.  weforum.org

INNOVATIVE CLIMATE FINANCING

Addressing the climate finance gap: a path forward for global emissions alignment and ambitious action

The sheer scale of the climate crisis necessitates transforming the financial system, bringing private partners into the fold and creating the right enabling environment.

Paolo Gentiloni, European Commissioner for Economy

BESIDES ENCOURAGING A SHIFT TO LESS CARBON-INTENSIVE ALTERNATIVES, CARBON PRICING CAN ALSO PROVIDE A BOOST TO PUBLIC FINANCES, AS WELL AS RESOURCES TO COMPENSATE THE MOST VULNERABLE DURING THIS TRANSITION PERIOD.

The stark reality of the climate crisis presents us with an inescapable truth: global emissions are not on track to meet the goals of the Paris Agreement, and the effects of rising temperatures are ever more devastating, especially in those countries most exposed to climate change. In this critical hour, we need an unprecedented level of ambition in both climate action and climate finance. The International Energy Agency reckons that climate investment must double in advanced economies and China, and quadruple in the rest of the world by 2030. The sheer scale of the challenge highlights the need for a transformation of the financial system. Bridging the financing gap requires a holistic approach that looks at the role of all actors, finance sources and policy levers. Public finance is a central driver of climate action. Budgetary constraints, however, require that its efficacy be improved. Domestically, this means first and foremost ensuring that public finance ‘does no harm’: investments and public subsidies in high-emission activities should be redirected to clean technologies and infrastructure. Setting the right incentives and price signals is crucial. In this respect, carbon pricing remains the most effective tool at our disposal. Besides encouraging a shift to less carbon-intensive alternatives, carbon pricing can also provide a boost to

public finances, as well as resources to compensate the most vulnerable during this transition period. For instance, the revenues of the European Union’s new Emissions Trading Scheme for buildings, road transport and fuels will feed into a Social Climate Fund that supports the people and businesses most affected by this measure. The EU’s carbon border adjustment mechanism is another such example. Despite still being in a transitional phase of implementation, CBAM is already inspiring other countries to introduce or strengthen their carbon pricing frameworks.

At the international level, optimising the use of scarce public resources means facilitating synergies among multilateral development banks to increase the impact and scale of their work. This is a powerful lever, considering that MDBs manage an estimated $2.2 trillion of global assets. The European Union is engaging with its G20 partners to develop a roadmap for MDBs to be “bigger, better and more effective” and work as a system to facilitate access to climate finance, in particular for developing countries.

Closing the gap

Despite rhis effort, the scope of climate-related investment needs goes well beyond the reach of the public purse. Closing the financing gap requires public investment to be complemented by private funding. Well-developed, liquid and integrated capital markets

have the potential to mobilise the necessary financing at scale. The EU’s sustainable finance framework, built on a taxonomy defining sustainable economic activities and mandatory sustainability disclosures, plays a key role in channelling funds for the green transition, as it enables market participants to understand, assess and integrate climate and other sustainability impacts into their decisions. At the international level, the EU is working with its G20 partners and beyond to develop principles for financial institutions and corporate transition plans, interoperable sustainability disclosures and taxonomies, aiming to drive a similar ambition in partner countries and facilitate cross-border financial flows.

Creating the conditions conducive to greater financing for climate mitigation and adaptation is critical. This includes creating an enabling environment, introducing effective financial instruments to reduce investment risks and fostering a pipeline of bankable projects. For the first time, at the request of Brazil’s G20 presidency this year, finance and climate ministries are working together in the joint Task Force on Global Mobilization against Climate Change to establish recommendations on how to advance ambitious national transition plans and reset climate finance on a more ambitious path.

The magnitude of the challenge is daunting – but I remain hopeful. In 2022, developed countries provided and mobilised $115.9 billion in climate finance for developing countries, exceeding the annual goal of $100 billion for the first time. Reaching this milestone was made possible by the contribution of the EU and its member states, which increased by 24% from the previous year to reach approximately $30 billion. I believe this result can help foster trust and secure an ambitious agreement on a new climate finance goal for the post-2025

PAOLO GENTILONI

period. It should be designed to accelerate the mobilisation of climate finance at the necessary scale. This means broadening the contributors’ base and mobilising all sources of finance, all actors and channels – public and private, domestic and international. It means identifying new, innova-

tive measures and sources. Above all, it means viewing climate finance as a global effort, shared fairly and as part of our broader action to achieve the United Nations Sustainable Development Goals. The green transition must be a just one, or it will not succeed. The EU will continue to play its part.

