The insufficiency of global capital has been well-documented in its inability to drive the transition to a low-carbon economy and fortify climate resilience. A remarkable $4.3 trillion is required annually by 2030 in order to effectively confront the challenges of reducing carbon emissions to net zero and building resilience to the physical impacts of climate change. Unfortunately, the investment in 2019-2020 fell significantly short of this target, with only $653 billion being allocated to global climate finance during that period.
The inadequacy of public finance alone to achieve the transition to net zero and resilience underscores the critical need for private capital. However, a significant barrier to achieving this lies in the lack of understanding and capability on the part of both project proponents and investors.
A report recently published titled “Accelerating Climate Finance”, authored by Mott MacDonald for British Expertise International, sheds light on the pressing demand and supply side challenges in the realm of climate finance.
The demand side challenges primarily stem from the fact that developing country governments, projects, and businesses struggle to navigate the fragmented and complex landscape of climate finance. They often lack the expertise to develop propositions that funders and lenders would deem as “investible”. On the other hand, the supply side challenges are characterised by potential investors’ limited understanding of the sectors and geographies they could invest in. It is essential for them to receive support in assessing levels of risk and the effectiveness of risk management mechanisms in place.
The report also includes insightful case studies, including the impactful work done with the Government of Nepal on its flagship Nepal Climate Change Support Programme 2. This programme, designed to address major climate risks in Nepal, has been successful in unlocking significant financial assistance for numerous projects, resulting in tangible benefits for hundreds of thousands of people. This serves as a powerful testament to the essential role of partnerships in unlocking finance and addressing the challenges posed by climate change.
In conclusion, it is evident that securing climate finance is imperative for addressing the pressing challenges of climate change. It is, therefore, essential for project proponents and investors to build new capabilities and understanding to bridge the gap and unlock the necessary funds for a sustainable future.
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