According to the International Finance Corporation (IFC), financial institutions must grow the share of climate-friendly projects in their portfolios from an average of 7% in 2016 to 30% by 2030 to finance the greening of the economy. This equates to an increase from approximately US$1.5trn to US$13.4trn.
Cashing in on climate action
The funding of climate-friendly projects, from innovative technology and nature-based solutions to community-driven resiliency programmes, is a critical part of the efforts to deal with climate change.
Falling technology costs have made it more commercially viable to invest in new climate-friendly projects in many parts of the world. India has recently developed a green bond market to advance the financing of projects to tackle climate change and help reduce its dependence on fossil fuels. In 2015 India’s fifth-largest private bank issued a green bond worth US$50m in IFC investment. YES Bank is particularly focused on increasing access to green financing for women-owned small and medium enterprises.
Similarly, the IFC has initiated the Lighting Papua New Guinea programme with the support of the governments of Australia and New Zealand to promote the use of solar power for businesses and households in Papua New Guinea, which faces regular blackouts and high electricity costs.
The Green Investment Group (GIG), whose mission is to accelerate the green transition, is developing renewable-energy infrastructure around the world through direct projects of its own, or by acquiring and expanding green development companies. GIG’s portfolio includes Blueleaf Energy, a solar-development company which is currently responsible for more than 3.4GW of solar projects across the Asia-Pacific region alone. Blueleaf Energy recently partnered with SunAsia to develop 1.25GW of solar projects in the Philippines.
Empty promises or promising progress?
However, global investment in green projects remains below the levels needed to meet the commitments of the Paris Agreement. While developed countries promised a total of US$100bn a year of climate finance to developing countries by 2020, it is clear that this figure will not be met.
In 2019 total climate finance provided to developing countries was US$79.6bn, a 2% increase from 2018. This marginal growth came from the rise in public climate finance, while finance from private institutions dropped. The figures for 2020 are not yet known, but with President Joe Biden’s recent pledge to double the US annual contribution to US$11.4bn, progress is being made. Some climate activists, including Greta Thunberg, claim these renewed commitments still fall far too short of what is needed.
In a recent statement OECD secretary-general Mathias Cormann emphasised the imperative to increase climate finance: “It is more urgent than ever that developed countries step up their efforts to deliver finance for climate action in developing countries, particularly to support poor and vulnerable countries to build resilience against the growing impacts of climate change.”
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