Paolo Gentiloni has been European Commissioner for the Economy since December 2019. He previously served as Italy’s prime minister (2016–2018), minister of foreign affairs and international cooperation (2014–2016), and minister of communications (2006–2008). He was a member of Italy’s Chamber of Deputies from 2001 to 2019. Other posts Gentiloni has held include chair of Italy’s Broadcasting Services Watchdog Committee, spokesperson for the mayor of Rome and councillor in the City of Rome. Prior to entering politics, he worked as a professional journalist. X-TWITTER @PaoloGentiloni

A coal storage yard in Ningbo city, China

An SDR bond for climate finance

Special drawing rights offer another way that multilateral development banks could mobilise finance to support countries with adapting to climate change – but there are some misconceptions about how this could work.

Brad W Setser, Whitney Shepardson senior fellow, Council on Foreign Relations

THERE IS NO GOOD REASON WHY SDRS SHOULD ONLY BE CHANNELLED THROUGH THE IMF. THE MULTILATERAL DEVELOPMENT BANKS ARE ALL AUTHORISED SDR HOLDERS, AND THUS CAN BORROW THEM FROM IMF MEMBERS AND EXCHANGE THOSE SDRS FOR HARD CURRENCY, JUST AS SHAREHOLDER COUNTRIES CAN.

Special drawing rights are the International Monetary Fund’s unique reserve asset. They are created when the IMF agrees to make a perpetual loan of SDRs to its members. They can be converted into any of the constituent currencies upon which the value of the SDR is based (US dollar, euro, Chinese renminbi, Japanese yen and British pound sterling). This is done through a special window at the IMF, through which members can sell SDRs to other members for the currency needed to settle private transactions.

However, the bulk of any newly created SDRs flows to the IMF’s biggest shareholders, as they are allocated based on members’ past contributions, not to countries with the most need.

That creates an opportunity, as very few of the reserves created in the 2009 and 2022 allocations have been mobilised.

How could this work?

Mechanisms exist to channel SDRs through the IMF – such as the Resilience and Sustainability Trust and the Poverty Reduction and Growth Trust –but they have their limits. The IMF is not set up to fund projects – in fact, it cannot do that. The RST, for instance, provides long-term funding to meet a long-term balance of payments needs, so it rewards countries with additional borrowed reserves for implementing good policies.

But there is no good reason why SDRs should only be channelled through the IMF. The multilateral development banks are all authorised SDR holders, and thus can borrow them from IMF members and exchange those SDRs for hard currency, just as shareholder countries can. Moreover, through development banking, the MDBs are structured to allow SDRs to be used to finance long-term clean energy lend-

ing and real projects while retaining reserve assets.

The key to all development banking is that the holder of a bond backed by the balance sheet assets of a credible financial institution has a liquid tradable asset: it can be sold for cash, even as the funds raised by the bond are invested in a diverse portfolio of longterm projects.

An SDR bond (which would settle in SDRs) or an SDR-denominated bond (which would settle a constituent currency but pay a coupon linked to the SDR rate) thus could function as a reserve asset in the same way that dollar and euro bonds now issued by the World Bank and other development banks function as reserve assets. Around 40% of the World Bank’s existing bonds are held by reserve managers seeking a liquid AAA credit.

Most countries are constrained because they hold SDRs as part of their foreign exchange reserves and must maintain their SDRs as a reserve asset. Some – although not generally the large countries with the most SDRs – have legal flexibility and can hold equities as part of their reserve portfolio. Switzerland and China, for instance, operate under tighter constraints and generally can only invest in bonds or deposits.

The flexible definition of a reserve asset led the African Development Bank and the Inter-American Development Bank to explore whether countries would be willing to use their SDRs to buy subordinated (or junior) debt that would qualify as equity. However, this proposal proved to be a step too far for most of the big SDR holders.

Clarity on bonds

Currently idle SDRs could provide the MDBs with standard bond financing. Such bonds could settle in SDRs or any of the constituent currencies. A bond

that settles in one of these currencies could be traded in the secondary market, with all the characteristics of a classic reserve asset. They are well designed to support long-term clean energy and climate lending.

Standard bonds are not equity and cannot be leveraged, which has led some commentators to (inaccurately) claim they lack financial advantage for MDBs. That is far from reality. Senior SDR-denominated bonds would allow the MDBs to tap a captive buyer base for very long-term bonds – something the MDBs generally do not have.

