Developing countries will need an estimated $4 trillion per year in investments up to 2030 to build infrastructure to meet their development needs that would mitigate against climate change.
This was contained in one of the World Bank’s report on financing climate change presented to the recently held United Nation’s General Assembly (UNGA).
According to report, meaningful climate action will require scaling up finance. This is especially important to help poorer countries make large investments in global public goods, such as reducing coal use, and to finance adaptation efforts, which require upfront costs but yield growing benefits over time.
“These investments would enable developing countries to build sustainable and resilient infrastructure, create new jobs, and sometimes leapfrog to low-carbon solutions. Current finance flows fall far short of that figure, however,” the report stated.
It stated that to successfully achieve climate and development objectives, the world must mobilize trillions of dollars in the coming decade, adding that the existing public, private, and concessional climate finance needs to be deployed in more transformative and catalytic ways, leveraging additional capital to bridge the gap between available resources and needs.
“The WBG will continue to play a critical role in mobilizing finance at scale for climate action. IBRD, IDA, and IFC have a financial model of issuing AAA-rated bonds in capital markets, which leverages scarce shareholder capital with substantial private capital mobilization (PCM). For example, since inception, IBRD has directly mobilized capital market resources to provide development financing volumes that are 40 times the amount of capital provided by shareholders.
“Along with the WBG committing, on average, 35 percent in climate finance and at least 50 percent of IDA and IBRD climate finance for adaptation, we will use our tools, platforms, and convening power to mobilize international, domestic, concessional, and private finance for mitigation and adaptation.”
“The WBG will structure financial packages that include guarantees, insurance, risk mitigating structures, and capital markets instruments to address incremental costs and other barriers to carrying out the five key transitions outlined in Section III.”
“To increase the financing available and maximize the use of finance for climate action, the WBG will focus on: (i) helping client countries boost their public domestic resources; (ii) increasing mobilization of international and domestic capital, including catalyzing domestic private capital; and (iii) supporting global efforts to raise and strategically deploy concessional climate finance to de-risk climate investment. “
“Well beyond WBG financing alone, the broader financial sector, encompassing both the public and private sectors, can and must play a key role in mobilizing capital for green and low-carbon investments and managing climate risks. In emerging markets, the ability to scale green finance provides a pathway to greening the real economy, including by helping high-emitting sectors transition to low-carbon alternatives.
The WBG will support greening the financial sector across emerging markets through its work with central banks, national development banks, and private sector financial institutions, including through targeted advisory engagements to equip clients with the necessary frameworks to create enabling environments and risk mitigation practices to embrace climate action, while also while also enabling innovative and scalable funding mechanisms in support of sustainable investments.
The WBG will work to catalyze and mobilize investment for climate action by (i) supporting upstream efforts to create new, sustainable, and green markets across developing countries that encourage private investment; (ii) expanding access to private capital and green finance; (iii) building climate capital markets; (iv) working with development partners and through capital markets to support finance for adaptation and resilience and finance for biodiversity; and (v) enabling the catalyzation of domestic private capital for climate investment.
Olusola Bello
