Presented by European Investment Bank
It’s too early for a clear verdict on COP 27, as the United Nations climate conference is still underway, but it’s been a busy time in the climate finance industry. We saw South Africa sign loans to transition away from coal, a plethora of new announcements, and a scathing critique of greenwashing from the U.N. chief.
Here’s what you need to know:
Net-zero backlash
United Nations Secretary-General António Guterres took aim at voluntary net-zero emissions pledges, such as the Glasgow Financial Alliance for Net Zero, or GFANZ, which has been under fire of late.
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The problem “is that the criteria and benchmarks for these net-zero commitments have varying levels of rigor and loopholes wide enough to drive a diesel truck through,” Guterres said at COP 27 last week. “We must have zero tolerance for net-zero greenwashing.”
To fossil fuel companies and “their financial enablers,” he said that net-zero pledges must include core products and activities, and that all voluntary initiatives — as well as corporate, finance, and government leaders — should adopt the guidelines laid out in a new U.N. report.
GFANZ, the global alliance through which hundreds of financial institutions representing more than $130 trillion in assets under management agreed to reach net-zero emissions, was one of the big outcomes of last year’s COP. But the initiative, led by U.N. climate envoy and former central banker Mark Carney, is now on shaky ground. It recently agreed to relax its standards and remove a requirement that members phase out fossil-fuel investments after some U.S. banks threatened to leave the group. The changes have raised questions about its effectiveness.
Catalytic conversion
One climate finance vehicle that has been around for more than a decade, the Green Climate Fund, is looking to be more catalytic in order to unlock more private capital for climate-related projects, my colleague Sara Jerving reports.
Last year GCF committed to about $2.9 billion in new projects, which range from water security to energy-efficient buildings and low-carbon transportation. GCF could double that if more resources were available, Simon Wilson, GCF’s acting chief of staff in the office of the executive director, tells Sara.
The fund, primarily capitalized by public-sector dollars, is gearing up for a replenishment next year. And while it doesn’t have a specific target, demand for its funding outstrips supply.
Read: The Green Climate Fund strives for a more catalytic role (Pro)
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U.S. announcements abound
Less than 2% of climate finance goes to adaptation, and the majority of that goes to high-income countries, U.S. Agency for International Development Administrator Samantha Power said in a speech at COP 27 last week. The private sector must get involved, and governments need to do more to bring them to the table and “reduce the risks that companies face for investing in high impact work, to make the business case for adaptation,” she said.
USAID launched a call for businesses to make new commitments to building climate resilience — and 10 companies including Google, Mastercard, Meta, and PepsiCo made pledges last week. USAID also announced a new Sustainable Banking Alliance to increase the capacity of banks to access climate finance, a Climate Finance Investor Network, and, in partnership with Amazon, a new Climate Gender Equity Fund.
USAID and the Millenium Challenge Corporation also jointly launched Climate Plus, aimed at working with countries to scale up green financing in low- and lower-middle-income countries. “We need to figure out how to use public money to crowd in more private money and figure out how we can structure transactions,” MCC CEO Alice Albright told Devex.
Read: New US climate finance initiative aims to mobilize $1 billion in private capital
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Adaptation funds
The private sector is also working to figure out how it can effectively finance adaptation, but it's not easy, Stephanie Bilo, chief client and investment solutions officer at responsAbility, an impact investing company, tells me. ResponsAbility launched its Climate Smart Agriculture & Food Systems Fund in February and is working to close the first $60 million by the end of the year.
It's challenging to fund this type of adaptation work because there are a limited number of companies big enough to provide the types of opportunities most investors are seeking, Bilo says. The result is that a bespoke approach, that included blended finance to de-risk some of the investments, was necessary.
Read: New fund aims to unlock private investment for adaptation, agriculture (Pro)
Malpass memo
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In a note to staff Monday, World Bank President David Malpass says he is “exploring all the options available” to increase the bank’s capabilities to address development and climate finance needs, my colleague Shabtai Gold reports.
How? Malpass is taking a three-pronged approach. Part one is to expand into more “global public goods” such as climate; the second, to get more capital to middle-income countries; and the third, to seek options for increasing the bank’s deployment of financial firepower — basically finding sustainable ways to lend more.
On a related note: Former World Bank staffer Andrew Steer, who now runs the Bezos Earth Fund and its $10 billion commitment from Amazon founder Jeff Bezos, told Devex he supports calls for an overhaul of MDBs’ lending approach so that more climate finance goes to lower-income countries, reports my colleague Stephanie Beasley. He also said philanthropic capital should be better leveraged.
Malpass to staff: World Bank exploring climate finance, more lending
Bezos Earth Fund chief: Banks, funders must 'leverage' climate dollars
What we’re reading
Pandemic preparedness fund gets a new name and two new co-chairs. [Devex]
The African Development Bank hits back at its own gender chief’s claims on lack of diversity. [Devex]
FTX bankruptcy also endangers founder’s philanthropic gifts. [Washington Post]
Opinion: Time to empower regional development banks for SDG financing. [Devex]
About the author
Adva Saldinger@AdvaSal
Adva Saldinger is a Senior Reporter at Devex where she covers development finance, as well as U.S. foreign aid policy. Adva explores the role the private sector and private capital play in development and authors the weekly Devex Invested newsletter bringing the latest news on the role of business and finance in addressing global challenges. A journalist with more than 10 years of experience, she has worked at several newspapers in the U.S. and lived in both Ghana and South Africa.