Most MDBs fund themselves with relatively short-dated (five- to seven-year bonds) that are rolled over to support long-term lending. It works – but requires a liquidity buffer that limits the bank’s ability to lend all the funds raised. For longer-dated borrowing, the banks must often pay a substantial premium on the risk-free rate. For instance, the World Bank’s concessional lending arm, the International Development Association, issued a 20-year, euro-denominated bond priced at 85 basis points over the

euro area’s risk-free benchmark. Bigger bonds would pay bigger premiums.

SDR holders need to receive a floating rate to match their SDR liability. But as long as interest rates float and bonds can trade in the secondary market, they do not need a short tenor or carry a significant risk premium. Rather, they could just pay the SDR rate over a maturity of 20 or 30 years. Some SDR holders may also be willing to swap the current SDR floating rate for a fixed rate SDR or SDR linked bond, which would provide MDBs with long-term financing at a nominal rate of around 3%.

How does this relate to climate financing?

SDR bonds could be used to mobilise large sums for climate finance in two ways.

The World Bank could borrow SDRs to hold in its own liquidity buffer. That would free up existing dollar and euro borrowing for lending and reduce the World Bank’s cost of funds. This creates capital over time, as more of its existing interest income flows back to it. This process effectively expands the World Bank’s ability to lend for clean

This new equity could be levered five or six to one: meaning that every $10 billion in new capital would support $50 billion to $60 billion of net new clean energy financing. $10bn $50bn $60bn

IT IS A TRUE WINWIN-WIN. MDBS GET A NEW FINANCING SOURCE. BORROWING COUNTRIES GET NEW CLEAN ENERGY FINANCE. COUNTRIES BUYING THE BONDS GET A BETTER RESERVE ASSET THAN THEIR CURRENT SDR DEPOSITS AT THE IMF.

energy finance without requiring any new shareholder contributions. Such financial creativity can help address the MDBs’ shortage of equity capital over time.

A more immediate proposal requires a set of countries to contribute new capital (potentially by buying subordinated debt) to the World Bank to support a special clean energy financing window that would raise long-term funds directly from shareholders for long-term lending. This new equity could be levered five or six to one, so that every $10 billion in new capital would support between $50 billion and $60 billion of net new clean energy financing.

The World Bank would issue SDR bonds for 20 or 30 years at either the floating SDR rate or at a fixed rate that reflects the market price of swapping a floating rate in the SDR’s constituent

currencies for a fixed rate plus a small premium. Such swaps are standard, with no real technical challenge calculating the ‘fair’ fixed SDR rate.

The World Bank would then lend the funds at close to its cost, giving up income over time to encourage countries to invest more in clean energy projects. The countries buying the SDR bonds would receive a financial instrument that either matched the financial characteristics of the SDRs held in their IMF account (which pays a floating rate) or are the financial equivalent (but pay a fixed rate). If the bonds settle in hard currency, they could be traded for cash outside the IMF’s special SDR window, making the instruments more liquid (and easier to exchange) than the SDRs now held in the SDR account.

The World Bank – or a similar MDB – would expand lending without the challenge of placing new long-term bonds directly in the private market.

From idea to actuality

It is a true win-win-win. MDBs get a new financing source. Borrowing countries get new clean energy finance. Countries buying the bonds get a better reserve asset than their current SDR deposits at the IMF.

What obstacles does this idea face?

The European Central Bank needs to conclude that any use of SDRs that preserves the characteristics of a reserve asset and maps to standard transactions conducted out of dollar and yen reserves is consistent with its requirements for Euro system central banks. Some incorrectly think that SDRs can only be channelled through the IMF under the current legal regime, when the real requirement is that any rechannelling must remain a reserve asset and avoid monetary financing.

The United Kingdom and the United States need to be willing to use existing legal authority to invest their reserves in high quality bonds and add to their functional reserve assets. It is doable. It just takes real political will.

Brad W Setser is the Whitney Shepardson senior fellow at the Council on Foreign Relations. Previously, he served as a senior adviser to the United States Trade Representative and as deputy assistant secretary for international economic analysis in the US Treasury. He is the author of Sovereign Wealth and Sovereign Power and coauthor, with Nouriel Roubini, of Bailouts and Bail-ins: Responding to Financial Crises in Emerging Economies. He regularly blogs at Follow the Money about global trade and capital flows, financial vulnerability analysis, and sovereign debt restructuring.

BRAD W SETSER

A public health perspective on climate change and small island developing states: the Caribbean region

The Caribbean is not only vulnerable to the extreme weather wrought by climate change, but also the ensuing increase in diseases and other knock-on effects to health and well-being.

