I lead the Climate Investment Funds, which invests urgently needed resources in 72 developing and middle income countries with to help them manage the challenges of climate change and reduce their greenhouse gas emissions.
There have been many events in 2016 which have reinforced the scale and urgency of the climate challenge:
- Ocean warming is affecting humans in direct ways and the impacts are already being felt, including effects on fish stocks and increased risk from water-borne diseases.
- The recent “super” El Niño is leading to reduced harvests and triggering dramatic food price spikes. In July this year, maize prices in Malawi were 192 percent higher than the five-year average.
- And science offers plenty of evidence that more frequent extreme weather events are becoming the new normal in a world with a changing climate.
But the year has also delivered potential for progress through some significant global achievements:
- Last year’s Paris Climate Agreement has entered into force ahead of schedule
- The Science Based Targets initiative – which drives ambitious corporate climate action - announced that 200 companies have committed to set emissions reduction targets consistent with the global effort to keep temperatures well below the 2-degree threshold.
These are encouraging signs but there is much more to do.
We all know that a greener future depends on the widespread adoption of low carbon technologies. Through the Sustainable Development Goals and Paris climate agreement, world leaders have outlined a transformative agenda which heralds a shift from a fossil-fuel based global economy to one that is low carbon and climate resilient.
And funding this future means we need to think in terms of trillions not billions. And yet, there is not nearly enough patient and long-term climate finance to trigger the revolution we need.
I believe climate finance has a crucial role to play to move us away from an ever-warming planet and its dire consequences. Currently, it is more expensive and riskier, to finance infrastructure projects in developing countries where the needs for renewable energy and other sustainable infrastructure are greatest.
Think about it. It you had money to invest, do you choose a technology or a country where there is certainty and predictability? Or ones with uncertainty and unpredictability?
Responding to real and perceived investment risks is where public concessional financing proves its usefulness. Concessional financing is money that is provided at below market-based rates in order to help de-risk the project and attract other investors. Well-targeted use of this type of financing is necessary to push new technologies, create new markets and to crowd in private sector financing.
Concessional finance is also increasingly necessary to support investments in climate resilience and adaptation, especially in the poorest and most vulnerable countries.
The Climate Investment Funds has been providing such concessional or de-risking financing since 2008. We can help with the choices and the challenges faced by those who want to make climate-smart investments in developing countries. We offer specialized help where there is first-mover risk and a lack of track record.
We have has been helping to fill the financing gap for climate action, providing 8.3 billion dollars to catalyze and scale up resilience, forestry, and clean energy investments in 72 countries in over 300 projects across the globe. Our projects are expected to mobilize an additional 58 billion in investment – about USD 7 for every USD 1 provided by the CIF.
Concessional financing that is ‘blended’ with commercial financing is not an abstract concept. Rather, it is a sound financial strategy that is leading to innovative projects in roof-top solar energy, flood-proof roads and bridges, or reforestation – all of which have real, positive impacts on people’s lives. This kind of funding can be really transformational.
The CIF is supporting and scaling-up investments in renewable technologies – from concentrated solar power to geothermal – at an unprecedented rate in low and middle-income countries.
We are a leader in driving global investments in Concentrated Solar Power - CSP. Our CSP investments are intended to establish a record of performance for the technology, thereby lowering perceived risk and reducing future project costs for private sector CSP investors and developers.
CIF allocations expected to contribute to projected generation capacity of around 1 GW, or more than one-fifth of the current global CSP capacity.
We are also working to break down barriers to the expansion of geothermal energy – that means harnessing the earth’s heat to generate electricity - by helping to expand markets in countries like Kenya, Indonesia, and Mexico, and supporting some of the first large-scale geothermal projects in Ethiopia, Tanzania, Dominica, Chile, and Armenia. CIF allocations expected to contribute to projected generation capacity of 3.6 GW, or more than one-quarter of the current global geothermal capacity.
I want to finish by saying that we need to think differently and we need to think bigger because the times we live in are a whole new ballgame.
To adapt to this new reality, the CIF is developing a new approach that has the potential to be a game-changer. We are developing a financing vehicle to raise financing from private capital markets. We know from our years of experience of working with the private sector that investors are keen to increase their low carbon and climate resilient investments by investing in a sustainable and diversified portfolio. And it would help provide emerging economies with the financial support they need to pursue their low-carbon development plans.
The obligation and opportunity is on us.