Heading into Finance Day, COP26 World Leaders Summit statements from Barbados and Italy shifted the COP dialogue on mobilising the trillions of dollars of public and private money needed to keep 1.5C alive.
US President Biden, President von der Leyen, and Prime Minister Johnson announced yesterday that they would pool their efforts to mobilise trillions of dollars towards green infrastructure around the world. Limited access to finance is a real blocker for bringing clean energy to scale in developing markets.
The US and the EU hosted a leadership event at COP26 to move forward on a pledge to collectively deliver a step change in the approach to infrastructure finance. This was a key deliverable of the G7 Summit in the UK in June. Yesterday, leaders announced key principles underpinning future infrastructure development efforts. This includes “a new paradigm of climate finance, spanning both public and private sources, to mobilize the trillions needed to meet net-zero by 2050 and keep 1.5 degrees within reach. The political stage is set for big changes in global clean infrastructure financing.
G7 leaders now need to turn these announcements into clear signals about where funding will come from to shift the deadlock on climate ambition at COP26. This does not require huge commitments of new public funds but rather a political agreement on how the bilateral and international financial institutions in which countries are shareholders can ensure a massive scale-up of high-quality investment for a green and inclusive global recovery in the developing world.
Italian Prime Minister Draghi’s proposal to harness the power of both public and private sector by co-sharing risks and working on platforms to deliver for countries is a step in the right direction. This approach could help bring together the various important but still disjointed initiatives launched recently, such as Build Back Better World (B3W), Clean Green Initiative and the EU Global Gateway. This coordinated approach could improve project development attracting institutional investments at scale in developing countries via green bonds.
The task force proposed by Draghi, which could be launched by the end of COP26, should aim to be the connective tissue. It would mobilise transition and resilience investment, include representatives from G20 and recipient countries, include private sector and civil society representatives, and leaders from national and multilateral public banks.
The Just Energy Transition Partnership with South Africa is another exciting start, and a win for cooperation on coal and long-term transition. The country-led, donor-supported $8.5bn partnership will put a ‘just transition’ for fossil fuel workers at the heart of its efforts to decarbonise South Africa’s coal-intensive economy while also supporting the build out of a new green development pathway in multiple sectors.
Quotes – infrastructure finance
Julian Havers, Programme Leader of Public Banks at E3G
Yesterday at COP26, US, the EU and UK leaders announced “a new paradigm” for infrastructure finance to mobilize the trillions needed to keep 1.5C within reach. New approaches to sharing risks between government and the private sector can be effective, but they need developing country buy-in and ownership. All voices need to be brought to the table so that this can power a political outcome at COP26.
Nick Mabey, E3G Chief Executive and co-founder said:
COP26 needs extraordinary political leadership to keep 1.5C within reach. By agreeing new principles for mobilising trillions of finance into country net zero plans the US, EU & U.K. have begun to build the foundations for the level of change the world needs.
Dileimy Orozco, E3G Macroeconomic expert said:
Yesterday it was clear that there is consensus that harnessing the power of both public and private sector will be key to deliver the finance needed. Leaders were clear that for this to happen, a new partnership is needed. One where recipient countries are partners, where the private sector buys-in, and where finance delivers for both climate and development. A net zero transition cannot be just, in an increasingly unequal world.
Ronan Palmer, Director Clean Economy said:
Draghi’s forum could be a vital base for holding governments and the private sector to account for delivery and outcomes. The world is tired of pledges without delivery
Available for comment
The following people are available for commentary – please contact them directly:
Julian Havers, Sustainable Finance expert
m: +49 (0)1602 120 435, julian.havers@e3g.org
Ronan Palmer, Clean Economy Director
m: +44 (0)7926 376 496, ronan.palmer@e3g.org
Dileimy Orozco, Macroeconomic expert
m: +44 (0)7867 301 615, dileimy.orozco@e3g.org
Notes to editors
- E3G is an independent climate change think tank accelerating the transition to a climate safe world. E3G specialises in climate diplomacy, climate risk, energy policy and climate finance.
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