Laura-Lee Boodram, Shane

Kirton and Lisa Indar, Caribbean Public Health Agency

The Caribbean Public Health Agency is mandated to support its member states in strengthening national health systems and coordinating regional responses to public health threats, inclusive of the impacts of climate change on health. Caribbean small island developing states are prone to natural disasters, such as hurricanes, flooding and earthquakes. Of the 26 members supported by CARPHA, 23 qualify as SIDS. The United Nations Office for Disaster Risk Reduction indicates that the Latin American and Caribbean region is the second most disaster-prone region globally. Climate change is the main driver behind the increasing severity of hydrometeorological events, as seen by the number of Category 4 and 5 storms experienced by the region over the past five years, as well as longer, more intense drought periods. The impacts from such storms include loss of lives and livelihoods, decreased human resources, heavy damage to infrastructure, reduced ability to provide public services and increasing incidence of disease. Other impacts of climate change involve reduced food security through changes in arable land available for agriculture, rising sea levels, oceanic acidification and

saltwater intrusion into water reservoirs.

An October 2019 Intergovernmental Panel on Climate Change report acknowledged that the targets set in the Paris Agreement and countries’ nationally determined contributions are not sufficiently ambitious, and will not bring significant reductions in climate change impacts, particularly on the marine environment. Global temperature rises beyond a warming limit of 1.5°C is estimated to destroy up to 99% of tropical coral reefs, and current projections by the World Meteorological Organization predict that this limit could be temporarily exceeded as early as 2026.

Increasingly extreme events

There are two main pathways through which Caribbean populations and health systems remain highly vulnerable to the impacts of climate change. The first is mediated through natural systems and overall ecosystem change; the other is linked to human activities, such as migration.

In the first pathway, shifting weather patterns and extreme climate events, such as hurricanes, droughts, floods, heat waves and Saharan dust incursions result in adverse health outcomes. Those outcomes include

increased transmission of vector-borne diseases, such as dengue, chikungunya and Zika virus; a higher incidence of respiratory disease, as well as water- and food-borne disease (from contamination of safe water supplies), and heat-induced conditions such as heat stress and heatstroke, which can trigger cardiovascular conditions. Natural disasters such as hurricanes result in injuries, fatalities and mental health impacts that have long-lasting implications for regional healthcare systems. As the Caribbean archipelago lies on the Atlantic Hurricane Belt, it is faced annually by the threat of high intensity storms causing widespread damage. In 2024, the National Oceanic and Atmospheric Administration predicted an above-normal hurricane season with 17–25 named storms. Hurricane Beryl, which severely affected the islands of the Grenadines, was the earliest Category 5 storm on record to hit the Atlantic basin. The devastation

THE

LATIN

AMERICAN AND CARIBBEAN

REGION IS THE SECOND MOST DISASTER-PRONE REGION GLOBALLY

to these islands was significant, with more than 98% loss of infrastructure recorded on Carriacou.

In the second pathway, climatedriven human migration and population displacement can lead to loss of livelihood, heightened poverty levels, reduced work capacities and productivity. Taken together, these effects limit progress towards attainment of the Sustainable Development Goals by the Caribbean SIDS. Hence, climate adaptation and mitigation strategies

across a range of sectors are essential to ensuring the future resilience of the region. To support this effort, SIDS have long called for greater advocacy, supporting partnerships, evidence building, predictable and sustained access to low-cost, long-term financing and climate justice.

Adaptation and mitigation

In assessing the vulnerabilities of Caribbean health systems to the onslaught of climate change and linking to the selection of appropriate resilience, adaptation and mitigation measures, the generation and implementation of health national adaptation plans are key. Such plans outline infrastructural investment and strategic actions that can protect health and build climate-resilient health systems. Inherent in this is the anticipation and transformation of public health to adapt to a changing climate, to protect populations and manage health

Hurricane Maria makes landfall in Puerto Rico in 2017

Global temperature rises beyond a warming limit of 1.5°C is estimated to destroy up to 99% of tropical coral reefs

1.5°C 99%

risks. One key measure currently being explored in the Caribbean is strengthening surveillance systems through integrated surveillance. Other adaptation efforts have involved the development of climate-integrated food and water resiliency plans. This initiative between CARPHA, the Pan American Health Organization and Caribbean states looks at securing a safe and secure supply of food and water, and considers the expected climate changes over a 30-year period.

