The U.S. has committed to doubling its public climate finance. Is that enough?
President Joe Biden is trying hard to prove that U.S. leadership on climate is back. He’s sought to make clear commitments around climate — and climate finance — and rally other countries to take greater action. It is uncertain, though, whether that effort will be enough to mobilize the $100 billion per year that high-income countries promised to low-income countries more than a decade ago to address climate change.
• Last week, the United States committed to doubling its public climate finance to lower-income countries by 2024. The details of exactly where and how the money will be distributed aren’t known, though adaptation work will seemingly get a significant boost. The U.S. had all but turned its back on climate finance during former President Donald Trump’s administration, so we’ll be watching to see how quickly these commitments translate into action.
• The new leadership at the U.S. International Development Finance Corp. will need to reorient the agency around climate to achieve the ambitious commitments it announced last week. Its effort to reach a portfolio with 33% of its investments related to climate will shape where DFC invests, how it ramps up renewable investments, and how it evaluates emissions vs. development impact.
• Despite all the positive rhetoric, flawed reporting standards, and a lack of transparency around climate finance are straining global trust as the $100 billion annual commitment to low-income countries remains unmet. “We need clear signals that commitments made by developed countries to developing countries will become a reality,” United Nations climate chief Patricia Espinosa said last week.
Still under construction: EU development finance
Last week, we brought you the latest on the European Investment Bank’s plan for a new “dedicated operational setup” for its development work outside the European Union — though my colleague Vince Chadwick didn’t get far Friday when he asked EIB President Werner Hoyer how the greater impact and risk appetite will be “cost neutral.”
On Thursday, EU development ministers are set to discuss how to make the bloc more “efficient, coherent and visible” around the world. For Devex Pro subscribers, we’ve gone through the draft document they’ll be considering.
Attracting capital to Africa
“Let us put in place the financial infrastructure needed to absorb foreign capital efficiently, and undertake speedy policy and structural reform to attract private flows that Africa needs.”— Ghanaian President Nana Akufo-Addo
Last week at the African Private Equity and Venture Capital Association’s annual conference, Akufo-Addo has championed a “Ghana Beyond Aid” vision and supported financial market reforms underway in his country. Private equity and venture capital are critical sources of development financing and have “proven to be the surest way of supporting small and medium scale enterprises,” he said.
EU thinking big and small
With France’s summit on sustainable finance in Africa approaching on May 18, we hear the European Commission is planning to announce an initiative for young businesses — hence a closed-door workshop Tuesday with development banks, investment funds, and others. (Hey EC, where’s our invite?) Local impact funds, ways to help incubators, and technical support for small companies at the pre-seed stage are all on the 3 1/2-hour schedule we’ve seen, with the commission’s Erica Gerretsen and Koen Doens running the show.
On the agenda
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Global Center on Adaptation
It’s now clear that last year’s Finance in Common Summit — a gathering of public development banks — will get a second act. It’s a fledgling effort by the head of the Agence Française de Développement, Rémy Rioux, to keep climate change front and center for development banks — but not everyone has bought in yet.
Can crypto deliver?
Curious about what impact cryptocurrencies — specifically those issued by central banks — can have on low- and middle-income countries?
Investments of interest
• Mauritius Commercial Bank committed $60 million to Karpowership to support electrification in Senegal. The project also supports a transition from heavy fuel oil to gas, which meets Senegal’s objectives to reduce power costs and diversify its energy mix.
• FMO announced that its controversial support to the Barro Blanco hydroelectric project — which had negative impacts on the Indigenous communities — has ended early, with the borrower prepaying the loan in full. The project was the first test of FMO and DEG’s complaint mechanism and resulted in a number of recommendations for how the institutions should approach future investments.