ED opening remarks

  • Event
    GCF Private Investment for Climate Conference 2021
  • Publication date 18 Oct 2021

His Excellency Mr Carlos Carlos Alvarado Quesada, President of the Republic of Costa Rica,
Prof Lee White, Gabonese Republic’s Minister of Water and Forests, the Sea and the Environment of the Gabonese Republic,
Mr Selwin Hart, Special Adviser to the UN Secretary-General on Climate Action and Assistant Secretary General for the Climate Action Team,
Ms Jacqueline Novogratz, CEO of Acumen,
Joan M. Larrea, CEO of Convergence.

Distinguished colleagues, dear friends,

On behalf of the Green Climate Fund, it is an honour to welcome you today to our annual Private Investment for Climate Conference.

I think you will agree this year’s conference is very timely coming just two weeks before the start of COP26 in Glasgow. The role of the private sector in addressing the increasingly urgent need to upscale global climate action is a key feature of the climate negotiations in Glasgow.

The Intergovernmental Panel on Climate Change (IPCC) stated in its latest report in August that global carbon emissions must fall by half by 2030 to keep global heating below 1.5C above pre- industrial levels, as required under the Paris Agreement.

The following month, the UN reported that countries’ current pledges to tackle climate change under their Nationally Determined Contributions would lead to a 16% rise in the next decade, prompting a “Code Red for Humanity” warning by the UN Secretary General. Superposed to this emission gap is a widening adaption gap, with almost daily report of climate destruction and dislocation.

In turn, these emission and adaptation gaps create a widening financing gap, particularly in developing countries. The current gap for funding developing countries’ ability to adapt to climate change only is estimated by the UN at USD 70 billion annually. It is a multiple of this amount to accelerate the transition to net zero emission.

Supporting the transition to a low-carbon, climate-resilient economy in line with the goals of the Paris Agreement will require significantly more investment, investment in a different set of assets, and investment that addresses the humanitarian imperative of social inclusion and poverty alleviation.

The pledge to provide USD 100 billion annually to developing countries is a central feature of the global architecture built to tackle this unprecedented global challenge. We need to keep striving to reach this goal - with the OECD indicating we were still over USD 20 billion short in 2019. Ultimately though, this climate finance under the UNFCC needs to be used in a highly catalytic way so that we can move from billions to trillions.

To drive this financial transformation, we need to work with the private sector to turn around the paradox that lies at the heart of climate finance.

On the one hand, trillions of dollars are earning negative interest rates in many OECD countries. On the other hand, low-carbon, climate-resilient investment opportunities could yield a direct economic gain of USD 26 trillion through to 2030. These flows should particularly benefit developing countries, where the bulk of investment in low emission climate resilient infrastructure is to take place in the coming decades.

But this is not happening, because of barriers that are hampering climate innovation and blocking large-scale flows of private climate finance to capitalise on these investment opportunities in developing countries, particularly LDCs, SIDS and African States. These barriers exist at all stages of climate innovation – from incubation to early-stage growth and then during the phase of commercialising and deploying innovation. They include policy and regulatory risk, as well as technical and above all financial barriers, particularly the lack of access to affordable, long-term project finance.

GCF is now a USD 10 billion fund – USD 37.2 billion including co-financing - following the latest GCF Board’s approval of 13 new climate funding proposals at its meeting earlier this month. And as the largest dedicated climate fund, GCF is using our resources to help overcome barriers to innovation and catalyse the movement of far greater flows of finance to address climate action in developing countries.

GCF’s approach is based upon a four-pronged approach to accelerate and scale up transformative climate innovation in developing countries, including establishing a conducive environment for climate action, encouraging innovation by facilitating the emergence of new climate solutions, mobilising finance at scale to deploy new climate solutions and aligning finance with sustainable development to accelerate the widespread adoption of new climate solutions.

Each of these four prongs will be discussed during this conference.

A supportive regulatory environment and public support are essential to remove barriers to climate innovation and investment. Bloomberg New Energy Finance found that, on average, countries with strong policies to support clean energy attract seven times as much clean-energy investment as emerging markets without such policies. Direct public support is equally important. In addition to their role as enablers, governments are essential to the creation and development of new markets as customers (through green procurement) and co-financiers (via subsidies, sovereign guarantees, and co-investment).

GCF’s grant-based Readiness Programme aims to strengthen the capacity of countries to design, finance and implement integrated climate strategies and policies. While private sector involvement in the first iteration of nationally determined contributions was limited, our Readiness Programme supports cross-sectoral and public private sector engagement for the formulation and implementation of the new generation of NDCs. And as we face the challenge of recovering from the COVID-19 economic shock, we are leveraging these readiness resources to assist developing countries in designing green, climate resilient economic stimulus measures and in exploring innovative financing instruments to finance them without increasing their debt burden.

GCF’s investments are also accelerating innovation. We are supporting incubators and accelerators to help climate innovators refine business plans and pilot new climate solutions. We are also developing specialty financing instruments to provide early-stage capitals to start-ups and SMEs. Here, I will briefly highlight our new USD 279 million investment in the Amazon Bioeconomy Fund which will take an innovative approach to protecting this vital part of the global ecosystem, by supporting bio-businesses across six Latin American countries to reducing emissions and enhancing climate resilience.

And we are working to mobilise private finance to deploy new climate solutions at
scale. Through new forms of blended finance, we aim to use scarce public resources to de-risk market creating projects and crowd-in private finance. For instance, GCF is investing USD 150 million of first-loss equity into the Global Sub-national Climate Fund, which will de-risk private sector climate investments at the critical sub-national levels. Almost half of the 42 participating countries are LDCs and SIDS.

And finally, we are strengthening domestic financial institutions to support the widespread adoption of commercially proven new climate solution. We assist domestic financial institutions in developing new appraisal methodologies to balance the higher upfront costs of climate solutions with their lower operational costs and vulnerability to climate change. We also help them originate and develop climate investment, as well as access capital markets to finance them. For example, we are working with the government of Jamaica to establish the first Caribbean exchange for green bonds to finance net zero, climate resilient infrastructure in the Caribbean region.

Your Excellencies, conference participants. It is only through innovative partnerships that we will be able to overcome the climate challenge. And the importance of the partnership between the private and public sectors cannot be overstated. The participation of Heads of States in the opening session of GPIC is a vivid testimony of it and a unique opportunity to deepen it.

I wish you plenty of fruitful discussions to strengthen this partnership to help us create a zero- carbon, climate-resilient future.