Climate-integrated early warning systems for health

In recent years, work on developing health early warning systems in the Caribbean has focused on four

CARPHA members deemed ready to accept these interventions. However, this work is not being conducted in isolation. Under donor-funded projects, CARPHA in collaboration with partners can holistically approach the strengthening of climateresilient health systems in the Caribbean. The WMO has established the Caribbean Institute for Meteorology and Hydrology, which works with CARPHA on early warning systems and impact-based forecasting process, and is also responsible for hosting the semi-annual Caribbean Climate Outlook Forum, which provides key weather information to sectoral stakeholders including health, agriculture, tourism, water

The aftermath of Hurrican Irma in St Martin

and disaster risk management, to aid work programming.

National climate-resilient food and water safety plans

Between 2022 and 2024, CARPHA and PAHO have been working with Barbados and Trinidad and Tobago to develop national food and water safety plans. These efforts have been multisectoral and involved stakeholders from health, agriculture, environment, meteorological services, works and infrastructure, national security, finance, gender and child affairs, as well as certain non-governmental organisations. Selected high-priority catchment areas in each country were examined in terms of food production and consumption, water usage, supply chains, infrastructure and other factors. The next step will be ministerial and financial review, as well as the establishment of national oversight committees to monitor progress post implementation. CARPHA and PAHO will likely continue to provide technical support during the aforementioned period.

LAURA-LEE BOODRAM

THERE IS A STRONG NEED TO INTEGRATE HEALTH CONSIDERATIONS INTO CLIMATE POLICY FOR PROMOTING PUBLIC HEALTH AND EQUITY. INCREASED FUNDING WILL ENSURE THAT THE REGION DOES NOT LOSE TO SMALL GAINS THAT HAVE BEEN MADE

CARPHA has already secured funding to develop climate-resilient waste safety plans for two additional Caribbean states.

Health national adaptation plans and infrastructure greening

PAHO in conjunction with the Caribbean Community Climate Change Centre has been leading the process for developing health national adaptation plans, which is a critical strategy for assessing country readiness levels and proposing key strategic actions and financial planning required to sustain measures for strengthening health systems. In terms of infrastructural investment, PAHO has also been

Laura-Lee Boodram is the head of the Caribbean Field Epidemiology and Laboratory Training Programme at the Caribbean Public Health Agency. Her primary work centres on multidisciplinary training initiatives for public health workforce development, infectious disease epidemiology, the effects of climate change on health and disaster risk management. She previously served as a molecular biologist at the Caribbean Epidemiology Centre, and has had responsibility for the vector-borne diseases department at CARPHA. As part of CARPHA’s Emergency response team, she also trains personnel for rapid response deployment in the event of health emergencies and disaster situations.

SHANE KIRTON

Shane Kirton is programme manager and officer-in-charge of environmental health and sustainable development at CARPHA. He has successfully overseen environmental health, environmental management and sustainability interventions. His technical expertise and collaborative approach have been instrumental in developing effective strategies to mitigate environmental health risks and promote sustainable development to enhance the region’s resilience to the climate crisis.

LISA INDAR

Dr Lisa Indar has been the ad interim executive director of CARPHA since July 2024 and led the health response to Hurricane Beryl and mpox, as well as the Regional Pandemic Fund Stakeholder Workshop. She has been serving as director of the Surveillance, Disease Prevention and Control Division since 2020 and, prior to that, assistant director. She was responsible for leading, directing, coordinating and managing public health surveillance and response activities related to conditions of regional and international significance.

X-TWITTER @carpha1  carpha.org

leading the smart hospital initiative through financing from the United Kingdom’s Foreign, Commonwealth and Development Office.

Progress on efforts to mitigate the effects of climate and build regional resilience has been challenging. The environmental and health impacts of climate change are still being explored. In some cases, there is not yet a clear causal relationship between the changes and the attributed health impacts. This uncertainty makes decision-making difficult. Political leaders may not have good evidence to aid advisers in giving clear guidance. The diversity in the region’s geography, geology and demography means countries have different needs and priorities. These competing priorities of communicable diseases, trade, tourism and education, among others, means the financial resources available at the country level can be scarce. If well studied and well understood, the impacts of climate change, the utilisation of appropriate adaptation and mitigation measures, and the lessons learnt in the Caribbean region will point to better strategies for other island and non-island communities and countries. There is a strong need to integrate health considerations into climate policy for promoting public health and equity. Increased funding will ensure the region does not lose the small gains that have been made, and can amplify them into greater gains in the coming years. Furthermore, a holistic approach that recognises the interconnectedness of human, animal and environmental health will be crucial in safeguarding health for current and future generations.

