‘Get the blend right’ and we can unlock trillions in finance for Global South, say experts

  • Innovative blended finance models key to attracting private capital needed to help low-income countries mitigate climate change
  • Recent Just Transition Partnership deals for South Africa, Indonesia and Vietnam just scratch surface of what will be required
  • World needs to spend $3-$6 trillion a year on mitigation by 2050, says IMF
  • Net-Zero Asset Owners Alliance with $10 trillion under management say lower risk will help them invest
  • BlackRock’s Climate Finance Partnership has raised $673 million with focus on energy storage and renewables

January 13 – There’s a big black hole in the finances needed for the climate and energy transition.

Spending today (primarily on mitigation) is around $600 billion. Africa alone needs $3 trillion by 2030, and according to the IMF, the world needs between $3 and $£6 trillion a year until 2050. It sounds like a lot, but private investors have the money: they control assets worth some $210 trillion; banks potentially another $200 trillion. How can they be persuaded to spend some of it?

The answer hinges on risk. Low- and middle-income countries are risky propositions for investors, says Chris Clubb, managing director of Convergence Finance, a non-profit set up to increase investment going into those countries to achieve the sustainable development goals. The country risk and currency risk are so high that investors would be failing in their fiduciary duty to pension-holders, shareholders and stakeholders – or be non-compliant with regulations – if they did invest.

But the appetite is there, suggests Clubb, if risk could be reduced to bring it under the barrier. And this is where blended finance comes in: to use public sector finance to reduce the level of risk to something acceptable to private investors.

Groups like the U.N.-convened Net-Zero Asset Owners Alliance, with $10 trillion assets under management, “are saying three things: one, we have the money that we’re looking to invest. Two, we’ve looked at developing countries, and we would like to invest the money…

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