Thank you, Ambassador Mark Green, for your inspiring opening remarks, and Lauren for the kind introduction. I would like to express my sincere thanks to the Wilson Center for hosting the Green Climate Fund here today to discuss our role in scaling up finance for climate action.
You have summed it up extremely well Ambassador Green - the climate crisis is here and so is the opportunity to respond. Over 120 countries responsible for over 60% of emissions have adopted or are considering net zero targets. These net-zero targets have put the Paris Agreement’s goals within striking distance.
2021 is a critical year for action. President Biden’s recent Climate Summit has helped galvanize global efforts to limit warming, mobilize private finance to drive the net-zero transition, and help vulnerable countries cope with the impacts of climate change.
The two objectives are equally important. We must both scale up climate mitigation and adaptation efforts to address the climate crisis. Climate impacts are also materializing faster than expected. For example, twenty years ago, we were not expecting threats to the survival of unique ecosystems to materialize before a global average temperature increase of 4 to 6°C. Today, we fear that a 2°C increase in mean global temperatures could wipe out 90% of coral reefs and endanger the security and economic livelihoods of hundreds of millions of people.
Ambassador Green mentioned the huge cost of adaptation – expected to rise to up to $500 billion per year by 2050. Yet globally, only one fifth of the funds mobilised for climate finance is going to adaptation and resilience, exposing millions to the worst impacts of climate change. The Green Climate Fund can play a significant role in supporting efforts to finance climate ambitions, particularly for adaptation and resilience.
GCF was established to promote a paradigm shift in our fight against climate change. We are the largest dedicated climate fund supporting developing countries and the GCF accounted for two thirds of all multilateral climate finance last year. Half of our resources are allocated to adaptation – and over two thirds of our adaptation funding go to the poorest and most vulnerable countries in the world.
GCF is an open, country-driven partnership. We work with over 200 national and international partners, including commercial and development banks, civil society organizations, United Nations agencies and private equity funds. This enables us to foster unprecedented coalitions to finance frontier climate investments.
Notably, we work closely with the private sector by using a range of financing instruments to meet the needs of developing countries and investors - grant, concessional debt, guarantees and equity. This flexibility lets us pilot new financial structures to create new markets for new climate solutions. GCF’s investments of $8.4 billion are leveraging almost $22 billion in additional public and private finance.
GCF has also developed extensive environmental and social safeguards to promote inclusive and responsible climate finance.
We leverage these capabilities in four ways:
- First, – we work with developing countries to help create an enabling policy environment climate action and to raise the ambitious of their Nationally Determined Contributions – or NDCs. We also work with developing countries to realize their climate ambitions by translating their NDCs into investment plans. This is particularly important to ensure that their key adaptation and resilience projects are prioritized, that those projects are financed through the right sources of finance using the instruments that meet their specific needs. Saint Lucia for example, one of the Small Island Developing States hardest hit by climate change has translated its NDC into a detailed investment plan. GCF will help Saint Lucia explore financial innovations like resilience bonds and climate debt swaps to supplement public resources and finance these efforts without raising its debt burden.
- Second, we pilot innovative ideas to establish a proof of concept. Innovation in new technologies, business models and financing instruments is imperative if we are to achieve our climate goals. Technological innovation is required to accelerate efforts in sectors hard to decarbonize such as transport and industrial processes and innovative business models and financing instruments are critical to de-risk private investment at scale in adaptation and nature-based solutions.
Two-thirds of our projects support technology development and transfer to developing countries. For example, in partnership with Acumen Fund – a US impact investment fund - GCF is providing risk capital to SMEs that are developing off-grid solar and climate-resilient agriculture solutions for vulnerable communities in East Africa. Risk capital is extremely scarce in developing countries, yet it is a pre-condition for innovation.
- Third, we need to make blended finance work better for adaptation, low income countries and small island developing states. Blended finance has proven effective for mature technologies in mature markets, but not for early-stage technologies in early-stage markets. In 2012-18, USD 205.1 billion was mobilized from the private sector by official development finance interventions. But only 5.3% of these flows went to LDCs and other LICs and very little to adaptation and nature-based solutions.
Together with our partners, particularly the private sector and development banks, we crowd-in private finance by serving as an early investor to establish a commercial track record for new climate solutions. One exciting initiative with US private equity firm – Pegasus Capital - is the Global Sub-national Climate Fund. This initiative leverages $150 million in GCF’s equity investment to mobilize $650 million in institutional finance for climate mitigation and adaptation projects at the sub-national level. Half of the participating countries are Least Developed Countries & Small Island Developing States.
With our partners, we are also working on several new private equity initiatives to specifically de-risk private investment in adaptation technologies and coral reef protection. Examples of potential investments include sustainable seaweed-based fertilizers or nutritional supplements made from kelp and water recycling technologies.
- Finally, we strengthen the capacity of domestic financial institutions and entrepreneurs to accelerate the widespread adoption of commercially attractive climate innovation. National and sub-regional development banks alone represent about 10% of global investment, disbursing more than USD 2 trillion annually. They are the largest group of GCF partners, and we work with them to reduce the risks of innovative climate investments.
For example, we helped the Development Bank of Southern Africa establish a dedicated climate facility and will assist them to issue the first municipal bonds for recycled water in South Africa.
Ladies and gentlemen,
The climate crisis demands collective global action at unprecedented scale. Countries are taking action – but more must be done. The Green Climate Fund stands ready to support these efforts though innovative, inclusive climate finance that can help climate action reach scale.