Note: This article has been edited due to space constraints. A full-length version is available at globalgovernanceproject. org.

A closer look at South Africa’s approach

The country is looking to balance its ambition to achieve a just transition with ensuring that its population has the skills to succeed in a post-coal world.

Interview with Elizabeth Sidiropoulos, chief executive, South African Institute of International Affairs

Both the 28th Conference of the Parties to the United Nations Framework Convention on Climate Change and the G20 have committed to triple renewables, but where is the money going to come from?

move forward as quickly as is necessary. The cost of the transition to South Africa has been calculated at over $100 billion. We’re getting only around $12 billion over a five-year period now through the JETP. That’s not going to cut it.

South Africa is a large player in the African Development Bank and the New Development Bank. Are they doing enough to provide climate finance?

SOUTH AFRICA HAS

ARGUED AT COP MEETINGS AND IN DISCUSSIONS ABOUT THE JETP AND ELSEWHERE THAT WE TEND TO GET OBSESSED BY THE AMOUNT OF MONEY NEEDED FOR CLIMATE FINANCE. THAT IS IMPORTANT OF COURSE, BUT WE SHOULD ALSO LOOK AT THE QUALITY OF THAT MONEY.

Climate change is particularly important for South Africa not just because of the way it’s affecting societies on the continent, including us, but also because we have a Just Energy Transition Partnership. That comes with many resources that have to be mobilised but are not delivering on the scale that is necessary. It will be interesting to see what comes out of the Task Force for the Global Mobilization Against Climate Change, created under Brazil’s G20 presidency this year. South Africa has argued at COP meetings and in discussions about the JETP and elsewhere that we tend to get obsessed by the amount of money needed for climate finance. That is important of course, but we should also look at the quality of that money. We need to think about the balance between grants, highly concessional loans, market-related loans and so on. Whether deliberately or not, the JETP has been structured based on traditional development aid frameworks, but what is needed now is something that is flexible and adaptable and allows for creativity and innovation in how to deliver the finance. Also, development finance agencies have a particular way of doing things. But we are living in a world where all these things need to change. Without that change, ideas and projects cannot

ELIZABETH SIDIROPOULOS

The NDB has provided support to South Africa in the areas of clean energy and energy efficiency over the last few years, including in a battery energy storage project and a renewable energy sector development project. There is also money from the AfDB, and also from the World Bank to decommission one of the coalfired power stations. But such funding still needs to be scaled up further.

Plus we must not forget the social and developmental aspects. There can’t be a trade-off. It can’t be that you have to reduce your carbon footprint but you can’t roll out more coal-generated electricity to the townships, if the townships don’t have energy access. And how are we going to reskill all those workers, or, in the absence of being able to reskill them, how do we provide social safety protection for people who will be unable to be employed anywhere else? Our official unemployment rate is already around 33%. If that includes people who have given up looking for work it’s over 40%, plus we have a huge cohort of more than 55% of the population under the age of 25. So if people lose their jobs in the coal sector, that’s 90,000 workers who probably sustain at least half a million people, if not more.

It’s not just about financing the decommissioning of coal plants or building more solar plants. It’s also about skilling, reskilling and identifying what you’re going to do with people who aren’t in a position to retrain. We need to think about it broadly, in terms of communities rather than just the workers in the coal mines or power stations.

Elizabeth Sidiropoulos has been chief executive of the South African Institute of International Affairs since 2005. She is co-convenor, together with the Institute for Development and Sustainability, of the Think20 Africa Standing Group, established in 2017 during the German presidency of the G20. She has served as co-chair of various taskforces in the T20 engagement group and in 2024 is coordinator of the General Secretariat of the T20 Brazil International Advisory Council. She has served on the United Nations Under-Secretary-General’s High-Level Advisory Board on Economic and Social Affairs since 2020.

X-TWITTER @siderop  saiia.org.za

Will rising action levels outpace rising sea levels?

14 - 16 January 2025

Bringing together industry influencers, problem solvers, and cutting-edge solutions, the World Future Energy Summit is an accelarator for the global transition to clean energy. Join us as we create the blueprint for a sustainable future from 14 - 16 January 2025.

TRANSITION STABILITY

As a global leader in the energy industry, we are committed to a future where sustainable energy solutions coexist with reliability and progress.

This is why instead of stability or transition, at Eni we prefer stability transition.