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    • News
    • COP 27

    New US climate finance initiative aims to mobilize $1B private capital

    The Millennium Challenge Corporation and USAID launched a new initiative to use about $80 million in grants to unlock $1 billion in private capital for climate needs, Alice Albright, MCC CEO, recently announced.

    By Adva Saldinger // 11 November 2022
    Alice Albright, Chief Executive Officer at the Millennium Challenge Corporation. Screengrab from: Devex via YouTube

    A new U.S. government initiative is going to try to use up to $80 million in grant funding to bring in $1 billion in private-sector investment to ramp up climate financing in emerging markets.

    Through Climate Finance Plus, announced Wednesday, the Millenium Challenge Corporation and the United States Agency for International Development will work with countries to scale up green financing in low- and lower-middle-income countries.

    “The investment capital in the world does not go to all the countries that are facing the most high degree of vulnerability to climate change. That's what has to change,” MCC CEO Alice Albright said at the Devex @ COP 27 event in Sharm el-Sheikh, Egypt, on Thursday.

    Official development assistance, or donor funding, including development banks, can only provide a fraction of the money needed to support the countries most exposed to climate change, she said.

    “We need to figure out how to use public money to crowd in more private money and figure out how we can structure transactions,” she said, adding that we also need to explore what adaptation models can be financed and what types of projects have the necessary revenue streams to attract private capital.

    While the solutions include complex operational and structuring questions, it is critical to think differently about how to finance climate-related needs, Albright said.

    “If somebody says, ‘Well, is $50 or $80 million going to really make a difference?’ — that's not the right question. One of the problems we're trying to think about is that many countries that we work with at MCC don't really have all the right mechanisms in place to essentially create a market to attract capital,” Albright said. “So this is the regulatory systems, the reporting systems. How do you structure transactions? How do you build a pipeline of transactions?”

    That’s what Climate Finance Plus will aim to tackle. MCC and USAID will work to expand the technical tools available to enable the use of green bonds and other blended finance products, starting in Indonesia, Mozambique, and Zambia. The agencies believe that by doing so, they can help leverage, or attract, billions of dollars for climate finance, they said in a statement.

    The aim is to “create a much more systemic approach to this question, rather than simply looking at a transaction or two,” Albright told Devex.

    Already many of the countries MCC works with want to address issues tied to climate impacts, she said, pointing to the examples of Mongolia and Timor Leste where MCC is working to address water issues.

    Albright noted that the program was initially launched under a different name, the somewhat clunkier Green Finance Pilot Program, “which didn't quite roll off of everyone's tongue,” she quipped.

    So it was changed to Climate Finance Plus at the U.N. Climate Change Conference.

    “We gave it a better name,” she said. “We're not changing it again.”

    More reading:

    ► Global Fund pledge: ‘It’s not too late to take action,’ NGOs urge UK

    ► Only 7% of $1.7B COP 26 pledge is going directly to Indigenous groups

    ► Climate philanthropy: Small gains, big hopes, but reality still bleak

    • Banking & Finance
    • USAID
    • Millennium Challenge Corporation (MCC)
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    About the author

    • Adva Saldinger

      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.

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