Speaking to the “Partnership Consultation on Realizing NDCs through Improved Alignment with Investment Planning,” GCF Executive Director Yannick Glemarec emphasised that 2020 is a critical year for both raising and realising ambitions for Nationally Determined Contributions (NDCs).
Achieving these objectives will require quality NDCs that identify transformative initiatives, which can be translated into bankable projects financed through a mix of public and private investment.
The event, hosted in New York by the UN Deputy Secretary-General, brought to together a range of partners to ensure a collective effort to strengthen support for developing countries in 2020 and beyond.
Statement by Yannick Glemarec, GCF Executive Director
Dear colleagues, partners and friends, good morning from South Korea.
I am delighted to be given the opportunity to make some opening remarks at this NDC Partners Consultation, convened by the Deputy Secretary-General with the support of the GCF and NDC Partnership. Unfortunately, I was forced to cancel my participation in person due to the recent rapid escalation of the coronavirus outbreak in South Korea.
As we know, 2020 is a critical year for both raising and realising NDC ambitions. Achieving these objectives will require quality NDCs that identify transformative initiatives and can be translated into a pipeline of bankable projects to be financed through a mix of public and private investment.
However, there is a paradox at the heart of climate finance. On the one hand we have billions of dollars earning negative interest rates in many OECD countries. By mid-2019, the pile of negative-yielding bonds topped USD 17 trillion, or a quarter of all investment-grade debt. On the other hand, we have nearly USD 23 trillion in attractive opportunities for climate-smart investments in the sole emerging markets between now and 2030.
This translates into a huge financing gap. About USD 4 trillion on average each year is needed to advert catastrophic climate change and meet the 17 Sustainable Development Goals in developing countries. However, public and private climate investments are hovering around half a billion a year.
What are the reasons underlying this paradox and the resulting huge climate financing gap? When investors are asked why negative-interest earning finance is not shifted towards seemly profitably climate-resilient investments in developing countries, their standard response is that there is a dearth of bankable projects.
Why is this the case? Extremely attractive climate-resilient, low carbon investments are often regarded as non-bankable because of their specific cash flow profile – higher upfront costs against lower operations and maintenance costs. This means that climate projects with a potentially high rate of return can be appraised as too risky by both developers and financiers because of their longer pay-back period. For investors to consider such projects as bankable, they need longer-term visibility and certainty. This in turn requires a supportive policy environment to de-risk investment.
Climate finance is to a large extend a public policy-driven private finance. Catalysing finance at scale to raise and realise NDC ambitions will require a tight vertical integration along the NDC investment value chain. This means creating linkages and synergies between different stages in the investment value change, starting with identifying through the NDCs transformative initiatives aligned with national priorities and investment plans; creating enabling policy de-risking environments; supporting policy, institutional, technological and financial innovation; and directly investing in public and private sector projects through a variety of financing instruments.
Such linkages will improve the effectiveness and impact of our collective support and reduce transaction costs for developing country governments. Each of us individually will not be able to adequately support countries raise and realise their NDC ambitions. The value of today’s NDC Partners Consultation is to create this opportunity for institutional partners from across the investment value chain to come together to explore such synergies and complementarities.
GCF is a partnership institution. GCF is a partnership between developing and advanced economies, which achieves results through sharing costs and risks with a network of 95 Accredited Entities. Partners agencies span multilateral, and national development banks, UN agencies, commercial banks and equity funds, conservation agencies, government agencies and more. We partner with many of the institutions here today across the investment value chain to assist countries in realising their NDC ambitions.
Our Readiness Programme, supports countries formulate NDCs, long-term climate strategies, and national adaptation plans; identify transformative investments; create enabling policy environment; and strengthen national capacities for NDC implementation. As of 31 December 2019, the GCF has approved 270 readiness grants valued at approximately USD 126 million.
We can also support countries to develop Country Programmes to translate NDCs and other priorities into a climate finance strategy that can shape pipeline development for the GCF as well as for other public and private financiers. For example, Senegal’s Country Programme identified 25 mitigation programmes and 17 adaptations programmes, of which Senegal will prioritise about 5 for the GCF over the coming 4 years. Other programme could be supported by other partners. To date, about 62 countries have developed country programmes, and another 50 countries are in the early stages of this process (Of the 62 country programmes, 24 have been validated and endorsed by the government, while 38 are in draft form that have been shared with the GCF).
Through our Preparatory Support Facility, we have approved almost USD 20 million to support countries convert NDC and other priorities into a pipeline of bankable projects and funding proposals.
The bulk of our work is investment in projects using a wide range of financial instrument - grants, loans, equity, guarantees and results-based payments - to support innovation and market transformation to scale up climate adaptation and mitigation. To date the GCF has committed USD 5.4 billion to 123 projects, with a total value of USD 19.3 billion (including co-financing).
Aligning financial flows with the Paris Agreement is a key crosscutting priority within our 8 result areas. Through our partners, we provided more than USD 1 billion to help financial institutions accelerate the deployment of green banking products. We are also supporting the development of sustainable finance policies and institutions such as dedicated green banks or green facilities within existing financial institutions. In addition, the GCF allocated about USD 400 Million of capital to build private equity markets for climate adaptation and mitigation in developing countries.
The GCF welcomes this dialogue opportunity with other institutional partnerships to foster vertical integration and synergies. We see several areas where we may consider strengthening collaboration, for example,
- Of the 62 country programmes, 24 have been validated and endorsed by the government, while 38 are in draft form that have been shared with the GCF.
- Linking NDCs with SDG planning and sharing data and analysis to increase the likelihood of identifying transformative initiatives that would both realise NDC ambitions as well as meet national sustainable development goals.
- Collaborating to identify and structure the most appropriate mix of finance to implement these transformative initiatives.
- Lay out the barriers and pre-conditions that need to be met in order unlock the mix of different sources of finance.
- Identify which partners are best placed to offer support to governments to address the identified barriers.
We see initiatives like the Climate Investment Platform and others as useful ways for realising synergies between different institutions in practice.
The GCF looks forward to the discussions over the coming 2 days and to collaborating with partner institutions to ensure that collectively we strengthen our support to countries to raise and realise NDC ambitions in 2020 and beyond.